Small and Medium Enterprises have been globally recognized as vital components of a domestic economy and major contributors to employment generation in a country, regardless of global barriers. SMEs form the lifeblood of any vibrant economy. In an emerging economy like India, SMEs have a significant socio-economic role to ensure overall development of the nation.Steel Sector is an important and booming sector in India. The Indian Steel Industry is undergoing transformation due to the new economic policy and business environment in the post WTO regime. With the delicensing of the entire steel industry and the removal of the restrictions on foreign investments, almost all the important global players have entered in the Indian Industry. It has still a huge scope for either direct entry or through collaborations with the local companies.This paper examines the problems, strategies for investments, competency development, technological up gradation, quality improvement, Govt. Policies, Equity participation by MNCs and overall improvement of this sector in the post WTO regime. The study has been done by using data acquired from an extensive survey of Indian SMEs in the Steel Sector and from the experienced Bankers/ Officials/Policy makers of Govt. of India.
{"title":"Strategic Options for SMEs in Steel Sector in Post WTO Era: An Empirical Study in the Indian Context","authors":"G. Popli, D. Rao","doi":"10.2139/ssrn.1465087","DOIUrl":"https://doi.org/10.2139/ssrn.1465087","url":null,"abstract":"Small and Medium Enterprises have been globally recognized as vital components of a domestic economy and major contributors to employment generation in a country, regardless of global barriers. SMEs form the lifeblood of any vibrant economy. In an emerging economy like India, SMEs have a significant socio-economic role to ensure overall development of the nation.Steel Sector is an important and booming sector in India. The Indian Steel Industry is undergoing transformation due to the new economic policy and business environment in the post WTO regime. With the delicensing of the entire steel industry and the removal of the restrictions on foreign investments, almost all the important global players have entered in the Indian Industry. It has still a huge scope for either direct entry or through collaborations with the local companies.This paper examines the problems, strategies for investments, competency development, technological up gradation, quality improvement, Govt. Policies, Equity participation by MNCs and overall improvement of this sector in the post WTO regime. The study has been done by using data acquired from an extensive survey of Indian SMEs in the Steel Sector and from the experienced Bankers/ Officials/Policy makers of Govt. of India.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"10 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-08-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74472365","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper investigates the impact of economic and commercial diplomacy on the geography of international trade. We replicate a recent study by Rose (2007) extending the analysis to include the year 2006 and 63 importing and exporting countries. Using a gravity model we are able to demonstrate that diplomatic representation via embassies and consulates is not a relevant trade enhancing factor for trade within the OECD. In contrast diplomatic representation is significant in bilateral trade relationships of developing countries as it both facilitates imports and stimulates exports. We discuss some implications of our findings for developing countries especially in view of South--South trade.
{"title":"The Weight of Economic and Commercial Diplomacy","authors":"Mina Yakop, Peter A. G. van Bergeijk","doi":"10.2139/ssrn.1469137","DOIUrl":"https://doi.org/10.2139/ssrn.1469137","url":null,"abstract":"This paper investigates the impact of economic and commercial diplomacy on the geography of international trade. We replicate a recent study by Rose (2007) extending the analysis to include the year 2006 and 63 importing and exporting countries. Using a gravity model we are able to demonstrate that diplomatic representation via embassies and consulates is not a relevant trade enhancing factor for trade within the OECD. In contrast diplomatic representation is significant in bilateral trade relationships of developing countries as it both facilitates imports and stimulates exports. We discuss some implications of our findings for developing countries especially in view of South--South trade.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"29 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-08-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82689992","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We exploit a panel dataset of Hungarian firms merged with product-level trade data for the period 1992-2003 to investigate the relation between firms' trading activities (importing, exporting or both) and productivity. We find important self-selection effects of the most productive firms induced by the existence of heterogeneous sunk costs of trade, for both importers and exporters. We relate these sunk costs of trade to the relationship-specific nature of the trade activities, entailing a certain degree of technological and organizational complexity. We also show that, to the extent that imports and exports are correlated within firms, failing to control for the importing activity leads to overstated average productivity premia of exporters.
{"title":"Trade Complexity and Productivity","authors":"G. Békés, C. Altomonte","doi":"10.2139/ssrn.1463198","DOIUrl":"https://doi.org/10.2139/ssrn.1463198","url":null,"abstract":"We exploit a panel dataset of Hungarian firms merged with product-level trade data for the period 1992-2003 to investigate the relation between firms' trading activities (importing, exporting or both) and productivity. We find important self-selection effects of the most productive firms induced by the existence of heterogeneous sunk costs of trade, for both importers and exporters. We relate these sunk costs of trade to the relationship-specific nature of the trade activities, entailing a certain degree of technological and organizational complexity. We also show that, to the extent that imports and exports are correlated within firms, failing to control for the importing activity leads to overstated average productivity premia of exporters.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"20 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-08-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84438297","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper is interested to apply the general theory of relativity develop by Albert Einstein (1916) into the analysis of international trade. We like to use this great theory of physics to explain the behavior of international trade among nations, at the same time, how a large country with a constant expansion of its economic mass (Ð) can generate a strong trade gravity attraction around it with the traditional trade partners and possible new trade partners. It is possible to be observed in the case of U.S. and China economy. Finally, we like to probe also if trade blocs request at less one of its member need to have a large economic mass (Ð) to generate a strong trade gravity to attract the rest of members into the same trade bloc, we suggest the uses of two trade blocs follow by NAFTA and ASEAN.
{"title":"The General Theory of Trade Relativity","authors":"Mario Arturo Ruiz Estrada","doi":"10.2139/ssrn.1462716","DOIUrl":"https://doi.org/10.2139/ssrn.1462716","url":null,"abstract":"This paper is interested to apply the general theory of relativity develop by Albert Einstein (1916) into the analysis of international trade. We like to use this great theory of physics to explain the behavior of international trade among nations, at the same time, how a large country with a constant expansion of its economic mass (Ð) can generate a strong trade gravity attraction around it with the traditional trade partners and possible new trade partners. It is possible to be observed in the case of U.S. and China economy. Finally, we like to probe also if trade blocs request at less one of its member need to have a large economic mass (Ð) to generate a strong trade gravity to attract the rest of members into the same trade bloc, we suggest the uses of two trade blocs follow by NAFTA and ASEAN.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"6 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-08-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81580468","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The importance of the General Agreement on Tariffs and Trade (GATT), concluded in Geneva on 30 October 1947, applied on a provisional basis from January 1948 until December 1994 and reincarnated since the establishment of the WTO in 1995 in the GATT 1994, cannot be overstated. As it functioned as the major international ‘agreement’ and ‘institution’ at the heart of the multilateral trading system, the GATT accomplished much of its original mandate: the substantial reduction of tariffs and other barriers to trade and the elimination of discriminatory treatment in international commerce.Scholars have described the GATT 1994 as an ‘incomplete contract’ for at least three sets of reasons. First, the GATT 1994 directly binds only certain trade policies, leaving WTO Members significant discretion over domestic regulatory and fiscal policies with a potentially high trade impact. Second, the GATT 1994 employs vaguely worded provisions, leaving the determination of the actual meaning of the agreement subject to adjudication or to further treaty negotiations. Third, the GATT 1994 includes more or less explicitly an ambitious built-in agenda with regard to the liberalisation of Members’ trade policies, conditioning the success of this agenda to Members’ ability to reach a consensus in future negotiating rounds. In this sense, the GATT 1994 is no different from most other international treaties, which suffer from similar ‘birth defects’.The present Chapter addresses a few selected key issues stemming out of the ‘incomplete’ character of the GATT 1994, and which remain controversial. The Chapter is structured in three parts, along the lines of Mavroidis’ subdivision of GATT 1994 disciplines: (i) disciplines on ‘trade instruments’ (measures affecting importation or exportation), (ii) disciplines on ‘domestic instruments’ (measures affecting production or consumption) and (iii) disciplines on ‘state contingencies’ (specific emergencies dealing, for example, with balance of payments, currency exchange and dumping). The Chapter advances that while the GATT has, so far, accomplished a lot in terms of establishing the key principles and approaches to the regulation of trade in goods, it has still further challenges to meet in its not-too-distant future.
{"title":"The GATT and its Challenges at 60","authors":"F. Ortino","doi":"10.2139/ssrn.1462341","DOIUrl":"https://doi.org/10.2139/ssrn.1462341","url":null,"abstract":"The importance of the General Agreement on Tariffs and Trade (GATT), concluded in Geneva on 30 October 1947, applied on a provisional basis from January 1948 until December 1994 and reincarnated since the establishment of the WTO in 1995 in the GATT 1994, cannot be overstated. As it functioned as the major international ‘agreement’ and ‘institution’ at the heart of the multilateral trading system, the GATT accomplished much of its original mandate: the substantial reduction of tariffs and other barriers to trade and the elimination of discriminatory treatment in international commerce.Scholars have described the GATT 1994 as an ‘incomplete contract’ for at least three sets of reasons. First, the GATT 1994 directly binds only certain trade policies, leaving WTO Members significant discretion over domestic regulatory and fiscal policies with a potentially high trade impact. Second, the GATT 1994 employs vaguely worded provisions, leaving the determination of the actual meaning of the agreement subject to adjudication or to further treaty negotiations. Third, the GATT 1994 includes more or less explicitly an ambitious built-in agenda with regard to the liberalisation of Members’ trade policies, conditioning the success of this agenda to Members’ ability to reach a consensus in future negotiating rounds. In this sense, the GATT 1994 is no different from most other international treaties, which suffer from similar ‘birth defects’.The present Chapter addresses a few selected key issues stemming out of the ‘incomplete’ character of the GATT 1994, and which remain controversial. The Chapter is structured in three parts, along the lines of Mavroidis’ subdivision of GATT 1994 disciplines: (i) disciplines on ‘trade instruments’ (measures affecting importation or exportation), (ii) disciplines on ‘domestic instruments’ (measures affecting production or consumption) and (iii) disciplines on ‘state contingencies’ (specific emergencies dealing, for example, with balance of payments, currency exchange and dumping). The Chapter advances that while the GATT has, so far, accomplished a lot in terms of establishing the key principles and approaches to the regulation of trade in goods, it has still further challenges to meet in its not-too-distant future.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"7 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-08-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78194063","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Recent Melitz-type (2003) intra-industry heterogonous trade models argue that a firm's productivity has significant effects on the firm's exports. This paper examines how a firms credit constraints as well as its productivity affect its export decisions. We imbed the firm's credit constraints into a Melitz-type general-equilibrium model by endogenizing the probability of the success of firm-specific projects. We show that, all else equal, it is easier for firms to enter the export market if (1) the probability of the success of their project is higher and consequently they have easier access to external finance from financial intermediaries; or (2) they have alternative sources, other than from financial intermediaries, to obtain funds. We test these theoretical hypotheses using firm-level data from Chinese manufacturing industries and find strong evidence supporting the predictions of the model.
{"title":"Exports, Productivity, and Credit Constraints: A Firm-Level Empirical Investigation of China","authors":"Zhiyuan Li, Miaojie Yu","doi":"10.2139/ssrn.1461399","DOIUrl":"https://doi.org/10.2139/ssrn.1461399","url":null,"abstract":"Recent Melitz-type (2003) intra-industry heterogonous trade models argue that a firm's productivity has significant effects on the firm's exports. This paper examines how a firms credit constraints as well as its productivity affect its export decisions. We imbed the firm's credit constraints into a Melitz-type general-equilibrium model by endogenizing the probability of the success of firm-specific projects. We show that, all else equal, it is easier for firms to enter the export market if (1) the probability of the success of their project is higher and consequently they have easier access to external finance from financial intermediaries; or (2) they have alternative sources, other than from financial intermediaries, to obtain funds. We test these theoretical hypotheses using firm-level data from Chinese manufacturing industries and find strong evidence supporting the predictions of the model.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"28 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-08-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81434419","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper develops a methodology for trade policy analysis of costs and benefits of alternative regional integration scenarios, based on the disaggregated gravity equation, and applies it to calculate the impact of the EU enlargement on integration strategies of non-member countries. In particular, the paper measures the impact of the 2004 EU enlargement from the standpoint of Ukraine – a country that has been lost in transition; Ukraine moves away from CIS, but does not get closer to EU. This angle allows estimating the costs of non-integration that occurred due to trade and investment diversion, and forgone opportunity to carry our structural changes in the Ukrainian economy. According to the results, EU accession would have had a small positive effect on total export volumes but would have dramatically changed the composition of Ukrainian exports by almost doubling exports of manufactured goods by 2007. The costs of non-integration accumulate towards the end of the investigated period. Projecting the results into the future clearly indicates that the benefits of EU accession for Ukraine would have been unambiguously positive and would overweight benefits of CIS integration.
{"title":"EU Integration and Trade: A Look from the Outside of the EU Eastern Border","authors":"Oleksandr Shepotylo","doi":"10.2139/ssrn.1458277","DOIUrl":"https://doi.org/10.2139/ssrn.1458277","url":null,"abstract":"This paper develops a methodology for trade policy analysis of costs and benefits of alternative regional integration scenarios, based on the disaggregated gravity equation, and applies it to calculate the impact of the EU enlargement on integration strategies of non-member countries. In particular, the paper measures the impact of the 2004 EU enlargement from the standpoint of Ukraine – a country that has been lost in transition; Ukraine moves away from CIS, but does not get closer to EU. This angle allows estimating the costs of non-integration that occurred due to trade and investment diversion, and forgone opportunity to carry our structural changes in the Ukrainian economy. According to the results, EU accession would have had a small positive effect on total export volumes but would have dramatically changed the composition of Ukrainian exports by almost doubling exports of manufactured goods by 2007. The costs of non-integration accumulate towards the end of the investigated period. Projecting the results into the future clearly indicates that the benefits of EU accession for Ukraine would have been unambiguously positive and would overweight benefits of CIS integration.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"32 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-08-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87147129","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper makes an attempt to use GTAP model to understand the interplay between the agricultural trade liberalization and land degradation in India. Like any other developing country, soil erosion happens to be one of the principal environmental problems caused by agricultural production in India. In this paper, our attempt is to simulate the on-site productivity impacts of erosion, along with standard intersectoral and inter-regional economic effects of trade liberalization. The deeper and fuller agricultural trade liberalization opens up opportunities for India’s agriculture. Our result indicates that paddy, wheat, and other agriculture are the sectors in India where production would expand following liberalisation while there would be a fall in production in cereal grain sector and livestock sector. Overall, there is a small increase in India’s welfare to the tune of US $ 360 millions. While India’s agricultural expands due to opening up of opportunities, soil degradation increases with increased use of land. To what extent, the above result would change if we incorporate land degradation feedback mechanism in our analysis? Our results indicates that agricultural trade liberalisation reduces land productivity, but the effects are weak to negate the benefits of India’s welfare from agricultural trade liberalisation.
{"title":"Land Degradation and Trade Liberalization: An Indian Perspective","authors":"S. Pohit","doi":"10.2139/ssrn.1457666","DOIUrl":"https://doi.org/10.2139/ssrn.1457666","url":null,"abstract":"This paper makes an attempt to use GTAP model to understand the interplay between the agricultural trade liberalization and land degradation in India. Like any other developing country, soil erosion happens to be one of the principal environmental problems caused by agricultural production in India. In this paper, our attempt is to simulate the on-site productivity impacts of erosion, along with standard intersectoral and inter-regional economic effects of trade liberalization. The deeper and fuller agricultural trade liberalization opens up opportunities for India’s agriculture. Our result indicates that paddy, wheat, and other agriculture are the sectors in India where production would expand following liberalisation while there would be a fall in production in cereal grain sector and livestock sector. Overall, there is a small increase in India’s welfare to the tune of US $ 360 millions. While India’s agricultural expands due to opening up of opportunities, soil degradation increases with increased use of land. To what extent, the above result would change if we incorporate land degradation feedback mechanism in our analysis? Our results indicates that agricultural trade liberalisation reduces land productivity, but the effects are weak to negate the benefits of India’s welfare from agricultural trade liberalisation.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"77 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-08-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73421816","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Exporters are few-less than one-fifth among U.S. manufacturing firms-and are larger than non-exporting firms-about 4-5 times more total sales per firm. These facts are often cited as support for models with economies of scale and firm heterogeneity as in Melitz (2003). The authors find that the basic Melitz model cannot simultaneously match the size and share of exporters given the observed distribution of total sales. Instead exporters are expected to be between 90 and 100 times larger than non-exporters. It is easy to reconcile the model with the data. However, a lot of variation independent of firm size is needed to do so. This suggests that economies of scale play only a minor role in determining a firm's export status. The authors show that the augmented model also has markedly different implications in the event of a trade liberalization. Most of the adjustment is through the intensive margin and productivity gains due to reallocation are halved.
{"title":"Economies of Scale and the Size of Exporters","authors":"Roc Armenter, Miklós Koren","doi":"10.2139/ssrn.1448001","DOIUrl":"https://doi.org/10.2139/ssrn.1448001","url":null,"abstract":"Exporters are few-less than one-fifth among U.S. manufacturing firms-and are larger than non-exporting firms-about 4-5 times more total sales per firm. These facts are often cited as support for models with economies of scale and firm heterogeneity as in Melitz (2003). The authors find that the basic Melitz model cannot simultaneously match the size and share of exporters given the observed distribution of total sales. Instead exporters are expected to be between 90 and 100 times larger than non-exporters. It is easy to reconcile the model with the data. However, a lot of variation independent of firm size is needed to do so. This suggests that economies of scale play only a minor role in determining a firm's export status. The authors show that the augmented model also has markedly different implications in the event of a trade liberalization. Most of the adjustment is through the intensive margin and productivity gains due to reallocation are halved.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"6 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-08-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84764815","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The 2008 election rekindled debate about whether US multinationals shift technology across borders and relocate production in ways that might harm workers and communities at home. President Obama now pledges to end tax breaks for corporations that ship jobs overseas. The preoccupation about the behavior of American multinationals takes three forms: (1) that US-based multinational corporations may follow a strategy that leads them to abandon the home economy, leaving the workers and communities to cope on their own with few appealing alternatives after the multinationals have left; (2) worse, that US-based multinational corporations may not just abandon home sites but drain off capital, substitute production abroad for exports, and "hollow out" the domestic economy in a zero-sum process that damages those left behind; and (3) worst, that US-based multinational corporations may deploy a rent-gathering apparatus that switches from sharing supranormal profits and externalities with US workers and communities to extracting rents from the United States. Each contains a hypothetical outcome that can be compared with contemporary evidence from the United States and other home countries. This working paper shows that multinational corporations do not locate their operations in a zero-sum manner that favors host economies at the expense of the home economy. The two-way flow of inward and outward investment does not create an outcome that can be reasonably characterized in any way as "hollowing out" the home economy. The evidence consistently shows that the expansion of MNC operations abroad and the strengthening of MNC operations in the home country are complementary, and the answer to the counterfactual--would the home country be better off, or would workers in the home country be better off, if home-country MNCs were prevented from engaging in outward investment?--is indisputably negative. Making it more difficult to engage in outward investment would not strengthen the home economy in the United States. Quite the contrary, placing obstacles in the way of US multinationals using the United States as the center for conducting their global operations would leave them, their suppliers, their workers, and the communities where they are located worse off and less competitive in the world economy.
{"title":"American Multinationals and American Economic Interests: New Dimensions to an Old Debate","authors":"T. Moran","doi":"10.2139/ssrn.1437673","DOIUrl":"https://doi.org/10.2139/ssrn.1437673","url":null,"abstract":"The 2008 election rekindled debate about whether US multinationals shift technology across borders and relocate production in ways that might harm workers and communities at home. President Obama now pledges to end tax breaks for corporations that ship jobs overseas. The preoccupation about the behavior of American multinationals takes three forms: (1) that US-based multinational corporations may follow a strategy that leads them to abandon the home economy, leaving the workers and communities to cope on their own with few appealing alternatives after the multinationals have left; (2) worse, that US-based multinational corporations may not just abandon home sites but drain off capital, substitute production abroad for exports, and \"hollow out\" the domestic economy in a zero-sum process that damages those left behind; and (3) worst, that US-based multinational corporations may deploy a rent-gathering apparatus that switches from sharing supranormal profits and externalities with US workers and communities to extracting rents from the United States. Each contains a hypothetical outcome that can be compared with contemporary evidence from the United States and other home countries. This working paper shows that multinational corporations do not locate their operations in a zero-sum manner that favors host economies at the expense of the home economy. The two-way flow of inward and outward investment does not create an outcome that can be reasonably characterized in any way as \"hollowing out\" the home economy. The evidence consistently shows that the expansion of MNC operations abroad and the strengthening of MNC operations in the home country are complementary, and the answer to the counterfactual--would the home country be better off, or would workers in the home country be better off, if home-country MNCs were prevented from engaging in outward investment?--is indisputably negative. Making it more difficult to engage in outward investment would not strengthen the home economy in the United States. Quite the contrary, placing obstacles in the way of US multinationals using the United States as the center for conducting their global operations would leave them, their suppliers, their workers, and the communities where they are located worse off and less competitive in the world economy.","PeriodicalId":14396,"journal":{"name":"International Trade","volume":"98 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2009-07-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88513836","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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