‘America First’ can’t trump the pursuit of profit
At a moment when the US-China trade war continues to escalate, the US is using every possible method against China. Aside from wielding the tariff stick, the US now is requiring its multinational corporations to retreat from China by threatening to levy more taxes and label them as traitors.
Despite the fast global expansion of multinational corporations, nationalism is still deep-rooted. Nationalism’s influence still beats that of internationalism. Though US companies are engaging in highly global activities, they are unable to lose their sense of belonging to the nation. US President Donald Trump has tried to link these feelings to patriotism. Labeling companies as traitors poses a dilemma for them, forcing them to choose between profitability and duty to the nation.
The US administration is making “America First” a reality by fully utilizing its leading position in the world and petty nationalism. However, US anti-globalization measures will not only fail but they will come back to bite the US in the future.
The purpose of multinational corporations’ investment overseas is to better allocate resources to maximize profits rather than to benefit host countries. The decision to invest overseas is made based on natural endowments, a company’s comparative advantage, competitive strategies and its products’ life cycle. A good investment environment is also a key factor to attract international investment. Those conditions interact and work together, driving investment behavior. As long as the pursuit of profits remains the primary drive of capital, companies’ long-term profits will outweigh short-term political considerations. The government’s motivations have only limited influence, and economic rules and investment behaviors will not be altered by arbitrary labels Trump gives to companies.
Moreover, global value chains have been drawing more attention and interest. Multinational corporations play an increasingly important role in international trade and investment activities. Multinational corporations now allocate the production process to subcontractors in different countries and regions all over the world through equity and non-equity investment methods, so the division of labor has penetrated every node on the production chain. Global purchase strategies have created a cross-regional and crossnational production chain for product manufacturing and marketing. Every country plays a role in the manufacturing and supply process.
The role of newly industrialized countries is irreplaceable for competition and participation within the global production chain. Trade activities within industries, corporations, production and production factors have reinforced the global production chain. The adjustment and transformation of any production activity will not be a simple decision and cannot be completed in the short term. Trump hopes to bring multinational corporations back to the US to pressure China, but the idea is economically ignorant and naive.
Finally, investment by multinational corporations is a rational choice and constrained by global value chain patterns. But as the external environment changes and the competitiveness of multinational companies wanes, some movements and adjustments are inevitable.
While China is further opening its market, an increasing number of modern services and hightechnology companies have turned their eyes and studied the Chinese market, getting ready to add more investment.
As long as the pursuit of profits remains the primary drive of capital, companies’ long-term profits will outweigh short-term political considerations. The government’s motivations have only limited influence, and economic rules and investment behaviors will not be altered by arbitrary labels Trump gives to companies.