Sovereignty and Transnational Corporations
Sovereignty is defined as the absolute, supreme and uncontrollable power by which any independent state is governed and from which all the political forces are derived. In other words, it refers to the ability of a country to make and apply its laws and control of its affairs without interference of other states. An example is the United States is a sovereign state for it makes and carries its laws, imposes taxes on its people and form relationships and treaties with other nations. Transnational Corporations (TNC) is a multinational corporation comprising of a parent organisation on its mother country, and its foreign affiliates that operate in other countries. A good example of a Transnational Corporation company is the Coca-Cola company with its headquarters being in Atlanta, Georgia in the United States but having its subsidiaries scattered all over the world (Rondinelli).
The Threat of Transnational Corporations
In an increase in globalisation and interconnection between countries has brought the rapid growth in transnational corporations and their influence over other nations across the world. For the first time, the sovereignty of a state or country is threatened by the influence of transnational corporations. Multinational corporations another term of TNC are portrayed as rivals of the state for they threaten traditional sovereignty with their enhanced mobility.
Political Influence of Transnational Corporations
Transnational corporations have political influence over some governments. This means that they use their occupancy in the economic growth of a foreign state which gives them the power to convince governments to support their practices. Many developing countries trying to improve their economy to develop infrastructure often possess as desperate to this multinational corporations I mean the main reason to merge with them is to provide employment and hence increased tax revenue which at the end promotes economic development and the pursuit of more lucrative programs. So due to this desperate move from developing countries, the multinational corporations dictate their demands, and if the country does not respond favourably, they merely threaten to pull out and invest in another state which has the lowest opportunity cost (Jenkins).
Lack of Loyalty and Development
One of the characters of a transnational corporation is not being loyal to all the countries that they choose to venture in. Most multinational corporations are only concerned with their interest, and those of another state does not matter to them. Many developed countries use multinational corporations to venture into international markets to maintain their development and stay ahead of competition from other developed countries. The integration into global markets creates a constant flow of goods, services, and ideas hence promoting sustained development. This clearly shows that they are only interested in their development. They even hire most skilled employees from the civil services as they offer high salaries and this cripples the government organisations best labour force. This leaves the state at the hands of unskilled employees, causing poor development which in turn causes citizens not to trust their government.
Control over Local Market
Domestic investment is the essential investment in a state. Many developing countries lack local investors due to lack or insufficient funds to invest in their countries. Multinational corporations have more than enough funds that are why they seek to exploit other foreign markets to expand their income. If these transnational corporations find local business venturing in the same area they are venturing in they are threatened by the local market competition. So to avoid or block competition, they purchase or by a large share into the local companies to control their influence on the market. In turn, this increases their revenue, and their mother countries benefit more from this action via taxation than the state of their foreign affiliates. This leads to a loss of economic development and independence.
Power and Influence over National Development
Due to the transnational corporations growing economic power they have complete power over national development that is on matters such as patent, monetary strategies and trade this causes them to have huge profits and hence considerable budgets to finance their projects such as advertising. This enables them to portray a much better image in the eyes of the local population. As a result, multinational corporations succeed in gaining the most shares out of local markets since local organisations cannot do the same. This further pushes local entrepreneurs out of the market and makes it harder for the majority of the population. By venturing mainly into the markets with very minimal competitions they can control the supply of goods and services in the markets and this gives them control over the country's economy not giving much power to the local government for they can easily influence the population and making them meet their demands politically by making the local government foster policies that benefit the TNCs (Liu Weidong).
Influence on Nation-States
Although most states have control over the laws and the regulations on an international level, transnational corporations still have a considerable impact over the decision-making process of nation – states. Multinational corporations continue to grow economically, and once you occupy a large portion of a country's economy, it is easier to influence their decision for your benefit.
Conclusion
In conclusion, transnational corporation challenges national sovereignty by taking control of a state's economy to demand policies that are beneficial to them. Due to their massive influence in the economy and a state's desire to develop they take advantage of this for the local governments cannot march their huge bargaining power and give in to their demands. The international trade committee should formulate policies to lower the influence these transnational companies have over local states.
Works Cited
Jenkins, Rhyns. Transnational Corporations and Uneven Development (RLE International Business): The Internationalization of Capital and the Third World.
NewYork: Routledge, 2013.
Liu Weidong, and Peter Dicken. "Transnational corporations and ‘obligated embeddedness." Foreign direct investment in China's automobile industry
(2006): 1229-1247.
Rondinelli, Dennis. "Transnational corporations: international citizens or new sovereigns?" Business Strategy (2003): 13-21. 14.4.
