INTRODUCTION

(1) Are multinational companies exporting U. S. jobs?

Thousands of jobs in such industries as apparel, radios, and bicycles have been lost to American workers because U.S. companies have shifted manufacturing or the production of component parts to such places as Taiwan, Singapore, or Korea, where labor costs are far lower. Between 1966 and 1969, 500,000 U.S. jobs were exported by such arrangements, says the AFL-CIO.

The charges are correct in general but misrepresent the total situation. When companies moved production abroad, the usual alternative was to lose sales—perhaps even in the domestic market—to foreign competitors. Says Reginald Jones, the chairman of General Electric: "As the last company in the United States to give up the manufacture of radios, we know exactly how tough the foreign competition has been." Moreover, U.S. multinationals export so much to their overseas affiliates that the net effect is that more jobs are created than are lost (but not necessarily in the same occupations or cities). Robert S. Stobaugh, professor of business administration at Harvard Business School, found in a recent study "using every bit of information available" that on balance U.S. corporate operations abroad add 700,000 jobs to the domestic economy and add an income of $7 billion a year to the nation's balance of payments. Some other studies have put the figures much higher.

(2) Do multinationals create "export platforms" abroad to ship back cheaply made goods to the United States?

One need only consider where TV sets and radios are being made nowadays. Companies shift manufacturing overseas to exploit cheap labor, to circumvent antipollution laws, and to avoid taxes.

Again, the balance runs in the other direction. Less than 10 percent of the products manufactured by overseas affiliates of U.S. companies are imported into the United States. But nearly a third of all U.S. manufactured exports go to foreign affiliates of American companies. The Department of Commerce found that in 1972 majority-owned foreign affiliates of American companies sold 72 percent of their goods and services in the country where they were produced. Another 22 percent of their sales went to other foreign countries; only 7 percent was exported to the United States, an increase from 6 percent in 1966.

(3) Are multinationals the villains of currency crises?

Companies have shifted "hot money" out of weak currencies and into strong ones in such massive amounts that past efforts to stabilize the dollar were weakened. By so doing, it has been argued by Andrew Biemiller, the AFL-CIO's chief lobbyist, that "corporations and banks put profits ahead of patriotism." Sometimes they do so to protect their holdings against anticipated exchange-rate changes and sometimes to engage in outright speculation.

Since the major currencies have been "floating"—that is, allowed by governments to fluctuate in value day by day in the international money market—the complaint is partly moot. After a long study, the U.S. Tariff Commission concluded in 1973 that while multinationals do have the "capacity for disruptive movements" of funds, few of them use it. The commission found that "only a small fraction" of corporate treasurers and bank vice-presidents speculate in currencies. (When the GATT tried to hedge against currency fluctuations in 1974, it miscalculated and lost more than $25 million.) The real cause of currency crises, as research economist Edward M. Bernstein told a U.N. inquiry, was the failure of governments to raise or lower the value of their currencies until long after it became clear to the world's financial experts that they must do so.

(4) Do multinationals exploit the economies of underdeveloped countries?

Critics, mostly from academia, complain that even when multinational companies have accelerated economic development, as, for instance, in Brazil and (in the late Sixties) Pakistan, the poor remain as poor as ever. Sometimes the multinationals preempt scarce local resources. Barnet and Muller contend that between 1957 and 1965 U.S.-based companies financed more than four-fifths of their operations in Latin America with local capital or reinvested earnings.

Governments, not multinational corporations, set the policies that determine whether all classes in a given country will share in economic advances. The poor of most newly rich Arab oildoms have received little of much of their countries' larger slice of the petroleum pie. Peru has been busy expropriating U.S. subsidiaries in the name of controlling its own economy, but there has been no transformation of class structure or the power of the elite. It is probable that some siphoning off of local capital did occur, though host governments could have prevented it at the time. In any case, it is becoming much more difficult to do so.

(5) Do multinationals evade taxes abroad by rigging prices?

In buying or selling goods within the confines of a company, but across national borders, companies manipulate prices so that they can avoid taxable profits in high-tax countries and inflate profits in low-tax countries. According to a U.N. study, such intracorporate trade within multinational companies accounts for nearly a quarter of the world's foreign trade in goods. It is concentrated in a few industries, including chemicals and autos. Some studies contend that overpricing in underdeveloped countries has ranged from 30 percent to 8,000 percent; underpricing, from 40 percent to 60 percent.

Some of this activity undoubtedly does, or at least did, go on. But most big companies require "arm's length" pricing of sales between subsidiaries or divisions. In the United States and Europe, tax collectors are zealous about auditing corporate books to prevent such practices. Apparently few executives would object if governments reached an international agreement setting uniform rules for tax purposes on all transfer pricing.

SOURCE:   C. Breckenfeld et al., " Multinationals at Bay: Coping with the Nation-State, " Saturday Review, January 24, 1976, 12-30, 57.