Multinational Enterprises and International Labor Standards Which Way for Development and Jobs?
R. Michael Gadbaw and Michael T. Medwig
Multinational enterprises (MNEs) occupy a position in the world economy that subjects them to many risks unique to transnational trade. While the commercial risks they face are no more onerous than those faced by domestic businesses, they must also cope with a growing variety of political risks found only on a global level. Unlike domestic enterprises, which tend to be subject to the laws of only a single home country, MNEs must comply with numerous national laws, international law, and a growing body of transnational custom.
Reconciling the competing social, legal, and economic goals of various national governments has become increasingly difficult because of the tendency of many governments to link trade with policy goals in non-commercial areas such as human rights, labor standards, and environmental protection. MNEs fear that the linkage of trade with non- commercial policies will spawn new and less manageable political risks, and many question how much political risk can be placed on the system before international commerce is undermined.
This chapter addresses only one aspect of a much larger trade linkage debate encompassing numerous non-commercial policy goals. MNEs view the linkage debate from a perspective somewhat different from that of the labor unions and other pro-labor policy advocates. While it is undeniable that an individual enterprise can gain a temporary advantage by resorting to abusive labor practices, most MNEs realize that the prevalence of such practices can lead only to the suboptimal performance of the individual firm and, by extension, to the suboptimal performance of the economy as a whole. MNEs, therefore, are just as eager as unions and other worker rights advocates to eliminate abusive labor practices.