A Perspective from the MNE Declaration to the Present: Mistakes, Surprises, and Newly Important Policy Implications - Working Paper No.11

Our understanding of the impact of MNEs has deepened considerably since the early days of the MNE Declaration. This is why, on occasion of the 30th Anniversary of the MNE Declaration, the International Labour Office would like to increase the knowledge base on the impact of multinational enterprises on host and home countries and about the policies that have worked to encourage the positive contribution of multinational enterprises to economic and social progress in different sectors and to minimize potential difficulties. To this end, the Office will commission a series of papers by renowned international independent experts reviewing research and evidence on different aspects of the trends, operations and impacts of MNEs.

The paper is particularly relevant for the current debate about the use of performance requirements to maximize the benefits of MNEs for host countries. There are two contrasting approaches in this regard: one that argues in favour of using performance requirements (such as local content and technology requirements) to encourage the development of backward linkages and the transfer of skills and technology, and another that argues in favour of leaving MNEs quite free to design their competitive strategy, while putting appropriate accompanying policies in place. The author argues that in a number of industries the latter seems to be a superior method of maximizing the benefits in terms of technology transfer, skills upgrading and developing local suppliers. The author adopts a position on these issues but leaves the reader much enlightened along the way based on a review of the vast literature and evidence on the subject. There is also a valuable section at the end with recommendations for future research on questions related to how foreign direct investment can be used to generate decent work the developing world.