The role of multinational companies in the world economy has expanded rapidly over the last decades. Multinationals both react to and a major driving force within the changing world economy1. The globalisation of markets is responsible for the increase in worldwide foreign direct investments. International inflows of foreign direct investment (FDI) amount for around $560 billion in 2003, representing an increase of around 130 per cent over 1990 levels. In terms of its share of global FDI, the United States of America are a major source country worldwide with a share of five per cent of total global FDI inflows in 2003. Furthermore, the United States of America were the last 25 years on position one of the Inward FDI Potential Index published by the UNCTAD23. These foreign direct investments may play a significant role in helping to transfer leadingedge skills, technologies, management styles and other important practises to host economies4. This report is based on secondary research and will assess the impact of Multinational Enterprises on the U.S. economy and is divided into three parts. First of all, I am going to give in my report a brief overview about foreign direct investments into the United States in order to give a good descriptive base for the main part. In the major part I will point out the costs and benefits of foreign direct investments for the United States both in theoretical and empirical terms. After this analysis my report will suggest policy implications based on the assessment of the costs and benefits. 1 Young, St., Hood, N., Hamil, J. (1988) 2 UNCTAD (2004) 3 See Appendix 4 South Centre (1997)
Table of Contents
1. Introduction
2. Descriptive base of foreign direct investment into the United States
3. The impact of Multinational enterprises in theoretical and empirical terms
3.1 Balance-of-Payments effects
3.2 Employment effects
3.3 Technological effects
3.4 Sovereignty
4. Policy implications
Research Objectives and Topics
This report aims to conduct a comprehensive impact assessment of Multinational Enterprises (MNEs) on the United States economy, exploring both theoretical frameworks and empirical data to evaluate the costs and benefits of foreign direct investment (FDI).
- Analysis of FDI inflows, investment positions, and sectoral distribution within the U.S. economy.
- Evaluation of the influence of MNE activities on the U.S. balance of payments.
- Investigation into the employment effects, considering both job creation and displacement factors.
- Assessment of the technological impact and the implications for U.S. national sovereignty.
- Review of government policy implications regarding inward foreign investment.
Excerpt from the Book
3.1 Balance-of-payments effects
Foreign direct investment effect on a country's balance-of-payments accounts is an important policy issue for most host governments. The balance-of-payments accounts are divided into the two main sections, the current account and the capital account. The current account records transactions involve three categories:
Merchandise trade, refers to the export or import of goods
The export or import of services,
Investment income, refers to income from foreign investments and payments that have to be made to foreigners investing in a country.
The capital account records transactions that involve the purchase or sale of assets. An investment by a foreign company can affect the balance of payments of the USA in three ways:
First, the capital account of the USA benefits from an initial capital inflow when a MNE establishes a foreign subsidiary. However, this is a one-time-only effect and the initial capital inflow that comes with FDI must be the subsequent outflow of earnings from the foreign subsidiary to its parent company. Such outflows have an adverse effect and shown as a debit on the capital account. Stewart described such outflows as an “invisibles” effect in form of interest, profits and dividends paid by foreign subsidiaries to their parent companies abroad.
Summary of Chapters
1. Introduction: This chapter provides an overview of the global role of MNEs and sets the stage for assessing their impact on the U.S. economy through secondary research.
2. Descriptive base of foreign direct investment into the United States: This section presents statistical data and diagrams regarding inward FDI flows, investment positions, and sectoral trends within the USA.
3. The impact of Multinational enterprises in theoretical and empirical terms: This main chapter analyzes how MNEs affect the U.S. economy regarding balance of payments, labor markets, technology transfer, and national sovereignty.
4. Policy implications: The final chapter discusses how U.S. government policies seek to maximize the benefits of MNEs while minimizing potential costs and ensuring national interests are protected.
Keywords
Multinational Enterprises, MNE, Foreign Direct Investment, FDI, United States, Balance of Payments, Employment Effects, Technological Transfer, Sovereignty, Economic Policy, Inward Investment, Globalization, Market Access, Capital Account, Current Account.
Frequently Asked Questions
What is the core focus of this research paper?
The paper assesses the impact of Multinational Enterprises (MNEs) on the economy of the United States, focusing on the costs and benefits of foreign direct investment.
What are the central themes covered in the study?
The study covers FDI statistical trends, balance-of-payments effects, employment consequences, technological influence, and the challenges to national sovereignty.
What is the primary objective of this assessment?
The objective is to provide a descriptive and analytical overview of how MNEs influence the U.S. economy and to suggest policy implications for host governments.
Which research methodology is employed?
The report is based on secondary research, utilizing economic data, statistical reports from organizations like UNCTAD and the U.S. Department of Commerce, and existing theoretical literature.
What does the main part of the report cover?
The main part examines MNE impact through four specific lenses: balance-of-payments, labor market changes, technological dissemination, and political/economic sovereignty.
Which keywords characterize this work?
Key terms include Multinational Enterprises, Foreign Direct Investment, U.S. Economy, Balance of Payments, Employment, Technology Transfer, and Economic Policy.
How does "transfer pricing" affect the U.S. economy according to the author?
Transfer pricing allows MNEs to manipulate internal company transactions to reduce their tax burden, which the author identifies as an "invisible" effect and a form of tax evasion.
Does the study conclude that foreign investment is purely beneficial?
No, the study balances potential benefits—such as technology transfer and job creation—against negative aspects like job displacement in domestic firms and potential loss of economic sovereignty.
- Quote paper
- Roland Urban (Author), 2005, Multinational Enterprises and their hosts: An 'impact' assessment on the United States of America, Munich, GRIN Verlag, https://www.grin.com/document/40939
