3How MNEs Help Mobilize Rural Labor for Industrialization, Alleviating Poverty (as have done across East Asia):Is the “America First” Policy a Threat?Terutomo Ozawa1.2．MNEs and comparative advantage magnification In an era of globalization, however, expeditious help comes from foreign multinational enterprises (MNEs), especially those from the advanced world that are good at detecting and exploiting both existing and potential comparative advantages across the world as they eagerly search for low-cost locations and develop their supply chains. They can provide all those missing elements instantaneously in one package. Furthermore, MNEs do not just supplement comparative advantages fully, but also magnify their strengths through superior capabilities. All in all, this makes low-wage manufactures even more competitive, boosts an export-driven catch-up and favorably affects the host countries’ trade balances even further. These effects represent the pro-trade type of MNEs’ operations (Kojima and Ozawa, 1984),2 and are what emerging host countries can capitalize on to kick off industrialization. Also, emerging economies’ institutional arrangements are normally in poor shape at the start, hindering participations in international trade and investment. For example, a high level of government involvement in, and excessive regulations of, business activities are pervasive, blocking the market-guided path to an export-driven takeoff and private-sector growth. This is the very reason why so-called “trade facilitation agreements” are mediated by the World Trade Organization for reducing regulations and cutting red tape among those emerging markets that are determined to promote trade as an engine of growth.3 When these economies are eager to attract MNEs as development partners, they are also more likely inclined to deregulate and create business-friendly ecosystems. In this sense, MNEs play a crucial role in inducing and facilitating institutional reforms. 2．Agriculture-to-industry labor shift and abject poverty reduction It is well known that the starting phase of successful industrialization is characterized by the mobilization of labor from the countryside to new-born industrial centers, a mobilization that can supply low-wage labor for infrastructure development, local entrepreneurial businesses, and foreign MNEs’ manufacturing activities. The rural sector is where dire poverty mainly exists, and labor is either unemployed or underemployed, barely eking out living. Once the economy takes off for industrialization, rural laborers can begin, at least, to earn wages (however meager they may be) or receive industrial wages that are higher than those in the rural, subsistence sector--and in most cases sufficiently high enough to support their families left behind in the rural communities. This is the typical pattern of labor migration from rural to urban areas, with income transmissions out of migrants’ savings in a reverse direction. 2 See also Chapter 4 in Ozawa (2016) for the genesis of the notion of pro-trade investment and the decades-long friendship of the late Kiyoshi Kojima (1921-2010) with the author. 3 For example, Sub-Saharan Africa, the least developed, low-income region, requires the longest time to process exports: “nearly 200 hours of inspections, regulations, and paperwork” compared to only 15 hours in high-income countries, as is reported in “Trade deals: Trying for Anything,” Economist, Feb. 4, 2017.