U.S. Foreign Relations and Multinational Corporations:

What's the Connection?

PAD-78-58: Published: Aug 23, 1978. Publicly Released: Aug 23, 1978.

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Multinational corporations (MNC) are defined by the United Nations as enterprises which own or control production or service facilities outside the country in which they are based. They engage in many types of operations which have varying impacts and policy implications for the home and host governments. The legal existence of MNC is derived from the laws of the home government, but the firms are also restricted by the laws of the nations in which they operate.

MNC have been a source of conflict and cooperation in international affairs. The conflict often results from actual or perceived threats to national sovereignty. The impacts of MNC on U.S. foreign relations are illustrated by the following: (1) international tensions are sometimes created by the extraterritorial application of U.S. legislation; (2) U.S. embassies furnish assistance to U.S. firms overseas, including diplomatic support; (3) MNC conduct direct negotiations with host-country governments with or without official U.S. knowledge and approval; (4) MNC can promote international cooperation through regional economic integration, increased trade, and by bringing together firms and nations to promote their respective interests; (5) they contribute to the formulation of foreign policy either directly or by influencing public opinion; (6) they can enhance the economic strength and influence of both home and host nations; and (7) U.S. security can be affected by the influence of host nations on MNC. Projections for the future are that MNC will continue, investments will be more selective, problems will develop because of host country demands and U.S. regulation, there will be more collaboration between MNC and host countries, international regulation will not be achieved, MNC may contribute to gaps between developed and developing nations, there will be more host nations, and restrictions across borders will hamper operations.

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