HookRana Plaza: the morning the label looked back
On the morning of 24 April 2013, workers at the Rana Plaza complex in Savar, outside Dhaka, pointed managers to the cracks that had appeared in the building's walls the day before. They were ordered in anyway. The eight-storey building — housing five garment factories cutting clothes for Western brands including Primark — collapsed just before 9am, killing 1,134 people. It remains the deadliest disaster in the history of the clothing industry.
Within weeks something unusual happened: not just outrage, but leverage. Primark paid compensation to victims' families; more than 200 brands signed the legally binding Accord on Fire and Building Safety in Bangladesh; thousands of factories were inspected and refitted. Rana Plaza is the whole of 3.4 in one story — multinationals bring the jobs and export earnings Bangladesh urgently wants (garments provide around 80% of its export revenue), impose costs that fall on the people with the least power, and can be pushed — by law, by consumers, by their own fear of headlines — into behaving better. Who benefits, who pays, and who holds the leash: that is this section.
ModelWhat MNCs bring — and what they take
Start with the credit side, and use Nissan. Its Sunderland plant, opened in 1986, employs roughly 6,000 people directly and supports an estimated 30,000 more through the supply chain; for decades it has ranked among Europe's most productive car factories, and most of its output is exported. That is the FDI package host countries compete for: jobs (usually better paid than local averages), tax revenue, export earnings, and — often most valuable — technology and skills transfer: Japanese lean production methods spread from Sunderland into British manufacturing culture. A local multiplier follows: wages spent in local shops, suppliers hiring, colleges building courses around the plant's needs.
Now the debit side. Profits are repatriated to the parent company rather than reinvested locally. MNC scale can crowd out domestic firms that cannot match its costs or its marketing. Incentives extracted from host governments — tax holidays, grants — transfer public money to foreign shareholders. And MNCs are footloose: the same mobility that brought the plant can take it away, which hands the company standing bargaining power over wages, subsidies and regulation — when Nissan warned after the 2016 referendum that future models at Sunderland depended on trading terms, ministers responded with written assurances within weeks. The honest evaluation is that both columns are usually true at once.
MechanismEthical issues — the conduct gap
The recurring ethical charges group into four. Pay and working conditions: Bangladesh's garment minimum wage at the time of Rana Plaza was about 3,000 taka a month — roughly £25 — and was raised in stages to 12,500 taka (about £90) by the end of 2023 only after mass protests. MNCs argue they pay at or above local market rates; critics reply that the rates themselves rest on suppressed unions and weak enforcement. Environmental degradation: Shell's operations in the Niger Delta left decades of oil spills, and in 2021 Dutch courts ordered compensation to Nigerian farmers — offshoring production can offshore pollution to wherever enforcement is weakest. Marketing ethics: Nestlé's promotion of infant formula in developing countries triggered a boycott movement that began in 1977 and has never fully ended. And tax avoidance: legal structures that move profit away from where revenue is earned.
Keep the key distinction razor-sharp: tax evasion is illegal concealment; tax avoidance exploits legal rules — royalty payments, transfer pricing, debt loaded into high-tax subsidiaries. When Reuters revealed in October 2012 that Starbucks had paid £8.6m of UK corporation tax in 14 years on over £3bn of sales, no law had been broken. That is precisely why it became a political event rather than a court case.
MechanismControlling MNCs — who holds the leash
Control operates at three levels. National policy: regulation, competition law and targeted taxes — the UK's Digital Services Tax (April 2020) takes 2% of the UK revenues of large search, social media and marketplace businesses, deliberately taxing revenue because profit had proved so movable. International coordination: because MNCs arbitrage between countries, control increasingly requires countries to act together. In 2021 more than 135 countries agreed the OECD's 15% global minimum corporation tax on large multinationals, taking effect from 2024 — designed to end the race to the bottom by letting governments top up tax on profits parked in havens.
And civil society: pressure groups, unions, consumers and social media. After the 2012 revelations, UK Uncut occupied Starbucks branches, the Public Accounts Committee told executives it was not accusing them of acting illegally but of acting immorally, and within weeks Starbucks volunteered to pay around £20m over two years — a payment no law required. Investors form a fourth lever: Norway's sovereign wealth fund, one of the world's largest shareholders, publicly excludes companies on ethical grounds, and few boards enjoy appearing on that list. Reputational capital is an MNC's most valuable and most flammable asset; consumer attention is the cheapest regulator there is, though rarely the most durable one.
DataTransfer pricing — the arithmetic of profit shifting
Transfer pricing is how avoidance actually works: subsidiaries of one group trade with each other — royalties for the brand, interest on internal loans, coffee beans routed via a Swiss trading arm — at prices the group itself sets. Each transaction can be defended individually; the pattern moves profit from high-tax countries to low-tax ones. The numbers are worth doing once, because they explain both the public anger and the design of the 15% floor.
A multinational's UK subsidiary earns £100m of pre-tax profit. UK corporation tax at 25% would take £25m. Instead the subsidiary pays a £40m annual royalty for use of the group's brand to an affiliate in a jurisdiction where such income bears an effective 5% rate. UK profit falls to £60m, so UK tax is £15m; the affiliate pays £40m × 5% = £2m. Total tax: £17m — £8m saved, entirely legally. Now apply the OECD's 15% minimum: the group must top up the tax on the affiliate's £40m from 5% to 15%, an extra £40m × 10% = £4m, cutting the avoided sum to £4m. The floor does not abolish the game; it caps the prize — which is why 135-plus governments signed and why havens fought it.
VocabularyKey terms the mark scheme pays for
TrapsMisconceptions that cost marks
ExamWhat examiners want
3.4 is the most evaluation-heavy section of Theme 3: nearly every question is a version of 'assess the impact of MNCs on X' or 'evaluate methods of controlling MNCs'. Build answers stakeholder by stakeholder — local workers, local firms, the host government, the home country, the MNC itself — because Edexcel's levels reward impacts on NAMED economic agents, not on 'the economy' in the abstract.
The evaluation that reaches the top: bargaining power (a host with a huge market, like India, can impose conditions Bangladesh cannot), legality versus morality on tax, and short-lived consumer pressure versus durable rule changes like the 15% minimum. Quote the anchor numbers — 1,134 deaths at Rana Plaza, £8.6m of tax in 14 years, the 2% Digital Services Tax — because precise figures are what separate rehearsed knowledge from genuine application.