Deck 9: The Politics of Multinational Corporations

Question 1

According to projections used by Oatley,SWFs could grow to $10 trillion by 2012.This would make them

A) medium, but with five percent of total global assets, not yet significant players in global finance.
B) small, and but with only two percent of total global assets, almost insignificant players in global finance.
C) large, but with ten percent of total global assets, a major force to be reckoned with as players in global finance.
D) medium, but with seven percent of total global assets, somewhat more important as players in global finance.
E) large, but with two percent of total global assets, not dominant players in global finance.

Answer 1

E

Question 2

Obsolescing bargaining power happens when

A) the MNC can easily remove its fixed investment from the country.
B) uncertainty about of the return on the investment stays high.
C) technology has been significantly transferred to the host country workers.
D) technology has not been significantly transferred to the host country workers.
E) the MNC has monopoly control over the necessary capital.

Answer 2

C

Question 3

Only France and Japan

A) have been more open to FDI than other advanced industrial countries.
B) required explicit government approval for manufacturing investments by foreign firms.
C) excluded foreign firms from owning industries deemed "critical".
D) have been more restrictive of FDI than developing countries.
E) prohibit foreign firms from participating in defense-related industries.

Answer 3

B

Question 4

Nationalization was common during the late 1960s and the first half of the 1970s.Nationalizations occurred most often in

A) banking and transportation.
B) banking and public utilities.
C) transportation and extractive industries.
D) banking and extractive industries.
E) extractive industries and public utilities.

Question 5

Historically,international rules governing FDI have been based on the following legal principles:

A) Foreign investments are private property but are treated less favorably than domestic private property.
B) Governments have no right to expropriate foreign investments for a public purpose.
C) Governments must compensate the owner for the full value of the expropriated property.
D) The home country of the foreign investors must forcefully retaliate in the disputed host country's economy.
E) Expropriation, like foreign loan defaults, must be punished with no new investment for seven years.

Question 6

In the immediate postwar era,according to Oatley,the fifteen largest agricultural MNCs controlled approximately

A) 10% of developing countries' exports.
B) 30% of developing countries' exports.
C) 50% of developing countries' exports.
D) 80% of developing countries' exports.
E) 95% of developing countries' exports.

Question 7

Some American and European policymakers fear that governments intend to use their SWFs to achieve

A) prestige rather than political objectives.
B) political rather than economic objectives.
C) social rather than economic objectives.
D) economic rather than political objectives.
E) domestic rather than international objectives.

Question 8

Which of the following regulations were not performance requirements on MNC affiliates?

A) Required percentage of inputs from domestic suppliers.
B) Required percentage of exports.
C) Required percentage of research and development inside host country.
D) Limits on repatriation of profits.
E) Limits on access to local capital markets.

Question 9

Advanced industrial countries have been less vulnerable to foreign domination than developing countries because

A) developing countries have larger economies.
B) developing countries have more diversified economies.
C) foreign affiliates are more likely to face competition from domestic firms in a developing country.
D) developing countries have felt less compelled to regulate MNC activity.
E) foreign affiliates are more likely to face competition from domestic firms in a advanced industrial country.

Question 10

MNCs usually enjoy more bargaining power than host countries in low-skilled labor-intensive manufacturing industries because

A) only a few developing countries have excess low skilled labor.
B) investments in low-skilled manufacturing entail a relatively low amount of fixed capital.
C) investments in low-skilled manufacturing cannot be readily moved out of a particular country.
D) technology in many manufacturing industries changes rapidly and, therefore, is easily transferred to host workers.
E) like natural-resource investments, manufacturing investments can become hostages.

Question 11

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?

A) National security implications.
B) Lack of transparency in operations.
C) Absence of a common regulatory framework.
D) Lack of knowledge of what motivates their purchases.
E) Potentially destabilizing trading activity.

Question 12

The central political concern for developing countries regarding MNCs ownership of critical natural-resource industries was that

A) it compromised the hard-won national autonomy achieved in the struggle for independence.
B) governments would be unable to use these resources to promote ISI strategies.
C) extractive industries did not usually transfer technology.
D) extractive industries used primarily foreign workers so that skills were obtained by domestic workers.
E) extractive industries accelerated the depletion of non-renewable resources.

Question 13

Governments that have refrained from promoting active industrial policies have generally

A) not restricted foreign ownership of sensitive industries.
B) not restricted foreign ownership of cutting edge high technology industries.
C) attempted to protect national firms from competition by restricting foreign investment.
D) restricted foreign ownership of national security related industries.
E) less open to FDI than most developing countries.

Question 14

The politics of MNCs emerge from the competing interests of

A) host countries of MNCs.
B) home countries of MNCs.
C) the MNCs themselves.
D) host countries and home countries.
E) host countries and home countries and the MNCs themselves.

Question 15

Locational incentives are packages host countries offer to MNCs that

A) decrease the profits of a particular investment.
B) increase the costs of that investment.
C) increase the risk of that investment.
D) provide subsidized loans for that investment.
E) depreciate their investments at slower rates.

Question 16

The two largest foreign investors during the last 140 years,the United States and Great Britain,have also been

A) the most closed to inward foreign investment.
B) reluctant to invite retaliation that would make to harder for their own firms to invest abroad.
C) the most open to invite retaliation that would make to easier for their own firms to invest abroad.
D) more narrowly based on host-country issues.
E) the most closed to outward foreign investment.

Question 17

Export-processing zones are industrial areas set aside for MNCs with special rules or subsidies.Foreign firms based in EPZs are primarily allowed to

A) import components free of taxes, as long as all of their output is exported.
B) pay workers less than elsewhere in the country.
C) pay workers more than elsewhere in the country.
D) Ignore safety and environmental regulations.
E) import components for assembly free of taxes, as long as none of their output is exported.

Question 18

The reason why there are no comprehensive international investment rules is that

A) governments have never tried to create multilateral rules.
B) the OCED and WTO rules have already created effective comprehensive guidelines.
C) conflict between capital-exporting advanced industrial countries and the capital-importing developing countries has prevented agreement on such rules.
D) conflict between capital-exporting developing countries and the capital-importing advanced industrial countries has prevented agreement on such rules.
E) MNCs have already created rules on their own initiative.

Question 19

Different attitudes about the government's role in the national economy have translated into different approaches to FDI.According to Oatley,at this time we are likely to see

A) a shift back to more restrictive practices in developing countries.
B) most developing countries becoming more vulnerable to foreign domination.
C) developing countries still attracting more foreign investment in natural resources than manufacturing.
D) no evidence of an impending shift back toward interventionist strategies.
E) developing countries continue to make it harder for foreign firms to participate in the local economy.

Question 20

Sovereign wealth funds (SWFs)are

A) royalty-owned funds that purchase private assets in foreign markets.
B) royalty-owned funds that purchase public assets in foreign markets.
C) government-owned funds that purchase public assets in domestic markets.
D) government-owned funds that purchase private assets in domestic markets.
E) government-owned funds that purchase private assets in foreign markets.

Question 21

The Multilateral Agreement on Investment (MAI)began to be negotiated in the OECD in May 1995 to further liberalize FDI and provide greater security to MNCs.It was based on two central principles:

A) national treatment and most favored nation.
B) domestic favoritism and most favored nation.
C) national treatment and least favored nation.
D) fair compensation and remittance rights.
E) national treatment and fair compensation.

Question 22

The tension inherent in overlapping decision-making frameworks shapes the domestic and international politics of MNCs.

Question 23

The more the host country has exclusive control over the things the MNC values,the more bargaining power the MNCs has.

Question 24

South Korea and Taiwan imposed more restrictions on MNCs than Singapore and Hong Kong.

Question 25

Even though both developed and developing countries regulate MNC activities,developed countries have relied far more heavily on such practices.

Question 26

Describe and explain the political and economic concerns expressed by the growing importance of sovereign wealth funds.

Question 27

Most developing countries entered the postwar period as primary-commodity exporters often controlled by MNCs who kept the profits the exports generated.

Question 28

When a MNC can no longer easily remove its fixed investment from a host country and the investment becomes a hostage it is called an "obsolescing bargain".

Question 29

Discuss how expropriation of MNCs during the 1960s and 1970s served both political and economic objectives in developing countries.

Question 30

Nationalizations in the late 1960s and first half of the 1970s occurred most often in the extractive industries and the banking sector.

Question 31

The International Trade Organization's (ITO)experience with international legal protection for foreign investments is important because

A) it firmly established the Calvo doctrine as a legal mandate.
B) its success established international rules governing FDI.
C) the GATT rules became the prevailing guide since they had a lot to say about foreign investment.
D) its failure reflects a basic conflict that has dominated international discussions about FDI rules to this day.
E) support for its investment articles from American business proved a major reason for the ITO's success in gaining US congressional approval.

Question 32

Which of the following rules are not trade-related investment measures (TRIMs)?

A) Domestic-content rules
B) Trade balancing measures that require a firm's imports be offset by its exports
C) Restrictive foreign exchange practices
D) Constraints on the ability to link investment incentives to export-performance requirements
E) Full Compensation for expropriated properties

Question 33

Most developing countries have placed fewer restrictions on MNCs since the 1980s.

Question 34

According to Oatley,no American and European policymakers fear that governments intend to use their sovereign wealth funds to achieve political rather than economic objectives.

Question 35

The United Nations' Resolution on Permanent Sovereignty over Natural Resources was passed in 1962.This resolution

A) recognized the right of host countries to exercise full control over foreign firms extracting those resources.
B) recognized the right of foreign firms to exercise full control over their operations extracting those resources.
C) recognized the right of foreign firms to determine the appropriate compensation in the event of expropriation.
D) was formally rejected by capital-exporting governments in 1982.
E) was successfully re-negotiated in 1992.

Question 36

No matter how "globalized" the world economy becomes,economic production will always employ resources drawn from local communities.

Question 37

How has globalization of the world economy changed the political and economic stakes for MNCs and advanced industrial countries?

Question 38

Explain the political dynamics in newly independent developing countries after WW II with MNCs that controlled most of their exports.

Question 39

Explain the costs and benefits of Japan's unique experience with MNC regulation.How did it differ from other East Asian governments?

Question 40

Regulatory arbitrage is seen by critics as a "race to the bottom".This means that

A) MNCs may shift activities out of stringent countries into less stringent countries.
B) MNCs may shift activities out of less stringent countries into more stringent countries.
C) MNCs will demand no regulations on their activities.
D) MNCs will refuse to follow regulations that are imposed on domestic firms.
E) countries will not compete with each other for the least regulations on MNCs.

Question 41

Explain the pros and cons of no comprehensive rules governing the activities of MNCs.Which side gains more from no rules - home countries or host countries?

Question 42

Explain and analyze the costs and benefits of locational incentives to attract jobs and FDI in advanced industrial states.What role do local versus national governments play?

Question 43

Describe and explain conditions of the shifting balances of bargaining power between host countries and MNCs.Which side seems to be gaining power recently?

Question 44

What is meant by the phrase "the race to the bottom" in MNC regulation? Can governments realistically hold domestic firms to higher standards of working conditions and environmental protection than MNCs? How?

Question 45

Explain and compare the unique and competing interests of host and home countries of MNCs as well as those of the MNCs themselves.