Question

Corruption is widespread in many less developed countries. The U.S. anti-corruption laws sanction the U.S. multinational from bribing foreign entities. (The Foreign Corrupt Practice Act of 1977, amended 1988, and the International Anti-Bribery Act of 1998.) Do the anti-corruption laws handicap American firms in their ability to compete against multinationals from elsewhere?

Answer 1

Introduction

With globalization happening across all parts of the world at a faster rate than ever, Multinational companies now have the ability to sell their products and services to different people across regions and ethnicity.

The United States is one of the top manufacturing hubs across the world, and it is a well-known thing that products produced in the country are of a better quality than most other manufacturers.

Yet indeed, corruption happens to be a major problem in smaller countries which are lesser developed, countries such as India, China, Vietnam, Bangladesh etc are now becoming manufacturing hubs and are even leaving the United States behind in a lot of aspects such as cost in producing goods and the volumes which they can produce. Corruption in these countries promotes them to violate norms and engage in pollution or other fraud practices without a check which may give them an edge over competition for a brief time period.

The United States on the other hand has strict laws in place such as the Anti Bribery Act of 1998 as well as the Foreign Corrupt Practice Act of 1977. These laws prohibit companies from engaging in any form of bribery to avail contracts and are penalized.

The big debate now is that are Multinationals based in United States at a disadvantage which is as explained in the next section.

Case Specifics: -

Anti-Bribery Laws are only emerging in countries such as China and India because even they realize that generation of black money is not recommended for any society. However, in my belief the Industries in these countries do not have sufficient design and quality control to compete with US multinationals at the moment.

For example, in the technology space, companies such as Apple may indeed get-tough competition from the Chinese counterparts, yet the technique of production and the quality of products gives them an edge over Chinese manufacturers.

Therefore, in my opinion anti-corruption laws are necessary for any production-based country as they help in keeping favorism in check.

As long as the products being manufactured in the United States are superior in themselves, the initial push which other companies have got as a result of corruption will be nullified in the long run respectively.

Further, as these countries go through the development process, they will realize that competition can only take place in the aspect of quality of the products being sold and technological innovation is the only area which can give companies an edge.

Conclusion: -

We can conclude by saying the US multinationals are not handicapped in their ability to compete with multinationals from elsewhere even when smaller countries may have corruption.

This is because 1) The product quality which we produce is like no other country 2) Those countries are themselves trying their best to reduce the corruption rates

Please feel free to ask your doubts in the comments section if any.