Figure 1. US Apparel employment (‘000s) and import penetration (%), 1939-2000
Source: (Cited in Chan and Ross, 2003, 1015; Mintz: 2009: 44)
2) MNCs Impact on Employment and Wages:
The power of MNCs today lies in their remarkable mobility. The International trade expansion has brought labour markets of developed countries in close contact with those of developing economies. As stated in the 1947 preamble of the original General Agreement on Tariffs and Trade (GATT): “Relations among countries in the field of trade and economic endeavour should be conducted with the view of raising standards of living and ensuring full employment” (cited in Harvey et al, 2000: 4; Chan, and Ross. 2003: 1012).
Even though Transnational Corporations (TNCs) employ only 2 to 3 per cent of the world’s workforce which is approximately seventy-three million jobs, of which twelve million are based in developing countries (Chundnovsky, and Lopez, 2006: 83). TNCs account for one-fifth of all paid employment in non-agricultural sectors across the world  . This economic relationship has reaped great benefits, such as enhancing progress in the developing world through the transfer of knowledge which improves their productive capacity and attracts foreign direct investment (FDI) from the North. On the other hand, North has benefited from this trade relationship by experiencing rising standards of living.
III) Evolution of the Global Production System and Value Chains, and effects on International Division of Labour:
The past twenty years have seen a significant change in the nature of manufacturing in OECD countries (Pilat, 2006). In a short span of time, Asia has become a major exporter of labour-intensive manufactured goods, such as textiles and clothing, toys and footwear. In 2001 Asia held 80 percent of the world trade in manufacture goods which are exported to developed regions of the world. This rapid change in the balancing of the world exports has caused concerns in the North for job security and wages.
MNCs have been at the forefront in formulating the new pattern of global production and trade. In 1970s, when MNCs undertook foreign direct investment in developing economies, “a vertical integration of international production began to take shape” (Zammit forthcoming). MNCs embarked on this strategy to gain access to raw materials, capture newly emerging markets for their products, and gain advantage of cheap labour to manufacture labour-intensive products, such as textiles, and footwear etc.
During 1980s onwards, the formation of the global production system changed over to a “vertical disintegration” of production (Lall et al., 2004). With the emergence of newly industrializing countries and increasing production capacities of Southern countries, MNCs in the North grabbed the opportunity to exploit the differences in costs of raw materials amongst the Southern countries. This change in the global production system involved the outsourcing of segments of production, such as skill, capital, and echnology whereas, labour-intensive segments are placed in the lower end of the value chain in low-wage locations to curb costs. These transformations paved way for a series of global economic process: the increasing internationalization of retail activities by Northern companies  ; expanding corporate share ownership; increased oligopolistic rent-seeking, and brand-marketing; changes in industrial organization, and a shift from internal to external economies of scale through outsourcing (cited in Zammit, forthcoming: 9).
In this context, Nolan argues that the “global business revolution” has “changed the nature of the capitalist firm, the pattern of competition and the way in which economic production is organizing in much of the global economy” (Nolan, 2006: 1). This evolution of global business has generated competition at global level, which compels firms in similar industries to merge their resources in order to achieve economies of scale and gain competitive advantages. Thus, with these mergers and acquisitions make MNCs powerful entities to play a dominant role in the global production and trade arena.
The regulation of the new global production system and trade have been redefined under the guidance of multinational corporations and their subsidiaries, which have developed ‘system integrators’ in global value chains. The global retailers employ new technologies and methods acquired through mergers to exert pressure on firms in the supply chain. These system integrators possess unequal bargaining powers in the value chains, as they put pressures on the retail sector  . Their first tier suppliers, who are supposed to comply with requirements for ‘right price’ and ‘right time’, pass on the pressures to the bottom of the supply chain which is usually low wage and labor intensive, and therefore outsourced to developing countries by MNCs. This creates a ‘cascade effect’ to obtain economies of scale. Nolan argues that this will have profound implications for firms in southern countries attempting to catch up at the global level, and may create entry barriers for accessing global business (2006: 155).
From developing countries’ perspective, entry into the value chain is a crucial for local corporations to have access to “the global commodity chains of core firms” located in developed countries (Nolan, 2006: 3). Due to developing countries quasi-monopsonistic position within the global production system, developed country firms set the terms and conditions of business with their suppliers, which has ripple effects further down the chain. Thus, the admission of these less developed country firms’ into the value chain to capture other markets is not solely managed by the trade policies, but also by the strategic decisions of the parent firms in the value chains.
Although MNCs play a significant role in developing countries by investing in different industries and providing employment opportunities with their economic and industrial power, the governments in advance economies have exploited the ‘weak bargaining position’ of developing countries to create more avenues for big business (Madeley, 2008: 17). Therefore, “MNCs are not simply economic entities but part of complex interplay of factors”, that has both positive and negative effects on the social and cultural environment of the host countries (Chandler and Mazlish, 2005: 3-4).
Corporate Power Practices in the Value Chain:
In relation to the earlier discussion on the global production system and value chain, this next section looks at the evidence of corporate power exploitation in the value chain within the UK retail sector. Supermarkets in the UK, like Morrisons and Sainsbury, have joined together in a pool to negotiate buying power from other European retailers. Morrisons is a member of Associated Marketing (AMS), a group of 8 supermarkets with combined sales of £40 billion (ActionAid, 2007, p.Â 17). There are small numbers of global suppliers for supermarkets specially, in food and clothing. For example, as a result of the Multi-Fibre Agreement (MFA) quotas, the enterprises engaging in garment production and export has increased, thus intensifying competition (Zammit, Forthcoming).
These supermarkets have immense power to extract prices from suppliers that are way below the industry average. For example in 2000 smaller retailers paid almost 9Â per cent more to suppliers than the major chains, and in 2006 the situation had further deteriorated. The large supermarkets had paid their suppliers between 15 and 20Â per cent which was less than that paid by wholesalers supplying smaller retail firms (see ActionAid, 2007). These UK retailers pressurised suppliers into exclusive trading arrangements which will not allow them to leave or switch to another outlet. Additionally UK suppliers were only provided with short term contracts of six months or less which was not beneficial. Furthermore, these UK super markets and retailers regularly switched their suppliers to avoid the formation of close relationships and loyalties between suppliers and producers and prevent competition amongst them. Even worse, these retailers selected their suppliers via auctions and issued the contract to the supplier offering the lowest price. (ActionAid, 2007:Â 18).