Industrial Integration and the Multinational Enterprise

Abstract

A major objective of economic policies among nations is to achieve industrial development in ways which not only accelerate national industrial integration, but also integrate regional and international economies. The new phenomenon of the multinational enterprise, and the resulting international production, is a means of gaining industrial integration. But the resulting pattern of production and trade is not likely to be that which would have arisen with free trade under classical assumptions. At the national level, the multinational enterprise (ME) can respond to inducements to locate in "depressed" areas, helping to integrate the economy. Regionally, it is more responsive to policies directed at integration among members than are most local companies, and it has in fact been a catalyst for integration in the European Common Market, though it has not been permitted to be such in the Central American Common Market or in the Latin American Free Trade Association. At the international level, it is already integrating the advanced economies, but the pattern of industrial integration between the advanced and developing countries leaves much to be desired, partly because the MEs are not being used effectively. In addition, some restrictions are imposed by states, not so much because of the fact that the firm is "foreign," but because it will not necessarily produce the kind of integration sought by host countries. If governments moved to cause the multinational enterprise to support objectives of industrial integration at all levels—national, regional, and international—it would become a more acceptable addition to Western economic institutions. To achieve this, new governmental guidelines are necessary.