Agenda ► Questions? ► Review  Test 1, October 6 – Wednesday!  Special transactions and adjustments  Interdependent Global Economy ► WTO and Doha ► Multinational Enterprise

Test 1 will be based on the following sources:  Wheeler et al. Chaps 1-4  Lectures up to Monday, October 4  Scan the introduction to NAICS  Californian Perspective on Regional Economic Development Policy in Canada  Scan the CAMI site  Look over the WTO pages on the Seattle and Doha Ministerials, paying special attention to “Criticism, yes…misinformation, no!”

Canada’s International Trade Balance, 2001 ($ 000,000) Source: Statistics Canada 2003, Cansim II Table 228

Special Transactions and Adjustments ► Special Transactions include repairs, personal effects, private donations, arms and military stores and munitions, duty free exports, postal or courier trade (of a value less than $ CDN) etc... ► Adjustments include adjustments to import values which include inland freight from point of origin to the Canadian border, prescription drugs, and exchange rate fluctuations.

The Doha Round ► 4 th “Ministerial Conference” of WTO in Doha, Qatar, November 2001  Rejects protectionism  Affirms role of trade in promoting development  Committed to addressing the marginalization of peripheral regions  Committed to WTO as the global institution for setting rules of trade ► But accepts important role of regional trade agreements ► “Doha Declaration” sets the agenda for the “Doha Round” of WTO trade negotiations

Multinational Corporations ► Multinational/Transnational firms  Firms with a significant foreign direct investment (FDI) ► Global Firms  Firms in which FDI rivals domestic sales ► Text questions (p. 64):  Is IBM really an American corporation? ► >60% of sales outside U.S.  Is Honda really Japanese? ► >60% of sales outside Japan  Is Volvo really Swedish? ► 80% of sales outside Sweden ► Some would say, yes, yes and yes!

Motives for Foreign Direct Investment ► Market access ► Access to cheap inputs (factors of production)  Land (natural resources)  Labour (skills, productivity and cost)  Capital ► Technology (clusters)

How do multinational firms enter foreign markets? ► Exports (if motivated by market access) ► Licensing ► Foreign Direct Investment  Sales and service subsidiary  Manufacturing subsidiary ► Portfolio investment ► Strategic alliances ► Joint Ventures

Foreign/Foreign Joint Ventures ► CAMI in Ingersoll (General Motors of Canada & Suzuki Motor Company), 1989 ► 250,000 vehicles per year, $500,000,000 ► 1,700 CAW “team members” Chevrolet Equinox

Foreign/Domestic Joint Ventures ► Quesnel River Pulp in Quesnel (West Fraser Timber & Daishowa Canada), 1981 ► Mill has three pulping lines which produce 300,000 air-dried tonnes per year of thermo- mechanical pulp

Forms of Foreign Direct Investment ► New establishment:  Greenfield site  Brownfield site ► Acquisition of existing business:  Single plant/single location firm  Larger firm with multiple establishments, domestic or TNC

THE MNC, Global Interdependence and Regional Development ► Employment creation ► Technology transfer ► Local spending  Construction phase  Operations ► Local sourcing of parts, sub-assemblies, specialized services ► Downstream services (transportation) ► Tax base

THE MNC, Global Interdependence and Regional Under Development ► Most employment may be unskilled  Little scope for local skills development  If wages high: indigenous [small] businesses suffer  If wages low, exploitation ► Technology transfer is limited, state-of-the-art phases stay in home country ► Local spending/sourcing may be limited  Operations linked to home country inputs  No host country research and development  Specialized services purchased from home country ► Tax holidays limit public sector contribution ► Focused on external markets not basic human needs ► Impacts on environment/local resource base ► Potential for sudden closure

Interdependent Global Economy ► Global finance and banking ► World cities ► Global communications ► Next Friday we shift to more local issues ► Parts 2 and 3:  Interaction  transportation  and the city