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MC 221 Project

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Patricia Kim

on 11 February 2013

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Transcript of MC 221 Project

Why the "race to the bottom" is a myth There's not much of a race... Environmental Effects Economic factors & theory In Conclusion... Labor Standards MNCs & the "Race to the Bottom" There isn't any hard evidence that MNCs are relocating to less-regulated countries
By perpetuating belief in a nonexistent threat all sides contribute to a misunderstanding of the effects of globalization and the ways in which governments should respond to this situation
Two trends should be evident if the myth were true:
1) Countries that are open to trade/investment would have less-demanding regulations that affect production costs
2) MNCs should be flocking to countries with the lowest regulatory standards The Myth of the Multinational Corporation Race to the Bottom There is clear evidence that more protectionist countries are the biggest polluters
China, Brazil, pre-NAFTA Mexico
By bringing facilities to less developed countries, there is a transfer of technology that leads to more efficient production and the general acceptance of environmentally safer policies
Brazil, Mexico
In contrast to China's ability to attract investments with lower regulatory standards, Mexico successfully attracted foreign investment by increasing environmental protection policies
There is also an increase in the link between public opinion and profit, especially with environmental regulation
PepsiCo stopped producing in Myanmar (Burma) in 1997 because it did not want to be linked with the country's oppressive regime and poor environmental policies A recent study based on Bureau of Economic Analysis (BEA), statistics found that 90% of the production of foreign affiliates of U.S. MNCs is sold outside the United States. Just 10% of their production is exported to the United States, debunking the notion that MNCs are investing abroad to sell into the U.S. market

MNCs can be viewed as rooted in theories of economic liberalism that encourage trade and globalization

Firms can create private agreements that limit these "races to the bottom", preventing environmental damage, lowered labor standards, and economic losses There is no evidence that a race to the bottom is happening
Labor standards and environmental protection policy can and have been bettered as a result of the presence of MNCs
By allowing MNCs to produce, host-countries can gain power and, in turn, become more developed
Increased focus on consumer awareness can have an opposite effect, a race to the top
Some of the strongest anti-race to the bottom supporters are countries that are still developing (Mexico, Malaysia)
Venturing to places that weren't traditionally sought out is more of a result of globalization than competitive incentives Haley Bockhorn
Patricia Kim Why the myth has been sustained MNC...
A corporation that has facilities and other assets in at least two other countries that are not the home country.

"Race to The Bottom"
The scenario in which MNCs transfer production to countries with lower regulatory standards in order to lower costs of production.
In response to this, more developed countries (who typically have higher regulatory standards) lower these standards to better compete for foreign investment Works Cited Despite claims that the relocation of MNCs is lowering labor standards, the opposite is true
MNCs often pay higher-than average wages in developing countries
WB survey: satisfied with overall income levels
The race to the bottom provides a scapegoat for trends that negatively affect certain groups such as labor unions
Emergence of watch dog groups
Making Change at Walmart, Walmart Watch, National Labor Committee
Opening of trade between more countries draws more attention to countries with lower standards, this pressures those countries to raise them to prevent loss of business
Russia and the US The image of the RTTB is politically useful and is drawn upon by those both for and against globalization

The myth allows those for globalization to encourage de-regulatory policies that may produce short-term struggles, stating that globalization will punish those who refuse to de-regulate no matter what

Those against globalization argue that a race to the bottom is inevitable

Politicians can exploit the need for global competition as an excuse to support policies that could otherwise spark mass debate and public concern

Outsourcing is often cited as support for anti-MNC interest groups, however a BEC study found that U.S. companies that invest abroad create 2.3 jobs in the United States for every one they create overseas. Atlas of CO2 Emissions Moscow., David M. Herszenhorn; Ellen Barry And Andrew E. Kramer Contributed Reporting From. "Bill on Russia Trade Ties Sets Off New Acrimony." The New York Times. The New York Times, 08 Dec. 2012. Web. 10 Feb. 2013.

Harvey, Fiona. "An Atlas of Pollution: The World in Carbon Dioxide Emissions." The Guardian. Guardian News and Media, 31 Jan. 2011. Web. 10 Feb. 2013.

Oatley, Thomas H. "Bottom Feeders." Debates in International Political Economy. Boston: Longman, 2010. 202-09. Print.

"Making Change at Walmart." Web. Making Change at Walmart, n.d. Web. 10 Feb. 2013.

"The National Labor Committee." About Us - Institute for Global Labour and Human Rights. Institute for Global Labour and Human Rights, n.d. Web. 11 Feb. 2013.

Murphy, John. "Free Enterprise." Offshoring: Myths and Facts. N.p., 7 Oct. 2010. Web. 11 Feb. 2013.

"Manufacturing Locations." Exxonmobil.com. Exxon Mobil Corporation, n.d. Web. 10 Feb. 2013. Economic factors & Theory Continued There are many factors that contribute to an MNC’s choice for a site:
1.) Location-Specific Advantage
access to raw materials, proximity to markets, tax benefits, efficiency oriented investments (low wages, skilled labor), political stability/risk, and other factors that typically attract investment.
2.) Politics and Protectionist Barriers
3.) Currency Instability
4.) Competition Thank you
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