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Transnational Corporate Control over the Global Economy.

Although Republicans and President Obama are said to disagree about economic policies, there is one initiative that they both enthusiastically support: free trade agreements.

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One answer is the enormous economic power of transnational corporations (TNCs), the main beneficiaries of these agreements. According to the United Nations Conference on Trade and Development:

TNCs worldwide, in their operations both at home and abroad, generated value added of approximately $16 trillion in 2010, accounting for more than a quarter of global GDP. In 2010, foreign affiliates accounted for more than one-tenth of global GDP and one-third of world exports.

The largest transnational corporations are from developed capitalist countries. These corporations also tend to be among the largest and most powerful firms in their respective home countries. At the same time, as the table below shows, their international operations now account for a majority of their assets, sales, and employment. Looking at all TNCs, the United Nations reports that the value added by their foreign affiliates generated approximately 40% of their total value added in 2010, up from 35% in 2005.

Now, transnational corporations generally rely on complex cross border production networks that involve the linking of production across many countries, with final sales often taking place in still other countries. Most importantly, these networks often include “independent” partner firms that undertake various activities according to an overall transnational corporate strategy. While some of the partner firms may themselves be transnational corporations, many are not, which means that TNC controlled activity is greater than the combined activities of parent and affiliate firms.

Transnational corporations use a variety of so-called “non-equity modes” (NEMs) of control to direct the operations of their partner firms, with contract manufacturing and service outsourcing among the most important. Cross border activity involving NEM relationships is conservatively estimated to have generated over $2 trillion of sales in 2010. The United Nations reports that some 18–21 million workers are directly employed in firms operating under NEM arrangements. Around 80 per cent of NEM-generated employment is in developing and transition economies.

As the following figure reveals, cross border production activity anchored by NEM relations now dominates a number of key export industries. For example, NEM production now accounts for more than 50% of all toy, footwear, garment and electronics exports.

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