The Multinational Monitor

July/August 1989 - VOLUME 10 - NUMBERS 7 AND 8

T H E   U N I T E D   N A T I O N S

Tracking Transnationals

United Nations Centre on Transnational Corporations

by Richard Caplan

Earlier this year, a U.S.-based company offered to establish mining operations in a certain African country. Because of the country's economic plight, the company's offer was received with great interest, but it also raised concerns. The company, whose letterhead identified it as a subsidiary of a major U.S. mining firm, was to be granted mineral rights as part of the deal. Feeling ill-equipped to evaluate such a high-stakes venture, the country turned for advice to the United Nations Centre on Transnational Corporations (CTC). What the Centre discovered was enough to quash the deal: the company had no known assets and, moreover, it had fabricated its affiliation with the parent firm.

The CTC receives many such requests for assistance each year, making it, in a sense, the United Nation's (UN's) own "multinational monitor." Established in 1975 in the wake of revelations about International Telephone & Telegraph's (ITT) attempts to destabilize Chile and at the height of Third World demands for the creation of a New International Economic Order, the Centre has become the focal point at the UN for all matters relating to multinational corporations. Not only does it attempt to strengthen the negotiating capacity of countries-- particularly developing countries--in their dealings with multinational corporations, the CTC is also a leading research center, engaged in a wide range of studies on the impact of multinational corporations on home and host countries. Since 1977, it has also been working to forge an agreement on an international code of corporate conduct that would govern relations between sovereign states and multinational firms.

As Peter Hansen, the CTC's executive director, sees it, the Centre's mandate is "to minimize the negative consequences that the operations of transnational corporations have and to maximize the positive contribution they can make." Over the years, the work of the Centre has expanded, if only because of the increasingly important role that multinational corporations play in the global economy. Today these firms employ 70 million people worldwide, produce 25 percent of all manufactured goods and are responsible for approximately $135 billion in investment capital, including vital transfers of technology. "We're dealing with an 'issue area' that was perceived to be very great in the mid-1970s," says Hansen, "but which is indisputably much greater today."

The Centre is an autonomous agency, though it also gets direction from the Commission on Transnational Corporations, a 48-member intergovernmental body of representatives from each of the three major blocs--the developing countries, the socialist countries and the advanced industrial states. It is the Commission that has primary responsibility for drafting the U.N. Code of Conduct on Transnational Corporations, whose provisions, when adopted, will represent international consensus on the definition of the "good corporate citizen."

The Code, which will be non-binding, is meant to fill a void in the corpus of post-war multilateral economic covenants. Presently, there are regulations and institutions governing trade, monetary relations and development lending but no framework for direct foreign investment. "We're still living at the stage of the law of the jungle," says Hansen. "There [are] no globally agreed upon rules of what's right and what's wrong for transnational corporations, no sense of global responsibility to match the global reach of corporations."

For years code negotiations have bogged down over such fundamental issues as what defines a transnational corporation (the socialist countries wishing to exclude state-owned enterprises) and the arcane but critically important distinction between international law and international obligations. (Many Third World countries find the latter objectionable since they derive, in part, from customary laws of the colonial era.)

Almost everybody, including business representatives, favors adoption of some code though there are great differences of opinion over just how effective an instrument it can be. Esther Peterson, who represents the International Organization of Consumers Unions at the U.N., is very optimistic about what results it might achieve. "Even though the Code will be voluntary," she says, "it will have great credibility and moral authority because it will be based on f international consensus." Peterson cites the precedent of U.N. Consumer Protection Guidelines, which are also non-binding. "They contain a lot of recommendations that are now being adopted as national legislation--in Uruguay, Brazil, Spain and Kenya," she points out. Bruce Rich, a senior attorney with the Environmental Defense Fund, is less sanguine. "Just look at international law in general and how often that's flouted. Here you've got something that's much more ethereal and less well-grounded." Rich believes that "targeted campaigns" like the Nestle boycott and the South Africa divestment effort "where you can muster enough critical mass to force corporations to really do something," are more effective at influencing multinational corporate behavior.

Given the mood and circumstances surrounding the origins of the Centre, it is not surprising that it has often been regarded with suspicion in certain quarters. William Stibravy, who represents the International Chamber of Commerce--the business lobby at the U.N.--explained a few years ago that the Centre and certain other U.N. institutions were "tailor-made for countries or individuals who simply wanted to lash out at private enterprise generally and at multinational corporations specifically."

Criticism of the CTC has not been limited to the private sector. Anti-CTC rhetoric was a prominent feature of the Reagan administration's U.N.-bashing. Speaking to a closed luncheon of the International Business Council in 1985, Alan Keyes, then- Assistant Secretary of State for International Organization Affairs, characterized the Centre as a weapon designed "to attack the premises and legitimacy of the Western way of life, to attack the very concept and idea of capitalism, and the positive role of multinational corporations in development."

Today the shrill blasts of Reagan-era invective have given way to a "more constructive environment," in Hansen's view. "I've certainly seen evidence of change in the way the United States has been addressing issues and in the way various U.S. departments have been participating supportively in the Centre's work." A shift in attitude is also evident in the business community. "We perceive that there has been, over recent years, a decline in the degree of antagonism between the Centre and business and in the Centre's attitude toward business," says Ronnie Goldberg, senior vice-president of the U.S. Council of Business. Business would be even happier she adds, if the Centre were to omit environmental concerns from its agenda. "These are not multinational issues; these are issues for every business - local as well as multinational."

The Centre, like other U.N. agencies, often finds itself at the mercy of shifting political winds. Yet, it has probably been more consistent in its work than have been the attitudes toward it. And the Centre is certainly more benign and even conservative an institution than some of the controversy it has attracted would suggest. Through the assistance it has given to countries interested in establishing foreign investment regimes, for instance, the CTC has helped open doors for multinational corporations--in China, the Soviet Union and the socialist countries of Eastern Europe, among others. Its EMPRETEC program has identified and trained local entrepreneurs in Argentina, Nigeria, Venezuela and Uruguay. And a code of conduct, most everyone agrees, is as much in the business community's interest as anyone else's, since it helps to define the "rules of play." Indeed, some accuse the Centre of being too responsive to business pressure. According to Archie Singham, a professor of political science at Brooklyn College and a self-described "resident anthropologist" in the U.N. Delegate's Lounge, it is often said that the Centre on Transnational Corporations ought to be renamed the Centre for Transnational Corporations.

What certainly has changed over the years is the international economic climate, and that cannot but affect the work of the Centre. During the 1970s developing countries, emboldened by the Organization of Petroleum Exporting Countries' triumph over the wealthy industrial nations, were denouncing the "imperialist exploitation" of multinational corporations and pressing hard for the establishment of a new, more equitable, global economic order. Now these same countries, crippled by debt and disillusioned by the failure of some of their experiments in alternative development, are courting the multinationals. In his statement before the U.N.'s Economic and Social Council recently, Hussein Haniff, speaking on behalf of the developing countries, expressed his "concern [over] the substantial reduction of flows in direct foreign investment to the developing countries" and urged the Centre "to study these trends and make recommendations on the ways and means of increasing the operations of transnational corporations in developing countries."

The socialist countries, too, are more open to a greater role for multinationals in global development than they were in the past. "For years the Soviets would stand up in the Commission and give a speech about the need to control TNCs," observes one U.N. official. "Now they get up and talk about the importance of getting TNCs involved in developing countries." This convergence of interests, more than any other factor, explains the dramatic shift that has taken place in the debate over multinationals at the U.N. and the relative absence of controversy surrounding the Centre these days. Ironically, it is the increasing inequities of capital that are breaking down the resistance to multinational expansion--a goal the business lobby has strived for many years to achieve.

Although the Centre has never been the watchdog agency that some hoped and others feared it would be, it has at times demonstrated a real boldness. When the U.S. government refused to cooperate with the Centre's efforts to identify the brand names of U.S.-manufactured goods for inclusion in a consolidated list of banned products, the Centre sidestepped Washington and sought the assistance of non- governmental organizations. And when the Philippine government under Corazon Aquino solicited the Centre's advice on negotiating the $2.2 billion debt it owes for the now mothballed Bataan Nuclear Power Plant (which was built near a volcano and several earthquake faults after Westinghouse reportedly paid a Marcos relative $80 million in bribes), the Centre dispatched a high-level expert team to the Philippines and is said to have advised the government to adopt a hard line.

Still, the Centre could be playing a more forceful and constructive role in shaping the development agenda. Its goal of "making the world safe for foreign investment and foreign investment safe for the world," as Peter Hansen puts it, ignores the fact that increased capital flows may actually contribute to a worsening of economic trends. The globalization of production has brought with it a general reduction in wage levels--here and abroad--as workers outbid each other to attract capital. And when wage levels fall, so does demand, resulting in a glut of goods and increased pressure for protectionist measures.

Mark Anderson, an economist with the AFL-CIO who also serves as an "expert adviser" to the Commission is critical of the Centre for buying into the conventional wisdom in this respect. "They're seemingly enamored with an export-led strategy. But everybody can't be an exporter and, moreover, such a strategy harms the interests of U.S. workers." The Centre has stressed the need for debt relief, which would tend to improve demand. But it has not addressed the larger question of the relationship between transnationalization and wage levels and the need to improve purchasing power worldwide. "Subsistence wages is not exactly an effective growth strategy," Anderson says. The Centre claims that wages are not in its purview, that the more appropriate forum for such a matter is the International Labor Organization. And yet, it does not leave it to the World Bank or the International Monetary Fund alone to deal with debt issues.

The CTC does play an important role in setting the international agenda on a number of different issues. External pressures, however, can play a significant role in shaping the Centre's agenda. Barbara Adams, a consultant to the U.N.'s Non- Governmental Liaison Service, says "I think the Centre does have some kind of capacity to behave differently. Where the pressures are going to come from, that's a different question."

Richard Caplan is an editor of World Policy Journal.

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