Foreign direct investment within the United States signifies a substantial section of the entire US economy. However, the relationship between the US Government and foreign direct investment in the form of multinational corporations have a turbulent relationship. Throughout various presidential reigns, the US government has maintained favorable conditions in order to attract FDI from a variety of sources. Throughout history, the US has been a front-runner in leading negotiating on free trade agreements as well as direct investment in the form of corporations. Furthermore, the model bilateral investment treaty in the form of Free Trade Agreements has been adopted globally. Examples such as the Dominican Republic and Central American Free Trade Agreement.

With the recent induction of Donald Trump, this historic ideology of American attitude towards FDI has been questioned. Trump has been very open and public about his attitude towards free trade agreements such as NAFTA. Trump believes that within these free trade agreements, the USA is carrying to much weight compared to its fellow constituents. An example of this is the US withdraw of the Trans-Pacific Partnership in January 2017.  Furthermore, his regimes attitude towards multinational corporations such as Huawei has been anything but favorable.

However, the United States remains as an enormous beneficiary of FDI. If we compare 2017 to 2016 we see a $182 billion reduction in foreign direct investment. A large part of this is due to the Trump administration and their attitude towards foreign investment. Instead of looking for outside investment, Trump has targeted American sources of investment in order to boost the economy. Interestingly enough, Trump claims that the American economy has grown significantly with the unemployment rate at its lowest in years; all since he has taken office.

That being said, the United States still needs to uphold a sizeable amount of foreign investment to allow for some diversification. As of today, the majority of FDI is spread over the wholesale and retail trade, information, banking, finance and insurance, real estate, and scientific biotechnology. As stated, the US is still home to a large amount of diverse, foreign investment. However, it is beginning to change and will continue on this path if Trump is re-elected. Will Trump make America (economically) great again? Probably not, but time will tell.

Sources:

Urquhart, Q. E., Orta, S. L.-D. M., Peck, J., & Cheng, T.-H. (n.d.). Investment Treaty Arbitration in the USA | Lexology. Retrieved April 4, 2019, from https://www.lexology.com/library/detail.aspx?g=ab1aaab4-4523-422c-9ce7-7a9aa2ff3a34

If you were to walk down West Georgia Street and the average person and ask them “who holds the power in international politics?” you would probably get a standard answer. Most people are entrenched in the school of thought that nations such as the USA, Russia, and China are the most powerful actors in international politics. Although they are not incorrect, most people do not regard multinational corporations as power political agents. For the common person, they do not think of companies such as Facebook, Apple, Amazon, Facebook, and Google as power-wielding political powers. However, when we analyze the processes of these corporations we see that they control global supply chains, sell mass amounts of products, directly influence global politics for personal or industrywide gain. With the exception of relationships such as Jeff Bezos and Donald Trump, the majority of high profile multinational corporations have a very positive working relationship with government agencies. This is evident through footloose tactics and tax dodging tactics. With that in mind, the question can be raised about which agents hold the most power in international politics.

In an analysis performed by The Economist, there was a comparison made on the valuation of corporations compared to states. Unsurprisingly, the top valuations were held by the likes of the US, China, Eurozone, and Japan.  However, there is an ample amount of corporations mixed in around the top of the list. For example, companies such as Berkshire Hathaway exceeded the valuation of states such as New Zealand, Australia, and Spain. According to the analysis chart, of the top 100 income producers, 71 of them were “nongovernmental” corporations. Another example of relations between governments and multinational corporations is that of Amazon and the US. In a publicly mixed relationship, Bezos and Trump have had aggressive comments towards each other and their intentions of power. However, Blue Origin, Bezos’s private company recently signed a $2 billion contract to supply rockets for the Pentagons satellite project. This is a fantastic highlight of how the world of politics and multinational corporations is not separate and rigid, it is a dynamic and transitioning to an ever related conglomerate.

It is difficult to argue against the facts that multinational corporations possess an enormous amount of political and economic power. As the distinction between politics and corporations continues to melt, there needs to be a sufficient amount of emphasis on regulation of political manipulation.

Sources:

Heemskerk, E., Fichtner, J., & Babic, M. (n.d.). Who is more powerful – states or corporations? Retrieved April 4, 2019, from http://theconversation.com/who-is-more-powerful-states-or-corporations-99616

Liberto, D. (n.d.). Jeff Bezos Says Amazon Will Support Pentagon. Retrieved April 4, 2019, from https://www.investopedia.com/news/jeff-bezos-says-amazon-will-support-pentagon/

In November 2016, newly elected Indian Prime Minister, Narendra Modi made a surprise announcement to the public during a national address. He gave an official one month notice for the abolishment of the 500 and 1000 rupee bills, which were India’s highest currency bills. The reasoning behind this demonetisation strategy was to flush out all the black money in the nation and starting a new age of digitalisation in India. Surely the motive behind this move was very thoughtful as both these changes were necessary for a growing economy like India’s.

However, such a change would ideally require years of preparation if not months. Modi believed that giving the citizens such a short time period was the only way he could bring out the black money from the economy. What he did not take into account was the large population of the country and the harsh consequences of this strategy that would affect millions of people, especially the lower class of the economy such as farmers and labor. These were people who had never had access to banks and lived in rural parts of the country, far away from government institutions. Years of their savings were saved in the form of currency bills which were suddenly declared as demonetised. The next month saw huge lines outside banks and ATMS. People lined up for days in front of ration shops and banks and this led to these institutions running out of new currency several times. The two bills comprised 86% of the Indian currency and to replace such a huge amount of money in the form of bills would require months of printing.

Clearly, the government had not taken the appropriate measures necessary to carry out such a massive economical change. The replacement currency bills were new 500 and 2000 rupee bills. The 2000 rupee bill was double the size of the biggest currency bill India had ever had and those possessing 2000 rupee bills found it very hard to use them as they were unable to get adequate change in return for a purchase. Demonetisation had a lot of adverse effects. Hundreds of farmers committed suicide in the next few months and many other small and local businesses were unable to function and had to shut down. On the bright side, thousands of bank accounts were opened in that short amount of time and online payment systems such as PayTM and Google Pay flourished. More than two years later it is still hard to tell whether demonetisation was the right measure, but it was definitely not the best one.

Amazon made $11.2billion in profits in 2018 but paid no federal tax. This tech giant is the leading online shopping MNC with an annual revenue of $232.887billion. However, it recently scrapped plans to build a second headquarter in New York after facing backlash over a proposed $3billion in tax subsidies. Opponents questioned why a company as successful as amazon should be lured to NY with taxpayer’s cash. Especially after the report by the Institute on Taxation and Economic Policy (ITEP) published a report showing Amazon was not paying a single cent in income taxes for the second year in a row.

In 2018, Amazon nearly doubled its profits, from $5.6bn to $11.2bn. But far from paying the statutory 21% income tax rate, it reported a $129m federal income tax rebate for the year – a tax rate of -1%.“You can’t lay the blame too much on Congress,” said Gardner. “It wasn’t Congress that came up with these ideas. They are the product of a lobbying blitz from these companies. These companies wrote the law in many cases.”

In a statement sent to the Guardian after the publication of this article, Amazon said it “pays all the taxes we are required to pay in the US and every country where we operate, including paying $2.6bn in corporate tax and reporting $3.4bn in tax expense over the last three years. “Corporate tax is based on profits, not revenues, and our profits remain modest given retail is a highly competitive, low-margin business and our continued heavy investment.”

Given this enlightenment, it is fairly obvious the power that MNCs hold when it comes to lobbying for policies that are in their favour. If a company like amazon cannot be accounted to pay taxes than the burden of generating tax revenue becomes heavier for the average citizen. Yes, a company this big is positively productive for the economy as they generate jobs, investments and pay other stake holders in the supply chain. But, this company’s operations does not economically add any value to anyone not affiliated with amazon. However, the billions that they can provide in taxes can be used to finance several social projects and infrastructure development.

References
Rushe, Dominic (2019) Amazon made an $11.2bn profit in 2018 but paid no federal tax. Retrived from
https://www.theguardian.com/technology/2019/feb/15/amazon-tax-bill-2018-no-taxes-despite-billions-profit

SNC-Lavalin Group Inc. is a Montreal based Canadian MNC that provides engineering, procurement and construction services in various industries and globally operates in fifty countries. In 2012 they were accused of a bribery and fraud scandal; they were accused of criminal charges “defrauding Libyan organizations of an estimated $130 million” and paying nearly “$48 million to Libyan public officials” in exchange for construction contracts. In 2019 they are the centrepiece of an ongoing political scandal that involves alleged political interference and obstruction of justice by the Prime Minister’s Office (PMO).

In 2016, the company started a lobbying effort with the newly elected Liberal government; advocating for the rapid adoption of legislation allowing Deferred Prosecution Agreements (DPA) and changes to Ottowa’s integrity regime that prevents it from doing business with bad actors. Due to the the ongoing criminal prosecution, the company’s stock had significantly tanked (buy stocks now!) and the company has since threatened to shutdown its Canadian operations and set up shop in America. The shutdown will cost 9,000 jobs and all in PM Justin Trudeau’s hometown; 2019 December is elections. One can only speculate now, but the question is did the PMO senior staffers exert improper/illegal pressure on the attorney general? The PM has denied any wrong doing. SNC CEO Neil Bruce has denied the above accusations and said, “A company cannot be prosecuted as a criminal, but if the company does not get the DPA then 9000+ innocent employees would lose their jobs as SNC attempts to secure greener pastures”.

Parag Khanna highlights that globalization and capitalism has shifted power from states to MNCs. This scandal directly embodies this power struggle. Here we have an MNC exercising it’s power to influence policy makers (including the PM) and successfully implemented the DPA. A policy that overlook their crimes on foreign soil and let it continue its operations. However, the state is resisting but SNC is continuing its coercion tactics by applying economic pressure (loss of jobs and relocation to a different nation).

The question is, who will yield?

References:

Swain, Diana (2019, Mar 08)An economic reality check on SNC-Lavalin: Are 9,000 jobs really at stake? Retrieved from
https://www.cbc.ca/news/business/snc-lavalin-scandal-economics-jobs-risk-1.5047248

Thurton, David (2019, Mar 12)Four questions without answers about the SNC-Lavalin scandal. Retrieved from
https://www.cbc.ca/news/politics/snc-lavalin-wilson-raybould-trudeau-1.5051909

Khanna, P., & Francis, D. (2016, March 15). These 25 Companies Are More Powerful Than Many Countries. Retrieved from https://foreignpolicy.com/2016/03/15/these-25-companies-are-more-powerful-than-many-countries-multinational-corporate-wealth-power/