From: firstname.lastname@example.org (M. Jagadesh Kumar)
Subject: MNCs - The Reason for India to Stay Out of GATT
Organization: University of Waterloo
Date: Wed, 27 Apr 1994 21:57:05 GMT
MNCs - The Reason for India to Stay Out of GATT
by Daya Krishna
The Multinational companies, on account of their way of working,
constitute an important factor necessitating India to stay out of GATT.
The MNCs are a natural consequence of the growth means of communication
and transportation in the world, which has greatly facilitated
criss-cross movements of capital and technology to distant lands across
the national borders, over the seas. On principle, there cannot be any
objection to the MNCs functioning in any part of the world, provided
they work within the assigned area, in accordance with the rules and
procedures laid down by the government of the host country.
All Developing countries need foreign investment. But while accepting
investments many countires lay down certain conditions mainly in order
to ensure that:
1) investments are in accordance with their development needs and plan
2) net outflows, whether by way of profits, remittances or payments for
goods and services etc do not cause strains on the balance of payments;
3) restrictive business practices (RBPs) of the MNCs are kept under
control, and their adverse effects on economy are reduced, if not
eliminated. All MNCs indulge in a very large number RBPs which include
market allocation; refusal to deal (boycott); arbitrary fixing of
prices; collusive tendering; exclusive dealing; differential pricing;
resale price maintanence; tied-selling; predatory pricing for imports;
and transfer pricing. All these RBPs are grossly unfair and illegal.
With the aim of preventing these RBPs, the host countries resort to
certain measures called Trade Related Investment Measures (TRIMS) which
include trade-balancing requirements; export requirements; manufacturing
requirements; local content requirements; local equity requirements;
join venture with government participation; domestic sale requirements;
licensing and technology transfer requirements; and remittance and
The Industrialised countries have mutually conflicting interests; but,
all of them are opposed to above said TRIMs because they have a common
approach vis-a-vis the developing countries.
For more than a decade, the issue of code of conduct of MNCs in regard
to their own conduct as also that of the host country governments, has
been sought to be dealt with at the UN Centre for Transnational
Corporations (UNCTC) and through multilateral negotiations under its
auspices. These negotiations have been blocked by America and other
major home countries of the MNCs. An international code for control of
RBPs had been negotiated under UNCTAD and adopted by UN General
Assembly. But again the home countries of MNCs have resisted all efforts
for making it a binding international instrument, and for assuming
obligation to enforce observance of code by their MNCs.
All measures to control functioning of MNCs formulated by host countries
are sought to be nullified by the Dunkel proposals, which want the MNCs
to be left free to carry on their functions without any control. All
MNCs are guided by centrally planned corporate decisions for maximizing
profits and accumulating capital, in the interest of their home country.
It is not possible to envisage a more impudent and inhuman efforts to
exploit the poor countries with a view to enriching the rich-nations.
The World Investment Report 1993 has revealed some of the hitherto
unknown practices of the MNCs for maximizing their profits. According to
this report, the largest MNCs have evolved new management strategies to
maximise the advantages of operating globally. The new structures
involve multiple and complex linkages.
There are four key factors behind evolution of new strategies. They are
1) emergence of new information technologies;
3) convergence of demand patterns in countries, for many products; and
4) government policies to reduce restrictions on trade and FDI.
As a result, MNCs have moved into cross-border production activities
leading to the emergence of integrated international product systems.
The growing trend for international integration of production requires a
parallel integration of policies for prevention of illegal and irregular
activities of the MNCs for evading taxes and concealing their real
incomes, or and transferring incomes across the national border in
devious manners and disgise forms.
But, the question is who will bell the cat? Who will take initiative for
the evolution of the needed parallel international integration of
policies for preventing illegal activities of the MNCs, which, with the
present trend of globalisation, are assuming new forms and are more
difficult to detect and prevent.
During the past several years, Government of India has persistently
avoided doing things which could be interpreted as an effort to provide
leadership to the poor countries of the world in their fight against
economic exploitation. And, consequently, the noose is now being
tightend around the neck of India itself.
In this situation, the minimum that the people of India expect from
their government is that it stays out of GATT and thus retains its power
to exercise needed control over the functioning of MNCs in India,
without the inhibitions resulting from the membership of GATT and the
rule of World Trade Organisation.
Courtesy: The Organiser.