Seminar on Trade Liberation on Business Performance of Selected Multi- National Corporation. A Case Study of Mtn
CHAPTER ONE
Objective of the study
The aim of this study was to evaluate the impact of trade liberalization on business performance of selected Multinational Corporations a case study of MTN. The specific objectives are as follows:
- To evaluate the trade liberalization policy reforms in Nigeria on the turnover, employment figures and wages structure of MTN.
- To evaluate the trade liberalization policy reforms on how issues related to economic empowerment have been addressed together with foreign ownership.
- To evaluate the trade liberalization policy reforms on the import and export initiatives of Multinational Corporation
CHAPTER TWO
REVIEW OF RELATED LITERATURE
The recent move towards more open trade policies in developing countries, after decades of production, has sparked off lively debates. The proponents of trade liberalization argue that an open market policy will result to a permanent direct minimum increase in gross domestic product [GDP] in addition to the indirect benefits that accrue in the form of a reduced regressive tax burden and positive dynamic externalities (Odusola and Akilo 1995). Much of the controversy relates to the macro analysis of trade-growth linkages. There are many arguments explaining why more open trade regimes lead to productivity improvements in the industrial sector. Perhaps the most basic is that returns to entrepreneurial effort increases as exposure to foreign competition rises (Martin and Page 1983, and Tybout 1992). A second argument is that increasing returns to scale imply lower costs per unit as output increases (Pack 1988 and Tybout 1992). The conventional views that trade liberalization is necessary and has positive effects for development and of the growth performance of the industrial sector constitute an increasing controversial issue. According to Adenikinju and Olofin (2002), trade policy might affect industrial growth through several channels. First, a less protectionist trade regime increases scale efficiency by enlarging the domestic market which otherwise might be too small for the efficient production of goods that show increasing returns to scale. Second, a more liberal trade regime leads to increased competition from abroad forcing domestic firms to adopt more efficient technology to reduce inefficiency and waste. Thirdly, it is argued that a freer economy eases foreign exchange constraints faced by most developing countries and hence enables a country to import needed raw materials and capital goods. Finally, a more open economy results in a faster rate of technological progress. In particular, Grossman and Helpman (1991) argue that technological change can be influenced by a country’s openness to trade. Openness to trade provides access to imported inputs, which embody new technology and increases the size of the market facing producers which in turn raises returns to innovation and affects a country’s specialization in research intensive production. Thus, a country’s openness leads to improvements in domestic technology, helps the production process become more efficient and culminates in productivity improvements. Technological change has been the focus of the endogenous growth literature (Lucas 1988). Their works show how trade liberalization may raise growth rates in the long run by generating economics of scale, operating through research and development and knowledge spillover, human capital accumulation and learning by doing. Cline (1979) enumerates the classical benefits of a move towards free trade as including savings to consumers through lower prices that is an increased “consumer surplus” and the liberalization of domestic resources that were formally used inefficiently for use in more productive activities.
CHAPTER THREE
Multinational Enterprise Affiliates, Exports and Policy Regime
Theoretical literature suggests that liberal trade regimes attract export-oriented FDI. Bhagwati (1973), using the framework of the international trade theory, argued that exogenous FDI inflows are essentially to exploit local-cost conditions a la H-O model and are, therefore, attracted to industries where the country has comparative advantage. Tariff barriers distort this pattern and induce tariff-jumping FDI in import-substituting industries. Vernon (1979) in his product cycle theory (see also Krugman 1979) suggested that cost competitiveness concerns drive production abroad in the maturing stages of production. Foreign production, therefore, is to exploit the location-specific advantages to achieve cost- efficiency. Its objective is to service the host country market and export to other countries. Thus, export-oriented FDI takes place in maturing stages of production. High tariffs, however, offer a locational advantage for tariff-jumping, import-substituting FDI in the early stages of production. Thus protected regimes are likely to attract import substituting FDI. Dunning (1993) argued that firms’ ownership advantages and the host country’s location-specific advantages interact with the internalisation advantages to determine the nature and consequences of FDI. Artificially high exchange rates, government regulations and protected economic environment within a restrictive trade regime induce FDI that is of market seeking variety. Open regimes that facilitate intra-firm trade, allow greater freedom to MNEs and are export-friendly may, on the other hand, attract resource seeking, efficiency seeking and /or asset acquiring FDI, all of which have a significant impact on trade. The literature on exports and technology treats FDI as a mode of technology transfer. It argues that owing to easy access to proprietary technology of their parents, MNE affiliates are likely to be more competitive in international markets.
CHAPTER FOUR
Conclusion
In making the argument and testing it empirically, we also contribute to the broader literature on MNCs in the global political economy. MNCs do not only participate in transnational production networks, but are also able to lead, cultivate and sustain the global value chains (GVCs) they are part of. Their sourcing decisions (either investing abroad and engaging in intra-firm trade or buying at arm’s length) fundamentally shape the form and strength of international production networks. This formative role in influencing value chains suggests that MNCs do not operate in a purely economic sphere, but are bound to have distinct preferences concerning international trade policy. Our results also indicate that these preferences get reflected in specific policy decisions, which gives us an idea about MNCs’ political power. In short, although the recent popular backlash against globalization and trade liberalization in many developed countries could have the potential to re-empower protectionist groups, at least in the short term our findings show that powerful actors like MNCs still have a lot at stake when it comes to trade policy. They have the resources to influence policymakers and are very likely to continue their efforts to facilitate trade in intermediates
Recommendation
There is a need for improving balance of trade by increasing exports as possible. The exportation of manufactured goods is highly recommended since manufactured goods fetch higher prices in the market. More industries need to be developed so as to expand production and export supply capacity in the country. Trade and investment policies require some reforms to adjust with changing economic environment. The policies should gear towards more free trade and the elimination of trade barriers. This will help the country to attract more trade and investments which promote growth.
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