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Transnational corporations and globalization

Corpus Corpus 1
Transnational corporations and globalization




A transnational corporation (TNC) is a firm that owns or controls productive operations in more than one country through foreign direct investment* (FDI). How do TNCs take advantage of the process of globalization?

1 New International Division of Labour (NIDL)

A A territorial hierarchy of the world

 Most TNCs originate from developed countries, where they still have headquarters and research centres. In the 1960s, they began to locate plants* abroad for cheap labour in South Korea, Taiwan, Singapore and Hong Kong. It was the first generation of Newly Industrialized Countries (NICs) (> card24).

 In the 1980s, the level of wages increased in these countries. Therefore, Japanese and Western companies sought locations in Malaysia and Thailand (second generation NICs), where wages were still low and which had more raw materials*.

 Since 2000, TNCs have been moving their routine tasks to China and India, the third generation of NICs.

B General Motors'strategy in Asia

 General Motors (GM) is an American TNC and one of the world's largest automakers. GM acts in 37 countries via owned subsidiaries*. Its first Asian manufacturing plants were opened in 1993 in Vietnam and Indonesia.

 Since the mid-1990s, South Korean offices have designed and developed different car models. Since 2013, Singapore has been hosting the new international headquarters of GM.

2 Transport and communication revolution

A Maritime transport

 TNCs strategies are highly facilitated by maritime transport. 90% of world merchandise trade is carried by sea. Containers can substantially reduce transportation time and costs. Hence subsidiaries can be relocated all over the world.

 The world container ship fleet includes 54 container ships of 9,000 TEU (>card24) and above, which can be produced and operated by only five maritime shipping TNCs such as CMA-CGM (France) or Maersk (Denmark).

B Information and Communications Technology (ICT)

 TNCs take advantage of the Internet and mobile technology to facilitate cooperation between different subsidiaries.

 Companies'ICT costs have grown 50% since 2002.

3 Trade liberalization

A National policies

Keyword Neoliberalism advocates

privatization, free trade, open markets and reductions in government spending.

 The emergence of neoliberal governments in the USA (R. Reagan) and the UK (M. Thatcher) in the 1980s helped consolidate the power of the TNCs.

 In the UK, major state-controlled firms were privatized. In October 1987, the British government sold its remaining shares in the British Petroleum Company (>card16).

B International policies

 Under the auspices of first GATT (General Agreement on Tariffs and Trade) and since 1995 the WTO (World Trade Organization), economic and legal barriers (tariffs, quotas and regulations) have been progressively abolished (>cards18&19).

 In 2013, the WTO agreed to pursue global trade liberalization with the “Bali Package”. This agreement does away with* limits on agricultural trade. For instance, an agricultural TNC like Cargill could export grain in any country.

  • Foreign Direct
    Investment (FDI)
    = investissement direct à l'étranger
  • a plant = une usine
  • raw materials = matières premières
  • a subsidiary = une filiale
  • to do away with = en finir avec


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