ABSTRACT
Introduction The Bretton Woods system did not provide institutions to deal with international capital movements, transnational corporations (TNCs), nor the internationalization of production.1 And yet, the importance of foreign direct investment (FDI) has grown dramatically since World War II, and much of it has been stimulated by the liberalization of trade and financial flows promoted by the Bretton Woods system and technological innovations. The worldwide foreign capital stock-an estimate of the total value of real assets attributable to foreign ownership or TNCs-has increased from $67 billion in 1960 to $2.7 trillion in 1995.2 The average annual growth of global FDI flows during the second half of the 1980s was almost three times faster than world economic output and twice that of international trade.3 Even with the FDI recession that prevailed in 1991 and 1992, global FDI flows from 1991 to 1994 grew at a rate three times faster than both international trade and world economic output. Global sales generated by foreign affiliates of TNCs-the closest measure of the value of the international production of TNCs-amounted to $6.0 trillion in 1993, exceeding worldwide exports of goods and non-factor services of $4.7 trillion (UNCTAD, 1996). The increasing significance of TNCs consisting of some 40,000 parent firms and some 250,000 foreign affiliates and the totality of their cross-border transactions in the world economy has made TNCs the new instrument of international economic integration.4
