From my point of view we should begin the discussion from the description ofinternational trade. I like the description given in one of the books. Authorsare saying that international trade is
“theexchange of products between countries” 1. Although I like this explanation ofinternational trade I think it is not full enough. From my point of view we must change the wordproducts into the word something.Because when we say products we usually think about something that ismaterially however states can change not only the materially stuff it can alsotrade in valuables like knowledge ( for example). Also I have to say that forme both states in the person of government and companies are actually the same.Because all in all their main target istheir own prosperity.
So let’s go to discuss about the relations between National Governmentsin multinational enterprises. After I red some articles I came to a conclusionthat this relations are always very different but usually they are good if bothcompanies and governments have one common aim. Now it is an era of euphemismslanguage and some things more likely not to be told. In the same time if wetake the book written in 1962 by John S. Ewing and Frank MEISSNER in thepreface we can read very interesting thing “Americanbusinessmen invest more capital abroad than entrepreneurs of any other country:the U.S government pours great amountsof taxpayers’ money into foreign countries to help friendly nations advanceeconomically and socially, and to strengthen their defenses against the forcesof communism”2. Here we can see the situation when there is only one purposethat purse companies and government is to defend themselves against anotherforce.
On the other hand I can show you an example, when because of differentpurposes the company was destroyed by a state. Everybody in Europe now a daysknows about conflict in Russiabetween oil company YKOS and the Russian government. Of course somebody can saythat YKOS actually is not real multinational enterprise however I will notagree with it because though the main % of safety stock was in the hands ofRussian citizen there were other keepers from different part of the worldincluding UKSA ( U.K USA).As I already sad everybody know about the conflict and only few know what washappening in reality. In early 90 this company was privatized by Mikhail Hodorkowsky. But the way it was privatized was not reallylegal.( it is very wide question so Iwill not discuss it in my work). And ofcourse state helped him to do it. Everything was O.K until Mikhail hasn’twanted to brake the rules. The thing is that though we do not have such stronglegal laws as in Europe and Americawe’ve got a lot of illegal rules that are necessary to obey. The first one –you should not try to go againstauthorities the second- you can not change the rules by your own wish. Actuallythere are 2 versions why everything has started .The firs one is that he wantedto become a President, the second is that he wanted to sell the company toforeign people. And nothing is bad in this deal except one thing. In 1990’s Thecompany was bought for only 6.000.000 but the real price was something about7.000.000. And this difference was like a debt on the owner and that’s how thestate could control him. In the case hesales it the buyers will be we cantranslate it like conscientious buyers. It means that they buy this companylegally and have no responsibility with the state so the government will losethe opportunity to control the company and to get money from it. As a resultYKOS is a state’s company now. I think it is very good example what relationsbetween state and company can be and how they can change. Because in thebeginning Hodorkowsky was in brilliant relations withthe government ,and authorities.
But it is unusual situation, usually relations are different from therelation I have just described.
Now days we can see the increasing of globalization. In Europe there are no borders anymore the politicalsituation is different ,companies are truing to assimilate new countries. Andgovernments can not stay a side. Thehave got 2 ways. The first one is the way of protectionism. The second one isthe way of free trade. Both of them have advantages and disadvantages.
“international trade activity now affects domestic policy more thanever. …… Governments can not be expected, for the sake of theoretical ideal of“free trade” to sit back and watch the effects of deindustrialization on theircountries”3. Some followers of the ”free trade” theory might say that formation of some countries withstrong economy today was taken place inthe conditions of “free trade market. And this fact will be correct but from mypoint of view it exact reason why now a days they do not want to apply this practiceanymore. As we’ve already decided that there are not so many differencesbetween state and the company, and the main target of a state is to protectitself and be reach, we can make the conclusion that protectionism is aninstrument used by state to protect it’s economical safety and helps their ownproducers. However from the other point of view, protectionism may lead tosome problems. I truly believe that company may work only when it compete withthe others because then it has toinnovate their production, to seek for new marketing ideas e.t.cBut in the conditions of protectionism very often they loose every wish to doit. And actually I can understand them. Why do you need to spend your money forinnovation if even without it you can have a big profit, people will buy yourproduct anyway. The second problem with protectionism is the more limitationyou make the more limitation made against you. ( only in case when the sidesare similar in their opportunities). So you are not allowed to export as manyproducts as you wanted to.
On the other hand “free trade” gives the opportunity of wealthcompetition in market. And sometimes it might be very good for economicalcondition but bad for security “ more often, economic security and nationalsecurity were seen as competing with each other”3-1.
So we can see that it is not simple question and not only because thereare a lot of types of protectionism but also because it touches not onlyeconomical but also political fields. As for me, I think that all thisinstruments may be used but only after deep researching of situation.
At theend I would like to say that a government has got a huge possibility to controlbusiness it has a lot of instruments either to draw multinational enterprisesor to push of by giving them either good advantages or bad. However if a statewants to be wealthy and strong it needs business because business meansinvestments into state’s economy. Sometimes some not very strong governmentsmight be under the control of big multinational but anyway, they will be underthe control of strong governments. Government and business are inseparable and for the time they exist theywill have to compound. But the further economy and world is developing the moredifficult will be manage all the problems.
References
1)Business fundamentals John A. Reinecke William F Shhoel 1987 (page 429)
2)International business management John S.Ewing Frank Meiisner 1964 ( page 5)
3)International Business Michael R. Chinkota a 7 th edition (page698), 3-1 (page 699)
4)Boris Berezovski Kremlin’s god father. Paul Khlebnikov 1999.
5)Internet.
Internationalbusiness
Assessment:
Relationsbetween national governments and multinational enterprises
Student 1521222