As the global economy gets integrated, national or local corporations will gradually transform in to a multinational corporation (MNC). When this type of development occurs, the host countries are usually the ones that become the immediate stake holders. This is because when a MNC sets its foot into a host country, there are economic, political, social and environmental impacts that result from their corporate actions. In many cases, it is certainly possible that it can end up in a win-win situation, if the host country and the MNCUs both work mutually.
However there have been unfortunate examples, where this has not been the case. In general, international agreements have its advantages, due to the fact that we can harmonize international standards. Therefore environmental concern is one of the key issues that the policy makers and MNCUs should set a high priority on. This is because growth and development is strongly correlated with environmental degradation. Furthermore, it is fair to say that the MNCUs are more likely to have a more harmful environmental impact from growth and development, as opposed to the local corporations.
This is because MNCUs may not be as knowledgeable as local corporations in resource utilization and land management. This also refers to the notion of Rthe locals know their land better than anybody elseS. The tropical rain forest of Brazil is a good example of this. The RindigenousS or the local people have a good understanding of how to extract and utilize its resources in a very sustainable manner. However when a multinational timber company comes into Brazil, result of their actions will probably be more harmful, due to the fact that they are not complying to the
RtraditionalS methods. Another important aspect is the fact that in any international trade agreement, a MNC is most likely going to shift their production to a lesser developed country. This is because LDCUs are a good target for cheap labor and low start-up costs. In Robert PastorUs essay, he mentions the term maquiladoras; Rcheaper labor that allows them (Mexicans) to assemble parts, import from the U. S. and then reexport the assembled productsS. In places such as the maquiladoras, safety standards are not as rigid and this puts the local workers in a serious health risk.
The Rblack lungS case is an example where miners in Latin America contracted respiratory diseases from working at unsafely regulated coal mines. Since it was in a lesser developed country, occupational health standards were lower than the usual. The Union Carbide incident from Bhopal, India is another example, where the explosion took place due to lack of safety and precautionary measures. Many experts have commented that the Union Carbide incident could have been completely avoided, if the plant was located elsewhere, in a more developed country, where they have more strict standards.
So there is a need for universal standard on these types of issues. Unless this is achieved, the LDCUs would be placed in a vulnerable situations as more and more MNCUs will take advantage of this. When MNCUs come into a host country, this increases their revenue and their GDP. However this does not necessarily mean that everyone benefits from it. This is especially the case in the most third world countries. The benefits usually go to the elites or sometimes to the ones living a more urbanized areas. This disrupts the level of equality as the few rich individuals get richer and a reat number of poverty stricken individuals get poorer.
This also increases political corruption. A good example of this is the case in Brazil with the discovery of oil in the late 1960Us. The level of corruption resulted in an unprecedented amount of national debt, leaving them worse off then before. In addition the Brazil suffered a great deal of environmental and resource degradation as a result of unsound environmental activities from the MNCUs. As Walter Reid puts it, there a need for Rgovernments to have a responsibility to invest a share of the national benefits in rural developmentS.
Most free trades also make it more difficult to push a political agenda. Major power such as the U. S. use economic sanctions on other countries to enforce their political agenda. Not too long ago, the French government was engaged in funding for nuclear testing. Most U. N. officials as well as the U. S. were outraged by the fact that France was not complying with the international arms agreement. As you know nuclear testing not only encourages the international arms race, it also has a detrimental effect on the global environment. However, because U. S. s engaged in a heavy free trade with France, this made it more difficult to impose an economic sanction.
So there is also a need for more serious political considerations, when being engaged in a free trade. In this case, the Department of Commerce should have carefully reexamined the political and military criteria, before a high level of free trade took place between the U. S and France. But as the world becomes more integrated socially and economically, the idea of expanding the international trade will have numerous benefits, if they are carried out in an RappropriateS manner.
After all, free trade promotes transfer of living in LDCUs as well as improving economic efficiency. This also allows increase in efficient use of natural resource, which can have numerous environmental benefits. NAFTA is a good example of an environmental success where the U. S. EPA and MexicoUs SEDESOL worked closely together to achieve common environmental goals. Free trades can serve as an instrument that can increase international cooperation. However it can have an enormous unintended consequences. Therefore there is a need for more scrutiny in the decision making process.