Introduction

The interaction between multinational enterprises (MNEs) and the governments of nation-states has been studied for over thirty years, going back to the classic analysis of Vernon (1971). The interaction between MNEs and home and host governments has been further developed by Stopford and Strange (1991) in a model of triangular economic diplomacy. The entire development of a scholarly field known as international political economy takes as its focus the interactions between MNEs and States. What can be added to this literature?

The answer is new evidence that MNEs operate predominately on a regional basis, rather than on a global basis as many earlier studies have assumed. Yet, rather than MNEs operating across borders around the world, the evidence, e.g., in Rugman (2000), is that the vast majority of MNEs have as much as 80 percent of their sales within their home region. Further, these “Triad” regions of the EU, North America, and Asia account for well over 90 percent of all MNE activity (as revealed by sales, or assets, or employees). Thus a focus on regionalization is now required to analyze states and firms.

The issues to be explored in this chapter are the following:

1. Given the new evidence on the economic interdependence within each region of the Triad, is this being facilitated by regional or multilateral trade agreements? The EU is much more of an integrated common market than the looser free trade agreements of the North American Free Trade Association (NAFTA), the Free Trade Association of the Americas (FTAA), and the Asian Agreement of November 2002. […]