Foreign Collaboration Agreements: Are Export Restrictions Inconsistent?
Express Exim Review, p. 8, January 22, 1996
4 Pages Posted: 3 Jun 2011
Date Written: January 22, 1996
Multinational Enterprises with the international transfer of technology to developing countries generally stipulate certain restrictive clauses in the foreign collaboration agreements (FCAs) which govern the over all operations and profitability of the technology importing firms. Amongst the various types of clauses the export restrictions constitute major part of such clauses. These clauses are popularly known as export restrictions (ERs) and may restrict the export of the resultant output of the new technology. These ERs are commonly practiced the world over, however, their real impact on firms export performance/global operations has been a topic of debate. However, the question arises as to why the right of exports of technology importers with the application of such practices be restricted by MNCs.
Therefore, the issue of restricting exports and declaring ERs as illegal the worldwide becomes extremely relevant in the context of new trading system and rules pertaining to investment flows that have emerged under the World Trade Organisation (WTO) and the related multilateral agreements. Would such ERs be pronounced as inconsistent with the Agreement on Trade Related Investment Measure (TRIMs) on the same lines as the conditions for domestic content and import export links have stipulated for multinational been pronounced as anti-GATT?
Till such time this is done, there is need of a great caution while signing a FCA by the technology importers. At no cost, non-permissible ERs be accepted, formally or informally. Reasonable, permissible ERs, however, in the unavoidable circumstances may be considered if they are absolutely necessary for the FCA. The experience reveals that number of ERs increase with liberalization. Technology importers should not allow them to go further. Foreign technology and investments are welcomed but it should be linked with an outward looking perspective, where ERs have no place.
Keywords: Export Restrictions, Foreign Collaboration Agreements, MNEs, WTO, TRIMs
JEL Classification: F14, F2, F23, L62
Suggested Citation: Suggested Citation