Corporations and the State

As Frieden and Rogowski mention in the very first pages of their article, the first consideration of international business must be cost versus reward. US corporations with vast overseas investments, such as Apple or McDonalds, must always first consider what the cost to their bottom line will be. McDonald’s has mostly dodged a large drain on profits, by establishing supply chains through their host countries. In this way they avoid excessive import/export duties on their products. Apple, on the other hand, liaises very publicly with their host countries’ government to achieve more favorable agreements for their products.

                The US likes to keep an eye on the international agreements and transaction that US-based corporations engage in, as that is shaped by, and alters in turn the US approach to dealing with international corporations interested in exporting their goods to the US. Many of these trades are negotiated under existing international trade treaties and agreements, such as NAFTA. Enforcement of these agreements, as with many multilateral international documents, is difficult to enforce, since there is no higher body that can exact firm punishment on those who break from the rules agreed upon in the treaty. This leaves much of the enforcement up to ‘great powers’ like the US. We have seen in recent months how changes with one signees’ policies can shake the foundation of the agreements. The UK with their ongoing exit from the European Union, and the United States with our increased demands on our trading partners are the most prominent examples in the news cycles.

                So what is there to be done? The behavior of nations affects their corporations, and the activities of the corporations catches the attention of the government, both of whom want to max their profits, either from taxes or sales. To that end, in a free market system, which theoretically is the basis of the international market, what effect would a higher power have on global corporations and their governments? We like things to be fair, unless there is a possibility that the scale will tip in our own direction, at which point humans become quite selfish. A global overseer for trade would, in this student’s opinion, destroy the free market, though things might be more balanced. Determining fairness is quite the steep task as well, since some nations produce nearly-identical goods, while others have singular, often agricultural, contributions to the world market. As we have been discussing in class for the last several weeks, It would likely take a massive systemic shift in order for any kind of governing body not to create more chaos as countries fight the impositions on their autonomy.  Corporations too don’t have a very bad deal right now, though they like to complain to the contrary. Apple, to return to an earlier example, has gotten away with housing enough of their operations in Ireland to avoid paying higher taxes in the US, although that may come crashing down sooner rather than later.