Introduction
Foreign direct investment on behalf of the McGill corporation (MGC) will provide Concordia with a range of benefits on the condition that the deal is drafted to meet the need of both parties involved. The scheme market is on a stable increase, as the demand for scheme-based products rises in the developed countries of the North. It appears beneficial for the state of Concordia and President Woodworth to take this niche and utilize the current landscape to the nation’s advantage. If an agreement is not reached, this position is likely to be occupied by one of Concordia’s neighbors.
Moreover, current observations suggest that the lack of state-regulated international policies of scheme export is likely to result in the expansion of black-market activities and corresponding violence. However, these risks do not imply that a one-sided deal can be accepted. This report outlines the principles upon which an international trade agreement between Concordia and MGC is to be arranged.
Analysis of the Case
Economic Aspect
The economic value of the scheme is undeniable in the current environment. Concordian soil possesses 1/10 of the known scheme reserves of the world, which makes it a valuable supplier to the market of the North. Unlike many nations within the same region, Concordia’s economy is stable, as the annual GDP growth has amounted to 8%, while the external debt is below 13% of the GDP. This data suggests that the country’s economic climate is favorable for entrepreneurial activities. However, the current statistics indicate significant room for improvement in terms of the country’s economic growth.
According to Oatley (2019), international trade has become the cornerstone of sustainable development in the age of globalization. For emerging economies, such as Concordia, foreign direct investment is instrumental in this regard. However, the current trade turnover is within the range of 15-17% of the GDP. MGC possesses immense financial opportunities, being one of the world’s five largest corporations. Its contribution to the Concordian economy can double the trade income for Concordia through the direct channel of scheme export.
Political Aspect
In the current complex environment, there is a certain political dimension to the case. Brawley (2005) writes that, as per the realists’ views, international trade represents a pursuit of power rather than wealth. In a way, MGC’s interest in Concordia can be viewed as a manifestation of this phenomenon. The company already processes approximately 38% of the global scheme. If an agreement with Concordia is reached, MGC’s share of the global market will be near half of the world’s scheme operations, of which 20% will likely be under its direct control. The political aspect can be viewed in both local and global domains. From a local perspective, Concordia will become strongly dependent on MGC’s capital, thus increasing foreign influence on local policies.
Globally, the corporation will approach the status of scheme monopoly, which is politically controversial, considering its military application. The political interests of MGC are obvious and correspond with Brawley’s (2005) vision of international trade: the objective is to “make a profit by taking capital from one country to another” (p. 271). Highly developed nations of the North have a stronger demand for resources, while, in the case of the scheme, they are unable to meet it on their own (Brawley, 2005).
Therefore, MGC is looking for a way to become the leading intermediary between African supplies and Northern consumers of the scheme. Its interests in Concordia can be explained by the country’s relative stability in terms of political relations. While Katanga and Inca are torn by internal conflicts over the scheme, Concordia has made considerable political progress since the 1986 Civil War. Accordingly, the nation’s attractiveness to MGC is not to be underestimated. President Woodworth can effectively utilize Concordia’s advantages to reach a better agreement.
Social Aspect
At the same time, Concordia’s government should consider the social aspect of the matter and defend the interests of the nation’s residents. Without attention to it, Concordia risks following the pattern of Eastern European countries described by Brawley (2005). These emerging nations provided industrialized and urbanized economies of the West with grain. As the needs of the latter were met, its development was sustained. Simultaneously, grain providers were unable to reach the required levels of growth and the gap widened. In the process, only the population of the West became richer, whereas only the landowners of Eastern Europe enjoyed the benefits of trade (Brawley, 2005). If this example is extrapolated to the matter at hand, only those who are directly involved in scheme extraction and export will see the advantages.
It is imperative to prevent economic disparities through effective social policies encompassing broader groups of Concordia’s population. This paradigm is dictated by the modern principle of liberalism, according to which international trade is not just an instrument of survival and profits (Brawley, 2005). Such agreements should serve to meet more sophisticated demands of each nation related to social policies, education, well-being, and security.
Implications
Positive
The potential deal with MGC presents an array of advantages for Concordia. First of all, international trade has become a vital component of sustainable development in the 21st century (Brawley, 2005). The prospect of a scheme deal with MGC corresponds with the needs of both parties. From one perspective, Concordia requires a higher level of foreign direct investment into its economy. The country successfully overcame the perturbations of the 20th century and took a stable position in terms of economic development. However, it is vital to ensure that the economic capacity of the nation is not exhausted, which is highly likely without strong foreign partnerships (Oatley, 2019).
Unless new sources of stable income are established, Concordia is likely to face stagnation, which, in turn, may push it along the same path as Katanga and Inca. Effective organization of scheme production will translate these activities into a legal and highly beneficial endeavor, which would prevent the development of a black market. This way, scheme export will be controlled and regulated within the legislative framework of Concordia.
Negative
On the other hand, history has seen examples of similar deals, which merely exploited the exporter for the benefit of the importing side. MGC pursues its own political goals, which lie in the Northern hemisphere (Oatley, 2019).
The corporation wants to access Concordia’s immense scheme reserves to exercise control and, most of all, meet the demand of the Northern states. Brawley (2005) discusses a history of similar trade relationships, which left the exporter in stagnation or even degradation for the sake of the further growth of already developed countries. Unless serious measures are taken, MGC’s scheme operations may leave the local population on the margins of the enterprise. Even though scheme extraction is not as efficient as it could be within the potential partnership, it still channels revenues into Concordia’s budget. If the realist perspective of trade relations prevails, Concordia will not see any increase in profits, while its national resources will be sacrificed for MGC’s power ambitions.
Verdict
Such a serious endeavor cannot be inherently positive for both sides and requires thoughtful consideration on behalf of President Woodworth and her office. The benefits of MGC are obvious and lie primarily in economic and political domains. If access to Concordia’s scheme reserves is granted, the corporation is likely to hold the majority of the world’s reserves. Moreover, MGC will obtain serious leverage on the people and the government of Concordia (Henin, 2021). There are abundant examples of uncontrolled exploitation of emerging countries’ resources to the developed nations’ advantage.
Nevertheless, a considerate approach from Concordia’s government will help find the right balance. The nation possesses a comparative advantage in terms of scheme production. As its neighbors are ravaged by internal conflicts, scheme extraction there would be more complicated. Additional expenses on security make these unstable countries less profitable – and, therefore, undesirable – for MGC. Ultimately, the scheme to deal with MGC is highly advisable for Concordia if corresponding social, environmental, and economic policies are discussed.
Policies, Terms, and Conditions
The agreement between MGC and Concordia must be comprehensive and not limited to the domain of direct scheme extraction and export. Multinational corporations actively utilize the imperfections of the market to ensure capital mobility (Henin, 2021). As such, all sides need to acknowledge the agency of such corporations. This idea suggests that they possess sufficient resources to influence local political, economic, and social processes on a profound level. The draft of the agreement is to reflect this agency, outlining specific sectors in which MGC’s influence is required or, on the contrary, restricted.
Trade Exclusivity Clause
Concordia’s natural reserves of the scheme are considerable and are capable of meeting MGC’s demand. The scheme represents a specific asset within this envisaged trade relationship, meaning that it will serve as an incentive for vertical integration (Oatley, 2019). When the production starts and MGC extraction facilities are inaugurated, the corporation may rearrange the terms of the deal in its favor. In this scenario, Condordia’s scheme production will already be incorporated into the corporation’s framework, thus compromising local agency and production independence. If Concordia objects to the change, MGC is likely to leverage the country by addressing its neighbors for additional scheme supplies. In this regard, bilateral exclusivity in the contract will defend both parties’ interests. Concordia will officially become the corporation’s single reliable provider of the scheme in the region, thus leaving more room for good-faith relations for both sides.
Socioeconomic Policy
As discussed above, the partnership cannot be centered only around the process of scheme extraction, processing, and export. The benefits for Concordia should be comprehensive and encompass the social aspect, as well. Hayek’s neoclassical paradigm dictates that markets should be able to self-correct (Henin, 2021). However, multinational corporations’ assets are immense in comparison to developing economies and often put the local population in an unfavorable position. Oatley (2019) suggests that while state regulations of foreign investment are required to ensure that local goals are attained, they should not be aggressive.
India attempted to enforce strict regulations on foreign-owned capital in the 1970s, which resulted in a significant outflow (Oatley, 2021). Instead, Concordia needs to ensure that the partnership is executed in the spirit of equality and cooperation.
The proposed agreement will allow MGC to retain the majority share of the local enterprise on the condition that a sufficient number of jobs is provided for the local population. The clause concerns high-level positions, as well, to ensure that local workers’ role is not limited to unqualified jobs. Another major component includes investment in Concordians’ education opportunities by MGC. The corporation will finance local institutions to help them establish partnerships with the leading foreign universities. Such an approach will prepare a generation of qualified local specialists who will contribute to the MGC’s success. As a result, the increase in the Concordian participation in the endeavor will be neither forced nor counterproductive.
Conclusion
Ultimately, the prospect of an official partnership agreement between Concordia and MGC demonstrates high positive potential. From the nation’s perspective, it is vital to find a stable channel of scheme export, and MGC will be able to ensure constant demand via its links to the North. As of now, Concordia lacks the technological assets required to optimize the efficiency of its scheme production. MGC is capable of bridging this gap through its expertise in the global market and advanced knowledge of the field.
However, Concordia’s role cannot be limited to that of a raw material supplier. Instead, the agreement should fix the country’s status as an equal partner who will receive investment in its labor market, education, and economy in exchange for allowing the North to benefit from its natural goods. Overall, President Woodworth is advised to organize a comprehensive task force charged with drafting the legal, economic, social, and political aspects of the case.
References
Brawley, M.R. (2005). Power, money, and trade: Decisions that shape global economic relations. University of Toronto Press.
Henin, T. (2021). POLI 305: International political economy.
Oatley, T. (2019). International Political Economy (6th ed.). Taylor and Francis.