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The United Nations on transnational corporations: a summary and a critique*

Published online by Cambridge University Press:  26 October 2009

F. I. Nixson  and
M. Yamin
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Extract

In 1973 the United Nations published an influential study x of the emergence of Transnational Corporations (TNCs) and their impact on the world economy in general and less developed countries (LDCs) in particular. The Report was based on a painstaking collection of statistical data and other information on TNCs broadly covering the 1950s and 1960s, The Report's significance, apart from being one of the very few documents containing a large amount of information on the subject, lay in the fact that for the first time an official and authoritative body explicitly recognised that the operations of TNCs can be a source of conflict and in particular that the pursuit of corporate objectives may well be incompatible with the goals of national development in the LDCs. In fact, both the Report and much of the debate that it generated exhibited a sense of urgency reflecting the discovery of existing or impending conflict. Thus, the Group of Eminent Persons, set up to consider certain problems in greater depth and provide recommendations for national and international action, noted.

Type
Research Article
Information
Review of International Studies , Volume 6 , Issue 1 , April 1980 , pp. 16 - 31
Copyright
Copyright © British International Studies Association 1980

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References

page 16 note 1 United Nations, Multinational Corporations in World Development (New York, 1973)Google Scholar. multinational or transnational corporation is broadly denned as a large firm which owns and controls productive assets (factories, mines, etc.) in two or more countries. Th e term ‘trans-national’ is preferred as it emphasizes the transnationality of operations (across frontiers) without implying that ownership or senior management are in any sense multinational.

page 16 note 2 For a discussion of this issue see Chapter III of the 1973 Report. The sources of conflict are numerous, involving a combination of economic and political questions, such as transfer pricing and taxation, restrictive practices, especially in relation to the transfer of technology, and particularly in the context of the developed capitalist economies, the ineffectiveness of national trade unions. Othe r issues include political power and influence of TNCs and their overt or covert interference in the political life of LDCs.

page 16 note 3 See United Nations, The Impact of Multinational Corporations on World Development International Relations (New York, 1974)Google Scholar. Among the recommendations of the Group was setting up of the Commission on Transnational Corporations to act “as the focal point within the United Nations system for the comprehensive consideration of issues relating to multinational corporations, ” Ibid. p. 57. The creation of a Centre on Transnational Corporations was also recommended, the main tasks of which would be the collection and analysis of information and other research on TNCs to assist the Commission in its work and to strengthen the negotiating capacity of host countries, especially the LDCs, in their dealings with TNCs. The Commission and the Centre were created as a result of Resolution 1913 (LVTI) passed i n 1974 and became operational in March and November 1975 respectively.

page 17 note 1 Ibid. p. 26. Emphasis added.

page 17 note 2 United Nations, Transnational Corporations in World Development: A Re-examination (New York, 1978), p. 1Google Scholar.

page 17 note 3 For a discussion of the NIEO see: Kirkpatrick, C. H. and Nixson, F. I., ‘The New International Economic Order: Trade Policy for Primary Products’, British Journal ofInternational Studies, iii (1977)Google Scholar and ‘UNCTAD IV and the New International Economic Order’, The Three Banks Review, No. 112 (December, 1976)Google Scholar,

page 18 note 1 Ibid. Chapter 3, Section D, pp. 68–69.

page 19 note 1 Ibid. Chapter 3, p. 37.

page 19 note 2 With respect to the latter phenomenon, firms from Brazil, India, Hong Kong, Mexico and the Philippines have begun to invest abroad, although the Report points out (p. 51) that it is not clear what share of the investments originating in these countries is controlled by foreign affiliates of developed market economy TNCs located in these countries.

page 20 note 1 Ibid, p. 53.

page 20 note 2 Hymer, S., The International Operations of National Firms: A Theory of Direct Investment, unpublished Ph.D. Thesis (M.I.T., 1960)Google Scholar.

page 20 note 3 Ibid. Table III-36, p. 240.

page 20 note 4 Great emphasis is placed on the taste transfer process by Barnet, R. J. and Miiller, R. E., Global Reach: The Power of the Multinational Corporations, (New York, 1974)Google Scholar; for a case study see: Langdon, S., ‘Multinational Corporations, Taste Transfer and Underdevelopment: A Case Study from Kenya’, Review of African Political Economy (No. 2, January-April, 1975)CrossRefGoogle Scholar. also Golman, D. and Nixson, F.The Economics of Change in Less Developed Countries (London, 1978)Google Scholar, Chapter 9.

page 21 note 1 Data taken from Table III-18, p. 222. The relative smallness of such figures is clearly illustrated when they are compared with the annual sales of the largest TNCs. In 1976 for example, the total sales of the three largest TNCs were: Exxon — $48.6 billion, General Motors - $47*a billion and Royal Dutch Shell Group - 136–1 billion (Table IV-i, p. 288).

page 21 note 2 Ibid. Table III-8, p. 211.

page 21 note 3 Ibid. Chapter 3, p. 51.

page 22 note 1 Ibid. Chapter 3, p. 47.

page 22 note 2 Calculated from Table III-I4, p. 218.

page 23 note 1 Ibid. p. 48 (based on Table III-56, p. 266).

page 23 note 2 Ibid. p. 48.

page 23 note 3 Ibid. p. 48.

page 23 note 4 Ibid, p, 43. For the United Kingdom, 30 per cent of exports in 1973 were intra-firm, a rise of 4 per cent compared to 1970 (p. 43). For a discussion of the issues relating to intra-firm trade, see: Lall, S., ‘Transfer Pricing by Multinational Manufacturing Firms’, Oxford Bulletin of Economics and Statistics (August, 1973)Google Scholar.

page 23 note 5 Ibid. p. 42.

page 23 note 6 Vernon, R., Storm over the Multinationals; the real issues (London, 1977), p. 31Google Scholar.

page 24 note 1 Ibid. pp. 44–45.

page 24 note 2 Ibid, pp. 39–40.

page 24 note 3 Ibid. Table III-33, p. 237.

page 24 note 4 Calculated from Table III-38, pp. 242–43. In the case of the Federal Republic of Germany over the period 1971–76, the stock of direct investment in manufacturing rose by 126 per cent and the stock of direct investment in the services sector rose by 422 per cent. Over the same period, there was a six-fold increase in West German direct investment in the extractive sector, although it started from the relatively low base of $92 million.

page 25 note 1 Table 111–47, p. 254.

page 25 note 2 More direct evidence on the relative importance of LDGs to TNCs cannot be given as the Report does not present data that would permit the breakdown of total TNC investment n i manufacturing in developed and less developed countries respectively.

page 25 note 3 See: Rowthorn, R., ‘Imperialism in the 1970's — Unity or Rivalry?’, New Left Review, No. 69 (1971)Google Scholar; Reprinted in Radice, H. (ed.), International Firms and Modem Imperialism (London, 1975) pp. 171–2Google Scholar.

page 26 note 1 Tax havens listed are Bahamas, Barbados, Bermuda, Cayman Islands, Netherlands Antilles and Panama (p. 254).

page 26 note 2 Brazil, Mexico, India, Malaysia, Argentina, Singapore, Peru, Hong Kong, the Philippines, Trinidad and Tobago (Table III-47, p. 254).

page 26 note 3 For a discussion of these developments see: Helleiner, G. K., ‘Manufacturing Exports from Less Developed Countries and Multinational Firms’, Economic Journal, 83 (1973)CrossRefGoogle Scholar; G. Adam, ‘Multinational Corporations and Worldwide Sourcing’ in Radice (ed.), op. cit. pp. 89–103.

page 27 note 1 The Report recognizes that this is not a one-way process. Chile, Egypt, Mexico, Peru and Sri Lanka have all recently reduced regulations and controls over TNCs (Ibid. p. 24).

page 28 note 1 It is interesting to note that because ofthis neglect of the TNC s role in the manufacturing sector in LDGs, the Report does not discuss a key issue analyzed extensively over the past few years — the role of TNCs in the transfer of technology to LDCs and the implications of this transfer for economic development. For a discussion of these issues, see: Helleiner, G. K., ‘The Role of Multinational Corporations in the Less Developed Countries’ Trade in Technology’, World Development, iii (1975)Google Scholar; Colman and Nixson, op. cit. Chapter 10. It is relevant to note the work of the United Nations Conference on Trade and Development on the formulation of a code of conduct for the transfer of technology for TNCs.

page 28 note 2 It is perhaps not surprising that most progress has been made in the extractive sector. Natural resources cannot be moved and the technology required for their exploitation is more widely known or more readily available than many manufactuirng sector technologies. The increasing importance ofnational oil companies in the oil producing countries is evidence of this trend.

page 29 note 1 Ibid. p. 85.

page 30 note 1 Ibid. pp. 75–76 (emphasis added). Presumably those who would have to act on the research findings suggesting solutions to the lobbying problem are the very same people (especially in LDCs) who are being lobbied, and it is not being unduly cynical to presume that they benefit from lobbying in various ways and will thus have a vested interest in its continuation. The same comment must apply to many other aspects of the relationship between TNCs and LDCs (with respect to bribery and corruption, for example).

page 30 note 2 This point is of course widely recognized in the dependency literature, in both its ‘structuralist’ and Marxist guises. See for example: Sunkel, O., ‘National Development Policy and External Dependence in Latin America’, Journal of Development Studies, vi (1969)Google Scholar; Cardoso, F. H., ‘Dependent Capitalist Development in Latin America’, Mew Left Review, No. 74 (1972)Google Scholar; T. Dos Santos, ‘The Crisis of Development Theory and the Problem of Dependence in Latin America’ in Bernstein, H. (ed.), Underdevelopment and Development (London, 1973)Google Scholar; Alavi, H., ‘The State in Post-Colonial Societies - Pakistan and Bangladesh’, New Left Review, No. 74 (1972)Google Scholar; Leys, C., Underdevelopment in Kenya (London, 1975).Google Scholar

page 31 note 1 The plethora of proposals is also evidence of the importance attached by other international institutions to the question of a code of conduct. See, for example: OEGD Guidelines, ILO's Tripartite Declaration of Principles Concerning TNCs and Social Policy Issues, UNCTAD's Code of Conduct on the Transfer of Technology, as well as the work of the U.N. Commission on TNCs.