Maureen Appel Molot

Insiders, outsiders and host country bargains

The obsolescing bargain (OB) model analyzes bargaining between a host country (HC) government and a multinational enterprise (MNE) at time of entry and the circumstances under which the original bargain does or does not erode over time. The model has traditionally focused on the dyadic relationship between the MNE and nation state. However, if a second wave of foreign multinationals should enter the HC, the relationship is no longer dyadic but trilateral: the host government, the first mover firms and the latecomers. What happens to the original and to subsequent MNE-state bargains? We incorporate recent insights on the liability of foreignness, transaction cost economics, multimarket competition and the resource-based view (RBV) into a theoretical model of sequential entry by rival multinationals. We find that liability of foreignness, firm rivalry and governance inseparability are key factors determining winners and losers in the sequential bargains. International institutions and home country governments are external forces that can also affect bargaining outcomes. We test our models propositions on a longitudinal case study of public policy decisions in the Canadian auto industry.

Asymmetrical Dyads and Foreign Policy

An analysis of Canadas foreign policy toward the United States from 1963 to 1972 is used in a test of a theory of foreign policies of subordinate states in asymmetrical dyads. In this theory the interaction of two conditions—the state of a nations economy and the extent of concentration in its linkages with a superordinate power, along with a set of conditioning environmental factors—are used to explain the foreign policy actions of the subordinate state. The findings confirm the importance of the two main exogenous factors and the environmental variables, but the interactive effect of economic performance and linkage concentration is not corroborated. In particular the statistical effects of the economic performance variable on the foreign policy indicators are positive where a negative sign was predicted.

Continentalizing the North American Auto Industry

The automobile industry (defined here as autos and auto parts) is of enormous importance to the economies of Canada, the United States, and Mexico. In each of these countries it employs a significant number of people directly and, through its linkages with suppliers and buyers, another large percentage indirectly. The economic viability of the auto industry has a direct impact on the overall health of each of the three North American economies. Predicted substantial excess capacity and large numbers of plant closures over the next ten years threaten this economic health.

Foreign Policies of African States in Asymmetrical Dyads

An analysis of the foreign policies of black African states toward industrialized nations in the middle 1960s is employed in a partial test of a theory of the foreign policies of subordinate states in asymmetrical dyads. In this theory, the interaction of two conditions-the state of a nations economy and the extent of concentration in its linkages with a superordinate power-is used to explain the foreign policy actions of the subordinate state toward the superordinate country. Directed dyads are divided into asymmetrical and nonasymmetrical sets, and the hypotheses are tested over both sets via regression analysis. The findings confirm the importance of structural asymmetry as a scope condition on the theory but offer only limited support for the use of the economic strength and linkage concentration variables in the explanation of foreign policy. The results also reveal that the influence of these two variables on foreign policy is not precisely as stipulated by the theory. For the more developed African states, relative economic strength in combination with highly concentrated linkages is associated, contrary to the theory, with a foreign policy of expanded relations with superordinate partners. For the less-developed states, this combination produces a foreign policy designed to restrict relations within the asymmetrical dyad as predicted by the theory.

The Politics of Nationalization

This article will examine the politics of nationalization, focussing on the decision in 1975 by the New Democratic (NDP) government in Saskatchewan to take over the provinces potash industry. As the first instance of nationalization of a large and profitable industry engaged in commodity production, the Saskatchewan policy represents a radical departure from the norm of state intervention in North America. The determination of the government of Quebec to enter the asbestos industry suggests that it may not remain an isolated case. Our study will thus address a topical and important issue in Canadian public policy-what are the obstacles to nationalization? In it we examine reactions to Saskatchewans nationalization policy in two settingscontinental and federal-during the critical period between the announcement of policy (November 1975) and the first agreement to purchase an American-owned potash mine (August 1976). Despite initial vociferous opposition, we found that the multinational resource companies, the United States government and the federal government in Ottawa reconciled themselves to nationalization. In what follows, we shall attempt to identify the main opponents of Saskatchewans nationalization policy and to explain their accommodation to takeover. To do so requires that we explore the ways in which immediate economic interests-security of supplies in the case of the American government, an acceptable return on investment for the multinational corporations (MNCs), and protection of the tax base in the case of the federal government-were handled. Capitalism can no longer be equated with unfettered private ownership or with anarchic

Multinational corporations and economic nationalism: Conflict over resource development in Canada

Abstract Faced with rising Third World nationalism, multinational corporations engaged in resource exploitation are turning back to higher cost but apparently politically more secure investments in the industrialized states. To what extent does the dynamic of government– resource industry relations in an industrialized setting differ from the pattern observed in the Third World? To answer this question the article analyses the decision to nationalize the potash industry in the Canadian province of Saskatchewan using models of host government–MNC conflict developed by Vernon, Mikesell and Moran to study Third World cases. The research suggests that the dynamic logic of government-industry conflict in a developed country setting is very similar to the pattern observed in the Third World. The decentralized Canadian federation, the ideology of the party in power in Saskatchewan and the nature of the potash industry combine to structure a situation in which coercive nationalization of a resource industry was seen as the only policy option.

The North American Free Trade Agreement: Policy- or Investment-led?

For both Canada and Mexico, the decision to negotiate free trade with their most important trading partner was a dramatic change in policy direction. Canada, which had long eschewed a free trade arrangement with the United States, negotiated the Canada-US Free Trade Agreement (FTA), which came into effect on 1 January 1989. Then, just as Canadians were beginning to adjust to their new relationship with the United States, Mexican President Carlos Salinas and US President George Bush announced (in June 1990) that their two countries would begin discussions on a bilateral free trade pact. For Mexicans, the decision to seek a free trade agreement with the United States was the culmination of a concerted effort to liberalize their economy since the mid-1980s. For Canada, it had the potential to erode some of the gains of the FTA.

Reducing Barriers to Investment: Is the NAFTA Investment Regime an Appropriate Model?

The North American Free Trade Agreement (NAFTA) investment regime’ created by Chapter 11 is significant for many reasons: it covers two developed and a less developed economy; it includes existing as well as future legislative provisions; and most notably, it provides for investor-state dispute settlement. This chapter addresses the construction and evolution of the NAFTA investment regime — its philosophical and practical underpinnings, provisions, operations, assessment, and the complexities of revision. Although it is often argued that multilateral institutions are preferable to regional ones, regional regimes may provide an opportunity to test and refine cooperation on issues that have yet to be addressed more broadly. This is the case with investment in the North American context since Chapter 11 of NAFTA contains many of the same clauses that were included in the failed Multilateral Agreement on Investment (MAI). Thus NAFTA may be considered a test case for a larger investment accord. Moreover, since the investment provisions of the draft Free Trade Area of the Americas (FTAA) have been influenced by Chapter 11, an evaluation of the functioning of the NAFTA investment regime is directly relevant to what might unfold in the hemisphere.