UBC POLI 366 MC
Positive externalities arise when
economic actors in the host country that are not directly involved in the transfer of technology from a MNC to a local affiliate also benefit from this transaction
Export-processing zones are industrial areas set aside for MNCs with special rules or subsidies. Foreign firms based in EPZs are primarily allowed to
import components free of taxes, as long as all of their output is exported.
Given the alternatives developing country workers have to choose from, a job in a factory engaged in production for export
is typically the highest paying option.
The central political concern for developing countries regarding MNCs ownership of critical natural-resource industries was that
it compromised the hard-won national autonomy achieved in the struggle for independence.
Locational advantages for market-oriented investments are based on the ideal combination of
large fast growing markets, small number of indigenous firms in that industry and tariff/nontariff barriers.
The most important element of the climate change issue in the context of WTO rules is that
a global climate change regime is based on asymmetrical obligations that severely affect trade competitiveness.
Falling trade barriers and improvements in communications technology have made
it substantially easier for firms to internationalize their activities.
Foreign investment
allows a country to enjoy faster growth than would be possible if it were forced to rely solely on its domestic savings.
Sovereign wealth funds (SWFs) are
government-owned funds that purchase private assets in foreign markets.
In the late 1970s and early 1980s, Latin American countries were vulnerable to
rising debt service ratios.
Historically, developing countries have hosted
some MNC corporations but the amount of FDI has been relatively small.
Climate change has emerged as a pressing trade issue. Current estimates indicate that the world's largest emitter of GHGs (greenhouse gas) is
China.
The dynamics of environmental rules and WTO trade principles have produced a lot of vigorous disagreement. Which of the following statements are not likely to be used by defenders of globalization on this issue?
Current WTO rules give incentives for countries to "race to the bottom" for the lowest possible environmental standards to attract scarce investment funds.
In the 1950s and 1960s the principal sources of foreign capital for developing countries were
FDI and foreign aid and neither was abundant.
Which of the following rules are not trade-related investment measures (TRIMs)?
Full Compensation for expropriated properties.
Historically, international rules governing FDI have been based on the following legal principles:
Governments must compensate the owner for the full value of the expropriated property
The dynamics of environmental rules and WTO trade principles have received greater attention than ever before. Which of the following statements are not likely to be used by environmentalists on this issue?
Income gains from WTO free trade principles are more important than negative environmental consequences.
According to Oatley, which of the following concerns about SWFs seems to be the least important among those held by increasing numbers of American and European policymakers?
National security implications.
The financial crisis and macroeconomic stabilization precipitated deep recessions throughout Asia in 1998. The country that was the worst hit was
Indonesia.
Which of the following regulations were not performance requirements on MNC affiliates?
Limits on repatriation of profits.
Regulatory arbitrage is seen by critics as a "race to the bottom". This means that
MNCs may shift activities out of stringent countries into less stringent countries.
Poverty reduction has not been distributed evenly across the globe. Which of the following statements is incorrect?
Poverty reduction has not been concentrated in a small number of countries.
Which of the following conditionality agreements was not required by the IMF as part of the assistance packages in 1997-98?
Regulation of agricultural enterprises.
Which of the following domestic interest groups in developing countries stood to lose the least from stabilization and structural adjustment?
Rural farmers.
Financial crises became all too common during the 1990s. Each crisis was distinctive but shared the similarities that they
involved some form of fixed exchange rate and a heavily reliance on short-term foreign capital.
IMF conditionality agreements have long been a source of controversy. Which of the following statements is not criticism of these agreements?
These agreements make private foreign lenders more unwilling to invest.
Locational advantages are based on which combination of the following specific country characteristics:
a large reserve of natural resources, a large local market and efficiency opportunities
Weaknesses in the Asian financial systems in the late 1990s was caused by
appreciating currencies and popping real estate bubbles.
Specific assets
are assets that create incentives for vertical integration because it is difficult to write and enforce long-term contracts.
Intangible assets are
assets that are difficult to sell or license to other firms at a price that accurately reflects their true value
"Moral hazard" in the field of international political economy is when
banks believe that the government will bail them out if they suffer large losses on the loans they have made.
When foreign direct investments are made part of a global production network such integration
creates export opportunities that would be otherwise unavailable to indigenous producers.
Creditors were able to push such a large share of the adjustment costs onto the debtor governments because
creditors were better able to solve the free rider problem better than debtors.
MNCs usually enjoy more bargaining power than host countries in low-skilled laborintensive manufacturing industries because
investments in low-skilled manufacturing entail a relatively low amount of fixed capital.
The center piece of macroeconomic stabilization program intended to eliminate the large current-account deficits was the reduction of
budget deficits.
MNC investment in the developing world has increased during the last 30 years
but the majority of this investment has been concentrated in a very few number of developing countries.
The reason why there are no comprehensive international investment rules is that
conflict between capital-exporting advanced industrial countries and the capitalimporting developing countries has prevented agreement on such rules
The expansion of foreign aid programs during the 1960s reflected changing attitudes in advanced industrial countries as largely a product of the dynamics of
decolonialization.
The environmental Kuznets curve
demonstrates at high income levels the positive effects outweigh the negative effects substantially.
Oatley claims that global wage differences are not caused by different labor market regulations but by
different levels of productivity.
East Asian governments drew one overarching lesson from the crisis and crisis management -
do not let the economy become vulnerable to IMF intervention.
Nationalization was common during the late 1960s and the first half of the 1970s. Nationalizations occurred most often in
extractive industries and public utilities.
Horizontal integration occurs when a
firm creates multiple production facilities, each of which produces the same good or goods
Advanced industrial countries have been less vulnerable to foreign domination than developing countries because
foreign affiliates are more likely to face competition from domestic firms in an advanced industrial country.
In most instances, the environmental consequences of economic activity are not taken into account through the market. As a result,
governmental environmental regulation plays an important role in ensuring that economic consequences are more positive than negative.
Globalization has scale effects that arise from the expansion of economic activity. These scale effects are positive because
greater pollution is a small price to pay for greater convenience and cheaper consumption.
In absolute terms, sub-Saharan African total external debt
has much higher debt-service ratios than Latin American ratios in the 1980s.
The politics of MNCs emerge from the competing interests of
host countries and home countries and the MNCs themselves.
We expect to find the most amount of MNC activity when
locational advantages exist, and there are both intangible and specific assets.
A national company becomes an MNC when it
makes a foreign investment.
The large debt burden reduced the incentive that governments have to undertake economic reform because
many of the economic gains from reform accrue to foreign lenders.
"Core labor standards" elaborated in the ILO 1998 declaration do not include
maximum working hours.
Most of the debt of the world's poorest countries is owed to
official lenders like IMF & World Bank.
East Asian economies have been able to run persistent current account surpluses because their governments
pegged their currencies to the dollar at competitive exchange rates and decrease their money supply.
"Cash labor standards" elaborated in the ILO 1998 declaration do not include
prevention of discrimination in employment.
"Hot money" refers to
private capital that can be withdrawn at the first hint of trouble.
Locational incentives are packages host countries offer to MNCs that
provide subsidized loans for that investment.
Obsolescing bargaining power happens when
technology has been significantly transferred to the host country workers.
East Asian governments peg to the dollar because
the United States is their most important trade partner.
Multinational corporations (MNCs) are
the primary drivers of and beneficiaries from globalization.
The system that resulted from the arrangements that came from the IMF intervention in the East Asian financial crisis in the late 1990s has come to be called "Bretton Woods II" because
the system is stable as long as East Asian countries are willing to accumulate US government securities like Europeans did with U.S. gold.
Many MNCs have opted to remove many of their international transactions from the market and place them within a single corporate structure because
they can usually earn substantially higher incomes by internalizing intangible and specific assets.
Transfer pricing takes place when MNCs require the local affiliate
to purchase inputs from other subsidiaries at prices the parent sets to maximize its global profits.
