Despite the obvious competitive advantages and high level of economic efficiency, TNCs are seen as economic agents capable of creating economic problems in both the home and host countries.
The most frequent criticism of TNCs in home countries relates to accusations of domestic employment losses: foreign direct investment by TNCs abroad leads to “job exports”.
Indeed, the home countries of TNCs (since they are overwhelmingly developed countries) do not have a comparative advantage in products that rely heavily on unskilled or semi-skilled labor. Such production by TNCs prefer to transfer to countries with low wages. But it is in such industries in developed countries that trade unions are most common, which oppose foreign investment by TNCs.
Lost jobs can be partially compensated by increasing employment in the parent company in the home country. Clearly, this is not full compensation. It should be borne in mind, however, that jobs in the relevant industry in the home country may also be lost without investing abroad, for example as a result of foreign competition. And then there would be no partial compensation.
In any case, the transfer of industries that require unskilled labor from developed to less developed countries means an increase in the efficiency of the use of the world’s labor resources.
Claims in home countries are made against TNCs and in the case of their export of advanced technologies for use in foreign units. In this case, there are concerns that the export of technologies can adversely affect the prospects for maintaining the technological leadership of the investor country. To what extent such fears are justified, whether it is possible to avoid the loss of leadership by concentrating R&D in the home country, whether technology exports stimulate efforts to maintain technological leadership – it has not yet been possible to provide answers to these questions.
Another negative impact on the activities of TNCs for their country may arise from the application of transfer pricing, as well as from the transfer of their activities to low-tax countries. Thus, TNCs have a negative impact on the amount of tax revenues to the budget of their country.
All these reasons sometimes serve as a basis for imposing restrictions on the activities of TNCs.