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Internationalization of Production

 The process of establishing production relations between enterprises of different countries wherebythe pr 

oduction of a country increasingly becomes a part of the world production process.

Internationalization of production arises in the epoch of developed industrial capitalism and becomesfurth

er developed under imperialism. The process has become particularly intense under theinfluence of the s

cientific and technical revolution. In the first stages, internationalization ofproduction developed almost ex

clusively as an intersectorial international specialization. Furtherexpansion of internationalization of produ

ction is linked with the emergence of various forms ofintrasectorial specialization the international speciali

zation of individual sectors in a product !forexample, the specialization of large firms of the "#$, %reat &ri

tain, 'est %ermany, and (apan inthe production of certain types of e)uipment*+ the production of articles

of a specific type and size!for example, tractor assembly in the "#$ specializes in the production of the m

ost powerfulwheeled and caterpillar tractors, %reat &ritain specializes in mediumsized wheeled tractors,

and'est %ermany specializes in lowpowered tractors*+ component specialization of factories ofvarious countries in the output of articles, units, or parts for assembly+ and technologicalspecialization of enterprise

s of various countries in carrying out prescribed types of work.

Internationalization of production also takes the form of internationalization of scientific and technicalrese

arch. -ere, companies of different countries oin to carry out one or another form of scientific ordesign wo

rk. There also is specialization of individual countries in one or another form of scientificresearch.

Internationalization of production under capitalist conditions is the basis of internationalization ofcapital. T

he development of internationalization of production is also manifested in the formation ofinternational ec

onomic organizations in various fields of production, transportation, andcommunications, as well as in the

fields of international trade and finance.

Internationalization of production in capitalist society is a dual and contradictory process. /n oneside, it st

rengthens the social nature of production. /n the other, it sharpens contradictionsbetween such productio

n and the capitalist form of appropriation.

"nder socialism the development of internationalization of production is carried out foremost as theplanne

d formation of the international socialist division of labor. International specialization andcooperation, takin

g shape on the basis of coordination of the economic plans of the socialistcountries, lead to the establish

ment of close and firm economic links among the countries of thesocialist community.

"nder socialism, internationalization of production emerges as various forms of cooperation betweencoun

tries, including oint creation of various production rnits, construction of international transportlinks !for exa

mple, the 0ruzhba oil pipeline*, and unification of the energy systems of a number ofcountries. The emerg

ence of international production organizations of the socialist countries, suchas Intermetall and Intransma

sh, contributes to the expansion of internationalization of the economiclife of the socialist countries.

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The development of internationalization of production in contemporary conditions is becoming animportan

t factor in raising the efficiency of social production.

%overnance of International Production

Policy postures towards MNE behavior involve

Constraining the policies of host countries towards MNEs

Constraining the behavior of the MNEs themselves

In the realm of the former, the Organization for Economic Cooperation and

evelopment !OEC" has promoted multinational approaches to #Igovernance

In $%%&, the OEC promoted a Multilateral 'greement on Investment or M'I

 (he purpose of the agreement was to liberalize the cross)border *ows of

foreign direct investment

It would have re+uired host countries to apply national treatment- to all

foreign .rms

 (his e/ort failed due to a lac0 of support

 (he second issue is the multilateral regulation of MNE conduct

' number of guidelines e1ist such as the 2orld 3an04s E+uator Principles, the

E1tractive Industries (ransparency Initiative, and Publish 2hat 5ou Pay

3ut the most general guidelines are the OEC4s 6uidelines for Multinational

Enterprises, developed in $%78, revised in 9::: and currently under revision

again

;ee the appendi1 to this chapter for a list of the OEC 6uidelines