Debate
Multi-nationals are uniquely placed due to the fact that they cross borders. Indeed, different countries often have trade agreements with other countries/the rest of the world that makes it significantly easier for companies to penetrate foreign markets. However, there has been a huge debate on whether these multi-nationals have to be regulated by the government, or they should self-regulate. One of the key issues concerning regulation came up when several employees in Chin committed suicide while working on Apple products1. The fact that multi-nationals work in different countries, hence, are managed by different governments at the same time, also makes the option to be regulated by the different governments difficult. This essay looks into some of the pros and cons of government regulation versus those of self-regulation for multi-nationals. Further, a discussion on which of the two options is better will be given.
Multi-national companies should self-regulate due to the adverse negative impact government regulation would have on the industries, and the additional fact that there are already numerous treaties and laws that govern both trade and labor relations globally that can be used to monitor and guide multi-national activities in host countries.
Why Governments Should Regulate Multi-National Companies
It is important to note that national or government regulation of multi-national companies has often been misunderstood to mean that the governments interfere with the workings of the company. However, the actual meaning of the term is that the government monitors and provides parameters for business engagement. It should be noted that one of the key benefits of governments regulating multi-national companies is that it levels the playing field. This is due to the issue of competition. Arguably, if all the multi-nationals are guided by law in regards to their interactions in the host country, they will create healthy competition among themselves. This is critical for the economy of the host country. It will not only ensure growth but also indicate stability and in doing so, attract more investors. Looking at it in this light, therefore, shows that the regulation of multi-national companies by government is a good thing.
Secondly, one can argue that governments regulating multi-national companies also ensure that employees are treated well. Additionally, one can argue that several host countries have a threshold for local involvement, especially in terms of labor, that the multi-nationals have to adhere to. This premise means that these companies are encouraged (by the government) to hire more locals than foreigners to get the needed support from the communities2. Further, this acts as a way of creating a sense of ownership among the society members. Therefore, this not only benefits the local government but also the multi-national in question. This is due to the fact that when the society fully accepts the company, and takes ownership of the same, then they will support the business to succeed. This is one of the reasons several multi-nationals consider partnerships with local companies to penetrate a market well.
It is important to note that the wellbeing of employees is a key aspect of government and multi-national companies’ relationships. The example that has been mentioned of Apple and Chinese laborers is just one of the few3. The fact that these multi-nationals have the leeway to treat their employees how they want has led to various lawsuits. It is important to note that some multi-nationals do not extend their branches to all countries, but have partners that do certain aspects of the businesses for them. This is significantly common among first world countries that outsource labor intensive work to developing nations, and China. However, due to the fact that there is no government regulation of such businesses, the companies in the host countries take advantage of their people.
Despite the numerous advantages of having governments regulate multi-nationals, there are a few limitations of the same. Notably, one of the limitations is that the government might interfere with the company’s activities. As mentioned previously, the multi-nationals would have to be regulated by different governments. This creates a difficult environment for the global company to function as different governments will most likely also have different needs in relation to attaining positive political goodwill. One can argue that the liberalism theory best suits people who support this school of thought. Watson explains that liberalists believe that governments or states should work together to ensure prosperity, while at the same time, also lower risks of conflict4. In an ideal world, this would indeed ensure that the governments work together for the benefit of the whole community, including the business community. However, some may argue that regulation of international firms is motivated by other selfish political needs, making it dangerous.
Why Multi-National Companies Should Self-Regulate
One key reason why multi-national companies should self-regulate is the political influence that would be infiltrated into the company structure. This is especially true for companies that are deemed too powerful. Further, one can note that political interest in multi-nationals varies from one country to the other. However, on numerous occasions, different countries can be grouped due to similar interests. For instance, multi-nationals can group first world countries and third world countries differently. One of the reasons for this is the fact that first world countries tend to have more expensive labor compared to developing countries. It is due to this that multi-nationals often outsource human resource to developing countries. Arguably, government regulation might affect such freedoms due to the different interests of the different governments. For instance, whereas a country like China would agree to have lower pay for their staff, a third world country like Nigeria would not, and so forth.
Additionally, multi-nationals should self-regulate due to their different and diverse interests and company objectives. Governments must form policies of trade5. These are normally covered under the trade deals that these governments have with one another and are supported by both liberalism and constructive theories6. The system has so far been sufficient due to regional trade agreements. For example, commonwealth countries have their system which makes it easier for multi-nationals from one commonwealth country to be hosted in other commonwealth countries. However, allowing governments to regulate multi-national companies will mean getting into different deals with the different host governments to both penetrate and operate in their markets. This appears untenable and costly for the multi-nationals. Further, it does not address how the same regulations would affect online multi-national companies.
It can be argued that another reason why multi-national companies should self-regulate is the impact of the opposite on the different fields. Debatably, it can be stated that self-regulation pushes the companies involved in a space to advance it. This expansion can be done in various ways. First is through active competition where different multi-nationals use self-regulation as a means of attracting clients. In this instance, companies tend to target the weaknesses of their competitors and use their self-regulation measures to resolve the viewed weakness and use it as a strength in their marketing strategy. Secondly, the expansion of the field also occurs due to the fact that the self-regulation measures that are viewed as best practices are adopted from one multi-national company to the next. This ensures that, for example, issues of employee relations are standard and well managed within that specific field due to the self-regulation measures.
One of the disadvantages of companies self-regulating is that there are no standard guidelines or protocols that apply to all companies in regards to regulations. A case study can be given to explain further. In 2019, there were several instances of Boeing 737 MAX airplanes crashes, leading to loss of life7. Arguably, the crashes were due to a failure of the company, Boeing, to properly self-regulate. It is important to note that the self-regulation also affects the whole industry. In the case study provided, Boeing blamed the airports for not training their staff on their newly installed technology, which led to the crashes. It can be argued that if the industry and the company were both regulated by government, the introduction of new technology would automatically require new training for all pilots and other related staff.
My Position
It is my position that despite the disadvantages, that multi-national companies should self-regulate. One of the reasons why I believe this is the best action is the adverse effects government regulation has on industries. It is common knowledge that governments all over the globe have various forms of bureaucracy. Arguably, these bureaucracies will stall or rather negatively affect industries if the government were to regulate multi-nationals. It is critical to note that it is due to the current self-regulation that different industries have grown and, arguably, become better in terms of service provision and quality of products. For instance, the field of technology has grown tremendously due to the leeway to self-regulate. Additionally, different types of innovation companies have also grown due to the fact that they self-regulate. It is critical to note that, as mentioned previously, self-regulation supports healthy competition that pushes the field forward.
It is also arguable that the regional trade deals and treaties are enough to offer policies and guidelines on how businesses should be run within that specific region. For instance, there are various treaties under WIPO that dictate issues such as copyright and trademark rights. Individual countries also have labor laws and investor guidelines under both their foreign affairs and trade dockets. Therefore, if the counter argument on self-regulation is based purely on the importance of the government to monitor and offer guidelines in the industry, then this should be covered in the regional treaties and the national labor and trade laws8. Further, several governments already adhere to the United Nation’s regulations in regards to human rights, which might be a cause of concern for countries that offer labor to the multi-nationals.
On the same note, it is critical to note that there is currently a lot of pressure on third world countries to offer man power for the multi-nationals. As explained previously, the international community has been concerned about how manpower is misused by multi-nationals in the developing nations. Although some numerous treaties and laws protect workers, the fact that manpower is an outsourced service makes it challenging. This is due to the fact that the alleged ill-treatment of the workers happens in their own countries. The blame is often placed on the multi-national company working with the local firm that provides the manpower and not the locals. This has been a key element of debate in why governments should regulate companies. However, one can argue that national labor laws are different in various countries. Companies can, however, have better labor laws that local firms, or rather companies that are associated with the multi-national have to also adhere to work seamlessly.
An example can be given to explain the premise further. The company, Apple, that was used as a case study previously, does not mistreat its employees in its American and UK offices. However, when they outsourced labor to China, the Chinese company mistreated its staff to the point that several committed suicide. If Apple had made sure that the company they outsource to also appreciated the importance of labor laws as depicted in Apple’s home office, this problem would not have arisen. Despite this failure on Apple’s part, government should not regulate multi-nationals. Arguably, this is a problem that can easily be resolved by the companies, as more people are becoming aware of their rights. It is now common to find communities calling out multi-nationals for environmental degradation activities and ensuring that their environment is protected. These accountability measures do not necessarily need to involve government regulation.
Bibliography
Brawley, R. Mark. Power, Money, and Trade Decisions that Shape Global Economic Relations. Toronto: University of Toronto Press, 2015.
Brett, Christophers. “Risking Value Theory in The Political Economy of Finance and Nature. Progress in Human Geography, vol. 42, no. 3, (2018): 330-349.
Cruz Silveira, Bruno and De Oliveira Dias, Murillo. “Crashed Boeing 737-Max: Fatalities or Malpractice?” Global Scientific Journals, vol. 8, no. 1, (2020): 2615-2624.
Oatley, Thomas. Debates in International Political Economy. 2nd ed. Raleigh, NC: Pearson, 2012.
Oatley, Thomas. International Political Economy. 6th ed. New York, NY: Routledge, 2019.
Merchant, Brian. “Life and Death in Apple’s Forbidden City.” The Guardian, 2019.
Watson, Matthew. “Historicising Ricardo’s comparative advantage theory, challenging the normative foundations of liberal International Political Economy”. New Political Economy, vol. 22, no. 3, (2017): 257-272.
Footnotes
- Brian Merchant. “Life and Death in Apple’s Forbidden City.” The Guardian, 2019.
- Mark R. Brawley. Power, Money, and Trade Decisions that Shape Global Economic Relations, (Toronto: University of Toronto Press, 2015) 285.
- Brian Merchant. “Life and Death in Apple’s Forbidden City.” The Guardian, 2019.
- Matthew Watson. “Historicising Ricardo’s comparative advantage theory, challenging the normative foundations of liberal International Political Economy”. New Political Economy, vol. 22, no. 3, (2017): 257.
- Oatley Thomas, International Political Economy. 6th ed, (New York, NY: Routledge, 2019), 137.
- Christophers Brett. “Risking Value Theory in The Political Economy of Finance and Nature. Progress in Human Geography, vol. 42, no. 3, (2018): 339.
- Bruno Cruz Silveira and Murillo de Oliveira Dias. “Crashed Boeing 737-Max: Fatalities or Malpractice?” Global Scientific Journals, vol. 8, no. 1, (2020): 2618.
- Thomas Oatley, Debates in International Political Economy, 2nd ed. (Raleigh, NC: Pearson, 2012), 95.