Sample Term Paper
No restrictions on profit remittances
i. No or minimal restriction on foreign investment
ii. No special treatment on local business over foreign investors
iii. Minimum taxes on investment income or corporate earning
iv. No quotas or other non tariff barriers
v. Strong and legal protection for investors
If we closely analyze these policies they are clearly against the interests of the host nations. No restrictions on profit remittances would in other words means that the host nation is not liable to ask for profit generated by the foreign company. No or minimal restriction on foreign investment would result in discouraging the local investors. As multinationals are huge entities and have magnanimous financial support on their back, it’s impossible for a local investor to compete with them. To gain market share the multinationals can very easily reduce the price of the product with minimum effect, but this price reduction would mean a lot for that local investor as his market share would be lost (Harrison, 2007).
Similarly no special treatment on local business over foreign investors would create direst among the locals, as they would be looking towards the authorities to provide them with subsidies but they won’t be able to get those because of the agreement policies. At the same time when the locals would not be getting incentives over their foreign counterparts then their loyalty would also be at stake (Cavanagh & Mander, 2004).
Likewise minimum taxes on investment income or corporate earning means that the foreign companies would not be accountable for the payment of any taxes what so ever to the host country and this would deprive the local country with a healthy amount of tax income (Harrison, 2007).
Among all of the policies the most detrimental is that of Privatization, which would mean reducing the state’s direct involvement in their activities. The reason why we have termed it as most dangerous for the host nation is because when the local authorities would not be looking after the government institutions then these institutions would no longer be welfare organization, rather than they would turn up into profit making organizations whose sole reason of existence is to earn profit. When the welfare organizations would have this kind of mentality then at the end of the day the public of that country would have to suffer because the organization would do everything to make profit as they are a profit making organization (Babb & Chorev, 2005).
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