FDI Looks Like a Regime, But Acts Like The Players Club
FDI Looks Like a Regime, But Acts Like The Players Club International management of Foreign Direct Investment (FDI) can be characterized as an International regime to the extent that, attempts are being made to establish regularities among MNCs, host countries and home countries. But, at the same time most of its ability to enforce rules and norms can be circumvented by the powerful actors who are the majority rule makers in an FDI regime. For the purposes of this essay, a regime is defined as, “Sets of implicit or explicit principles, norms, rules and decision-making procedures around which actors’ expectations converge in a given area of international relations.” Foreign Direct Investment is characterized as, investment by an MNC that extends management rights and controls over affiliate or subsidiary firms in host countries. “MNCs are most commonly c . . .
Parent firms in the home countries of MNCs acquire their foreign assets by investing in affiliate or subsidiary firms in host countries. FDI as a regime is in its infancy because like other regimes the global trade regime or investment regime it has no internatio! nal organization to answer to yet…. FDI is a regime to the extent that its actors have attempted to normalize international relations for the sake of leveling the playing field and liberalizing investment in their interests. Home countries outside of the US have circumvented these types of trade barriers to access Cuban markets. The UN attempted to establish a Code of Conduct for MNCs called, the UN commission on Transnational Corporations. Host countries did not benefit from the Organization for Economic Cooperation and Development (OECD), from its ability to liberalize capital flows, to a Declaration on International Investment and Multinational Enterprises. Most LDCs supported the draft ! Code because, “it focused on MNC behavior and sought to prevent MNC tax evasion, restrictive business practices and transfer pricing. Home countries and MNCs hold the majority of the percentage for FDI investment. ” Home countries through GATT/WTO attempted to regulate FDI in host countries were vaguely defined and disperse. From a regimes perspective TRIMs provided a framework for multilateral negotiations on FDI. Other principals were circumvented when “Host countries were reluctant to accept limits on their rights to control FDI within their boundaries. onsidered to be firms that control productive assets in more than one country. The MNCs circumvented the UN code of conduct by influencing their industrial states or home states to delay negotiations until the UN abandoned its effort to establish a code. ” The MNCs influenced by FDI transactions have engaged in principles such as horizontal integration, vertical integration, and transfer prices as norms by which to increase their market share, reduce transaction costs and monitor the performance of their affiliates. The “local content requirements” were that a certain percentage of a firms input must be of domestic origin.
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