1. ASEAN affects the multinational firms that invest in its members?
Formed back in 1992 by six member states which aimed at integration of regional trade, ASEAN has expanded of late. The U.S. multinational corporations investing in ASEAN economic community members have gained considerable revenues. On the one hand, the economic benefit results from increasing number of affiliates; on the other hand, the economic gain is a result of the bustling economic activity within at the level of “old” member states. As Antras & Foley observe, “about one-third of the growth in U.S. multinational activity is due to growth in the number of affiliates, while the remaining two-thirds is due to growth in the levels of activity at the affliate level” (Antras & Foley, 2009).
If to compare the affiliates in ASEAN economic community with affiliates in other Asian countries, the United States benefit from the former more. This is explained by the fact that AEAN affiliates direct a smaller part of their sales to the host market and bigger parts to the United States as well as to the third countries. Reduction in trade tariffs between the countries is attractive for investors as well. Moreover, it was found that ASEAN countries demonstrate a higher level of economic activity than other Asian countries.
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2. What is the effect on U.S. economy?
Because U.S. direct investment overseas means “ownership or control by a single U.S. legal entity of at least ten per cent of the voting securities of an incorporated foreign business enterprise”, the growing revenues generated by these enterprises mean great benefits for the U.S. (Antras & Foley, 2009). Apart from direct financial benefit, collaboration with ASEAN means enhancement of U.S. – Asian commercial ties; forming an alliance to balance China and India’s economic power; improvement of the region’s safety in accordance with U.S. strategic interests (Plummer, 2013).
- Antras, P. & Foley, F. (2009). Regional trade integration and multinational firm strategies. Retrieved from http://scholar.harvard.edu/files/antras/files/antras_foleyasean.pdf.
- Plummer, M. (2013). How and why the U.S. should help build an ASEAN economic community. East West Center. Retrieved from http://www.eastwestcenter.org/news-center/east-west-wire/how-and-why-the-us-should-help-build-an-asean-economic-community
