Corporations and the Cold War

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Transnational corporations during the Cold War period concentrated on three categories of manufactured products from Taiwan and other less developed countries. In this area, the initial technology was usually provided by the transnational firm. Here, a division of labor emerged between production done by local industrialists and global marketing done by foreigners. Production of these products was largely in the hands of domestic entrepreneurs or firms, but transnational buying groups played an important role in promoting at least some of the exports.

The clothing sector was particularly important in the Taipei case since it had been upgraded in the early s under the tutelage of US advisers intent on assuring the production of high quality military uniforms. In the apparel end of textiles, sales to mass marketers, such as K-mart, and subcontracting for foreign brand names, such as Arrow and Jantzen, accounted for a substantial part of production.

Exports as a percentage of textile production expanded rapidly: The third category, products of footloose industries, involved the evolution of extremely specialized labor intensive processes for manufacturing, including assembly operations.

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These industries were highly capital as well as technology intensive, embodying the latest technical developments. By , Hong Kong, Taiwan, South Korea, and Singapore accounted for nearly half the total manufactured products from the entire less developed world. These countries, known as the four little tigers , had been observed to have extremely close political ties with the home countries of transnational firms, especially the US and Great Britain. Still, it has been argued that they should not be treated as special cases.

In the context of the times, political stability implied that the risks of nationalization or confiscation of assets were reduced to a minimum, and labor docility implied a strict control over trade unions, reducing the possibility of industrial disputes, enabling firms to dismiss workers for the purpose of maintaining discipline, and allowing a cutback in employment in case of recession.

In the case of Taipei, political stability and labor docility were often facilitated through repressive action. Typical statements of multinational executives emphasize the importance of both. Regarding location decisions, one businessman stated:. As we have seen, the militarization of Taipei under the KMT government, including the continuing imposition of martial law, assured both domestic political stability and labor docility.

Corporations line up to fight as proxies for nations around the world.

Multinational Corporations Ranked by Foreign Assets, Fortune classifies companies according to the industry or services that represents the greatest volume of their sales; industry groups are based on categories established by the U. Office of Management and Budget.

Several of these companies are, however, highly diversified. Among these is GE. In the case of nonavailability, they are estimated on the basis of the ratio of foreign to total employment, foreign to total sales and similar ratios.

What Was the Cold War?

The role of MNCs in integrating production, transferring technology, and allocating resources will grow along with the global economy. Sales of overseas subsidiaries of MNCs already exceed the volume of world exports Figure , FDI stock versus fixed capital, affiliate sales versus exports and are increasing more rapidly. The policy environment for FDI continues to improve around the world. Paralleling the global trend toward market economies and liberalized trade, greater openness toward foreign direct investment, particularly among developing countries, has been a key trend of the s and s. A number of developing countries pursued nationalization of some MNC operations, particularly in natural resource-related industries.

As discussed below, tensions between MNCs and host governments will not disappear quickly in this new era and likely will become more complex as economic integration deepens. Still, suspicion and hostility toward MNCs on the part of host country governments are much more rare today. Technological changes will allow greater efficiencies and synergies in MNC management and operations. Throughout the history of international trade and business, and particularly over the past century, technological advances have enabled the efficient management of business organizations and activities of increasing complexity and geographical dispersion.

During the s, a period when many U.

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Corporations and the Cold War

At that time many manufacturing MNCs established international divisions to manage their overseas affiliates. Beginning in the s, some MNCs moved toward a structure of global, multifunctional product divisions to better achieve manufacturing economies and marketing efficiencies on a worldwide scale. The rapid advances in information technologies occurring today enable further advances toward more efficient management structures, with some of the larger MNCs opting for integrated global operating divisions supported by regional, corporate-wide coordinating functions.

Information technologies also make possible business and technological relationships between firms that are more flexible and responsive to market needs. In many cases international strategic alliances—which serve both as a substitute for and a complement to FDI, depending on the situation —allow companies to tap capabilities and reach markets around the world with a smaller international infrastructure than that traditionally required. Firms much smaller than traditional MNCs can achieve global reach and pursue a global business vision. Despite the overall positive trends, national differences in government policies, economic institutions, and technological capabilities will persist, posing challenges to policy makers and business leaders.

Even as MNCs accelerate the trend toward integrated production systems, regional and national characteristics continue to cause frictions between systems. Despite the obvious benefits brought about by the end of the Cold War and other positive trends, movement toward a more integrated and liberalized world economic order continues to raise challenges.

Some have predicted that economic conflicts among developed countries that were subsumed under the political imperatives of the Cold War will lead to more visible tension. Although formal barriers to trade and investment have fallen, particularly among developed countries, in some cases real reciprocal openness has not been achieved.


In the United States and elsewhere, concerns about this lack of reciprocity have grown. For example, some have asked whether the United States should allow significant ownership of its high-technology industries by companies based in countries where U. As a result of these and similar concerns, the focus of trade policy attention has moved to domestic practices and institutions that may differentially affect foreign and domestic companies. These include aspects of the legal system, financial structures, and systems for technology development and diffusion.

The discipline of the market is a two-edged sword. While promoting efficiency in the allocation of resources, the growing integration of the global economy can blunt or overwhelm efforts by national governments to control economic trends and outcomes.

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A good example is the setting of exchange rates under the floating-rate system. It is impossible for any government to significantly move the value of its currency against the judgment of the market in the short term,. Naturally, since investment and trade barriers rooted in economic structures often are tightly linked to cultural values or domestic political arrangements, it is more difficult to eliminate them through international negotiations than the more obvious barriers of tariffs, quotas, and capital controls.

But sharply different perspectives exist between nations and within the business and political leadership of individual countries over how national economic systems can be harmonized further to ensure long-term stability and mutual benefits. Some recent debate has revolved around the relative merits of various forms of capitalism, primarily comparing the Japanese and Anglo-American varieties. Still, the problems and questions go beyond the U.

The future shape and structure of the world economy will be influenced by how they are addressed in coming years. Frictions between developed and developing countries also may take new forms as FDI linkages grow. Although most countries have moved toward more open policies regarding FDI in recent years, a wide variety of approaches remains. Among East Asian economies, for example, Hong Kong has followed an essentially noninterventionist policy toward FDI; Thailand and Malaysia have combined active industrial policies encouraging domestic firms with promotion of export-oriented FDI in selected industries; Singapore has encouraged FDI but has selectively intervened to encourage desirable technological activities and industrial upgrading by MNCs; and South Korea and Taiwan have followed the Japanese model, separating foreign technology from foreign capital through selective restrictions on FDI within the context of a broad industrial policy.

Emerging market economies, such as China and India, also appear to be taking different approaches to FDI. Governments' desire to maximize technology transfer and other benefits of FDI sometimes will conflict with the strategic imperatives of MNCs to maximize efficiencies and avoid creating future competitors.

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It is critical for the world economy—and for the United States and Japan as the world's largest economies, techno-industrial powers, and direct investors —that progress continue toward more liberal trade and investment flow and toward stronger international institutions to support an increasingly integrated world economy. The current framework of international institutions and agreements that undergirds the world economy was established in the early post World War II period through the active leadership of the United States.

Over the years Japan and the other advanced democracies have increased their level of contribution and participation in these institutions. They can either play a positive role, through active leadership and collaboration, or a negative role, through failure to undertake this responsibility. It is useful to remember here that a significant degree of global economic integration was achieved in the pre World War I period.

However, this progress proved fragile owing to the weakness of international institutions and individual country policies, and economic integration fell by the wayside during the next several decades of war and economic upheaval. Today's mainly positive environment for global business should not be taken for granted, particularly by the United States and Japan—the two countries with perhaps the greatest stake in maintainingand improving this environment. See Keizai Koho Center. Japan An International Comparison. Tokyo: Keizai Koho Center, p. The U. World Investment Report New York and Geneva: United Nations, p.