Countries differ significantly in the way they handle the entry of new businesses as multinational corporations carry out wide range of businesses across the globe. These have given rise to many trade agreements with various countries where these multinationals use as their base for business operations (John, 2007, p. 43). Trade agreements have resulted in increased level of businesses which subsequently culminates into increased economies in the member countries. Multinational corporations may have adverse effects in the countries that they operate in and these may include environmental effects, economic effects, and social cultural effects. It is therefore imperative to regulate their operations in order to minimize the negative effects brought about by the multinational corporations and this will contribute highly in protecting the welfare of the consumers in different parts of the world.
International institutions aim to protect from exploitation of consumers by ensuring that multinational corporations provide high quality products. Regulations by governments ensure that companies meet the set minimum standards in the provision of goods and service. Regulations also reduce market failures caused by low quality products and other externalities such as pollution. Regulation of multinational varies across countries depending on firm sizes or the policies set up by various institutions (Trebilcock & Howse, 2006, p. 68). Many countries regulate the multinational corporations through registration processes with variations being experienced in time and cost of registrations. In the most efficient countries, the registration of multinationals is automatic and not involving at all. In a country like Germany, procedures for registering multinational take up to 87 days due to vigorous scrutiny in regulation procedures
Since 1970 United States has spent more that one trillion dollars in the reduction of environmental damages that come as a result of the unregulated businesses by multinational companies. This in a way has contributed to a trade deficit as environmental regulations impose costs that slow productivity growth. This eventually hinders the ability of US multinationals to compete fairly in the international market. Despite the complaints launched by many multinational companies, the US government has remained firm in enforcing regulations to multinational corporations especially in matters concerning environmental pollutions. A United States Environment Protection Agency (EPA) concludes that environmental regulations have major advantages to the concerned countries as they induce more cost effective business processes that reduce carbon emission to the environment.
Free trade has enabled the multinationals to locate their business in both the developed and the developing countries. One of the major effects has been the deteriorating effects in the environment which have caused a lot of concern with the environmentalist. Many of the companies for instance produce a lot of smoke that cause enormous pollution to the environment. International institutions have not been very effective in regulating the environmental pollution by the multinationals. This is largely because some of these companies have their operations in developing countries where there are very few regulations on environmental pollution. Lack of cooperation by the concerned governments has made regulating the multinationals to adhere to acceptable environmental measures, a difficult task for the international institutions concerned with regulations. The developing countries always fear that by allowing so many regulation sanctions the multinational corporations would shift their businesses to developed nations and hence affect their economies adversely.
Agricultural Industry Regulation in US and China
The US government plays a major role in regulating the operations of the agricultural industry or the sake of protecting consumers against unscrupulous companies. Regulations in this industry are enforced a federal agency known as U.S. Department of Agriculture (USDA). Established in 1862 improves and maintains farms as well as farm products and regulates the integrity of agricultural products (Evenson, 2004, p. 45). This agency works closely with other agricultural departments in US.
For effective regulation of the local and the foreign investments in the agricultural industry, the USDA is divided into several divisions. One of the divisions is the Agricultural Marketing Service that is majorly concerned with grading, inspection, certification and promotion of regulatory programs. Animal and Plant Health Inspection Service carries out regulatory and control programs that are specifically designed to protect plant and animals health (Vogel, 1997, p. 97). Any investor in the agricultural sector must abide to proper treatment of animals as well as the recommended methods of control of pests and diseases. It is also the duty of this agency to inspect all the agricultural products that are imported to US. The Federal Grain Inspection Service is responsible for administering inspections for all grain products and setting standards for the same. To ensure food safety and sustainable of agricultural research, the Cooperative State Research, Education and Extension Service is concerned with this role. It also monitors the introduction of new agricultural products in the market.
Agricultural industry regulation in China is a role of the Standardization Administration of China (SAC) which also harmonizes the domestic and international standards. This agency controls the agricultural imports and also monitors the production of agricultural products and their processing by both international and local companies. The Food Safety Law has enabled the enactment of a Food Safety Commission that supervises, licenses food establishments and also enforces food standards (Davies, 2006, p.8). The law on Farm Product Quality and Safety elaborates food quality and safety responsibilities for the Chinese government. It stipulates that all the producers marketing agricultural products including the small scale farmers must meet the basic food and safety measures. This law focuses on inspecting and enforcing the set regulation standards in the market.
To deal with the hygiene of the food products in the Chinese market, the Food Hygiene Law has been put in place. It governs the hygiene of all the food products including the food production equipment used by companies. The Public Health Administration of the State Council bears the responsibility of this law. Measures are put in place to monitor all the ingredients that manufacturers use in food processing (Kerry, 2002, p.86). The China Draft Nutrition Labeling Regulation provides guidelines to be followed by all companies dealing with food packaging in China. The Import and Export Food Labeling Management Regulation ensures that all agricultural foods are well inspected at the point of entry or exit to ensure that false or poor quality products do not leave or get into the Chinese market.
In general US has better regulations for the agricultural industry as it even pays attention to environmental concerns that may be raised by the agricultural companies such as emission of poisonous carbon fumes into the environment. China’s regulations in this industry do not factor in the issue of environment pollution that may be brought about by the companies dealing with agricultural products. The Chinese government is at times reluctant to deal with the issue of inspecting the quality of agricultural product s that are exported from China to other countries and hence leading to a rise in counterfeit products. A recent case was when China was involved in exporting counterfeit milk products and this was enough proof of the laxity in quality regulations.