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Government, Labor, and Multinationals

G.K. Helleiner

• University of Toronto

“Transnational Enterprises and the New Political Economy of U.S. Trade Policy.” Oxford Economic Papers (March 1977): 102–116.

In the orthodox literature of international trade, the State's image is the representative of all individuals and firms for whom it acts to maximize their collective welfare. Kindleberger, however, argued that the State pursues the interests of powerful groups (“Group Behavior and International Trade,” Journal of Political Economy, February 1951). In recent years further work has studied this group interest approach in the U.S.

In this framework, what are the origins of recent U.S. commercial policies and, in particular, what effects have resulted from the rise of the U.S. based multinational corporations? The author assumes that group interests pressure the government institutions which form trade policy. The resulting policies reflect the strength or weakness of vested interests rather than the social welfare of the United States.

An examination at the micro-level of the political origins of U.S. commercial policy suggests: (1) that organized labor has shifted from being liberal to being protectionist; (2) that the Democratic Party has become more protectionist than the Republican Party; (3) that pressures in trade policy now come more frequently from particular industries rather than from broad-based cross-industry associations; and (4) that labor and industry within the same industry have increasingly substituted antagonism for their traditional mutual accord.

Since World War II multinational firms have grown rapidly and a considerable proportion of international trade now takes place on an intra-firm basis in oligopolistically organized markets. Multinational firms favor freedom in international trade and in factor movements.

The emerging multinational firm has also weakened the position of labor in every U.S. industry. Labor worries about international trade in those firms with little prospect of intra-industry trade (especially where competing imports originate in less developed countries) and therefore with scarce employment gains to offset the possible job losses from imports.

The changed attitudes of the two political parties reflect these developments. Trade policy now follows the pressures exerted by (1) organized labor favoring protection in those industries where labor is most vulnerable and by (2) the U.S. based multinational firms favoring the reduction of trade barriers for the goods which they trade. The multinationals have little interest in the relatively labor intensive and declining industries. In general where unions and multinationals oppose each other, policy makers tend to prefer the interests of the multinationals.