The Victors' Spoils CALLING THE AUGUST 1990 invasion of Kuwait by Iraq a "wakeup call for the American construction industry," Max Franklin, president of the Program Group, an organization that works to promote U.S. business, opened the July 30 "Reconstruction of Kuwait" conference in Atlantic City. Franklin and other speakers urged U.S. companies to take advantage of business opportunities resulting from war damage in the Persian Gulf. About 150 construction contractors came to the conference to hear business and government representatives talk about the chances of profiting from the destruction of Kuwait's infrastructure. Speakers told contractors of work opportunities in repairing airports, housing, government buildings and the telecommunications system, as well as extinguishing over 600 oil well fires. "There is plenty of costly damage," Rod Stuart of the Department of Commerce assured the conference. Conference literature emphasized that "billions of dollars wait to be claimed in Kuwait." The message of most speeches, however, was that business opportunities in Kuwait are more limited than was forecast when the war broke out in January, and that only very large corporations such as AT&T and Bechtel are likely to reap much benefit from the destruction. Many of the small contractors who attended the meeting seemed disappointed in the news of limited opportunities. David Gump, who edits Gulf Reconstruction Report, a bi-weekly newsletter on Gulf trade information, said that because the war ended quickly "there wasn't as much destruction as people had assumed" there would be. Dean Campbell, manager of corporate business development at the Texas construction company Brown and Root, agreed that "the actual work to be performed is not as extensive or as complicated as originally anticipated." Gump said that the idea that quick fortunes could be made easily in the Gulf was spread by "the media machine [which] needed something to cover" once the war was over. Large multinational corporations are gaining most from the reconstruction efforts. For example, lucrative Kuwaiti government contracts have gone to U.S. firms such as AT&T, Caterpillar Inc. and 3M. The Kuwaiti government has also hired several Texas firms such as Boots & Coots and O'Brien Goins Simpson, Inc. which specialize in fighting oil well fires. In January 1991, the U.S. Department of Defense and Kuwaiti government officials signed a foreign military sales (FMS) case which gave the U.S. Army Corps of Engineers $46 million to provide planning assistance and to contract for goods and services related to the emergency and recovery phases of the restoration. According to James De Wire of the Office of the Assistant Secretary of the Army, the Corps began in February soliciting firms interested in providing prime construction contracting for Kuwait reconstruction. When the war came to a quick end the Kuwaiti government requested that the solicitation process be speeded up, and eight Army Corps contracts were awarded by early March, five of which went to U.S. firms, including such major corporations as Raytheon. De Wire said that any future contracts awarded by the Army Corps (the Kuwaiti government is expected to sign another $100 million FMS) will require prime contractors to submit a "small business involvement plan" which provides for the sub-contracting of work to smaller firms. Speakers at the conference attempted to encourage small firms about their prospects in Kuwait. Richard Favara, president of the Expedition Group, an international employment placement agency, advised smaller companies to solicit contract work with the larger firms already established in Kuwait, although he acknowledged that Bechtel and other large corporations are so inundated with requests for work in the Gulf that they are throwing away resumes and brochures by the thousands. Some speakers advised contractors to forget about Kuwait and explore markets opening up in the Soviet Union, Eastern Europe and Taiwan. Others, while stressing the advantages of doing business in a country where there is a feeling of "gratitude" toward the United States, recommended looking at other opportunities in the Gulf--with some cautiously suggesting the possibility of doing reconstruction work in Iran and Iraq. The questions that conference attendees asked indicated that they were most interested in finding out about specific work opportunities in Kuwait--they wanted to know what supplies were required, what sort of repairs needed to be done and what materials were being used. (One or two were interested more generally in living conditions in Kuwait. One attendee expressed concern about the effects of the oil well fires and was told by De Wire that the fires posed "no immediate health concerns" although there did seem to be "a high rate of respiratory diseases" among people living in areas near the wells.) Despite drawing people to the meeting with promises of easy money to be made in Kuwait, the tone of the conference was discouraging to the small contractors who were told again and again that there was no guarantee that they would find business in the Gulf. "Desert Storm simply allowed American business to knock on the door," said Stuart of the Commerce Department, but apparently only major multinational corporations have been let in. -Holley Knaus ------------------------------------------------------------------------------ [] MULTINATIONAL MONITOR VOLUME 12, NUMBERS 7 & 8. JULY/AUGUST 1991 The South Rises HONG KONG--Activists from around the world debated the future of the consumer movement at the contentious thirteenth World Congress of the International Organization of Consumers Unions (IOCU), held in Hong Kong during the week of July 8-12, 1991. Discussions focused on whether the consumer movement should maintain as its primary focus a commitment to ensuring consumers "value for money" or whether it should broaden and integrate environmental, health and Third World concerns into its understanding of consumers' interests. The fact that the dispute took place along largely, but not entirely, North-South lines made the topic even more explosive. The debate was put into historical context by an article appearing in a forthcoming issue of the U.K-based Ecologist and distributed to Congress participants. Written by one of the Congress participants, Tim Lang, head of the British Parents for Safe Food and a member of the European Eco-Consumer Network, the article differentiated between the "first wave" of the consumer movement, which focused on "value-for-money, information and labelling," and the "second and third waves," which are anti- corporate and ecologically minded. While appreciating the success of the first wave, Lang argued that its emphases are dated. "It takes too much for granted," he charged, "not least in assuming that the interests of those who control the production of consumer goods--in the main, large corporations-- are broadly similar to those of consumers in the market." This division between the first wave and the second and third waves, which corresponded to the debate at the Congress, was not discussed overtly, but it emerged in panel and workshop discussions and in the main issue of contention at the Congress, the General Agreement on Tariffs and Trade (GATT), the international agreement which regulates most world trade. In a November 1990 position paper presented to GATT negotiators, the IOCU secretariat in the Hague, Netherlands and the Bureau of European Consumers Unions (BEUC) called adoption of GATT "an urgent priority for consumers." Underlying IOCU and BEUC's position was a general faith in the ability of the free market and free trade to allocate resources efficiently and in the best interests of consumers. Jim Murray, executive director of BEUC, urged consumer activists to adopt a "more sophisticated" and critical stance toward regulatory policies. Maurice Healey, of the British National Consumer Council, defined the primary mission of consumer groups as ensuring the widest possible "choice" for consumers and argued that unregulated markets should play a key role in accomplishing this goal. These positions were echoed by several panellists who some Congress participants felt should not have been invited to speak: a representative of the conservative, federal Canadian government which signed the U.S.Canada free trade agreement; an economist with the Inter-American Bank, an affiliate of the World Bank; and a self-described, Hong Kong industrialist. Third World, Japanese and some European and U.S. activists criticized the pro-free market stance. Fabio Villalobos, an economist with the IOCU office in Montevideo, Uruguay, labelled GATT part of a "new international economic arrangement which serves "the interests of the industrialized countries and their transnational corporations." Many called on IOCU to oppose the current GATT proposals explicitly, saying their effect on the environment and the Third World would be devastating. Lori Wallach of the Washington, D.C.-based Public Citizen circulated a memorandum which explained how GATT provisions would prevent signatory countries- -and states and locales within those countries--from adopting health, safety and environmental standards more stringent than those agreed on internationally. Third World activists focused on the detrimental effects of GATT proposals in the areas of intellectual property [see "TRIPping the Third World," Multinational Monitor, November 1990], services and investments. They argued that these plans would open their economies to multinational corporations, destroy domestic companies and lead to higher prices for Third World consumers. Those critical of the IOCU position on GATT and trade formed a Consumers' Network on Trade to share information and "inject a critical consumer voice into the trade debate." The founding statement of the Network said, "Too often international trade agreements such as the GATT put the interests of commerce before consumers' long-expressed demands for a healthy environment, a secure and safe food supply and sustainable development." Second and third wave consumer advocacy emerged in other forums too, especially in Third World-run workshops and panels on rural consumers and green consumerism. In the workshop on rural poverty, Southeast Asian activists detailed their work, which has moved beyond narrowly defined consumer issues to embrace broader development concerns. Both Indonesian and Thai groups are organizing to decrease pesticide usage in their countries, not primarily out of concern about residues on food, but due to an awareness of the effects of pesticide poisoning on rural workers and of pesticide usage on the environment. The Congress ended with some clear shifts toward second and third wave consumer movement thinking. Each of the working groups created to take on specific projects had balanced representation from North and South groups. The newly-elected president of the organization, Emma Witoelar, is an Indonesian who has worked extensively in the Indonesian environmental movement. But IOCU's future, and the willingness of its European members to allow the organization to embrace a broad understanding of the consumer interest, is still uncertain. The challenge for the organization will be especially great, because one of its visionaries and past presidents, Anwar Fazal of Malaysia, resigned from his position as head of IOCU's regional office for Asia and the Pacific. Fazal, who was given the honorary title of IOCU "patron" at the Congress, consistently pushed IOCU to confront corporate misdeeds and to expand its definition of the consumer interest. -Robert Weissman Breaking the Code THE BUSH ADMINISTRATION has been waging a covert campaign to defeat passage of the proposed United Nations Code of Conduct for Transnational Corporations, while publicly declaring support for the Code and agreeing to participate in negotiations on its provisions. The Code, a set of voluntary guidelines covering all aspects of relations between multinational corporations and host countries, is scheduled to be considered by the U.N. General Assembly in September. While the United States has agreed to participate in consultations scheduled for August and September regarding the final version of the Code, the Bush administration has directed its diplomatic corps to pressure foreign governments to withdraw support for its consideration. A March 1991 State Department cable directs U.S. embassy officials in over 40 countries to "seek the support of host government officials responsible for foreign investment and quietly build a consensus against further negotiations at this time." A State Department official admitted to Multinational Monitor that the administration is "working both ends" in lobbying for governments to oppose the Code while agreeing to negotiate on its provisions this fall. The official said that the U.S. position on the Code is that private corporations have "played a crucial role in shaping the world economy" and that the administration and State Department are "fundamentally against ... rules which would tend to regulate" the activities of transnational corporations. Proponents of the Code have reacted angrily to the State Department's actions. "The administration is now in the process of sabotaging a widely supported UN effort to improve fairness in competition and honesty in business by international corporations," says Rhoda Karpatkin, president of U.S. Consumers' Union and past president of the International Organization of Consumers' Unions (IOCU). The Code defines multinational companies' consumer and environmental protection responsibilities and outlines host country obligations to foreign companies. Among its provisions, the Code prohibits bribery of public officials and requires multinational corporations to disclose to host countries information on company structure and policy, and on potential environmental dangers of the products it produces or sells. Authorities must be informed, for example, if a product has been banned in another country for environmental reasons. Host country obligations include ensuring that multinational corporations receive fair and equitable treatment in foreign countries and providing compensation to corporations whose assets have been nationalized. The current draft of the Code has been defined after a decade of negotiations with the United States and Japan the primary opponents. Disputes revolved around issues of semantics, many of them rooted in the distrust some Third World nations feel toward the industrialized countries--for example, a provision that refers to obligations under "international law" was opposed by developing nations which feel that international legal structures favor Northern interests. The countries which objected were suggesting less defined language such as "international obligations." Esther Peterson, representative of IOCU to the UN, notes that most major points of contention between industrialized and Third World countries were resolved during the last round of negotiations in terms favored by the United States. The State Department official says, however, that the United States still has several objections to the current draft of the Code. According to the official, the Bush administration wants provisions to more clearly outline procedures for international arbitration in cases of disputes between corporations and host countries and to guarantee that profits can be transferred from the host country to the home base of corporations without restrictions. The administration also believes that the Code places too much responsibility on corporations, and not enough on host countries, in bearing costs for environmental clean-up. The State Department spokesperson says that while the administration would "prefer that there ... not be a code at this time," the United States will participate in negotiations this fall in order to "shape the content of the Code." Peterson, however, says that the U.S. agreement to participate in these final consultations means little since the administration "has been going behind our backs and trying to kill it." -Holley Knaus ------------------------------------------------------------------------------ [] MULTINATIONAL MONITOR VOLUME 12, NUMBERS 7 & 8. JULY/AUGUST 1991 Let's Make A Deal CAMPAIGN CONTRIBUTIONS went hand-in-hand with the giveaways of the savings and loan bailout of 1988, charges "Let's Make A Deal," a report issued in July 1991 by the Washington, D.C.- based Center for Study of Responsive Law. The study examined almost 100 secret deals which were made in selling off 220 failed thrifts to rich financial speculators and politically connected insiders. The report estimates the cost to the taxpayers of the 1988 bailout to be $73 billion. "Let's Make A Deal" reveals that many of the individuals who acquired S&Ls made substantial political contributions, often to opposing political parties and candidates opposing each other. Contributions were concentrated among members of Congress who serve on committees overseeing the banking industry. The report concludes that "the fact that many contributors gave to candidates who opposed each other, and the large sums received by the Senate Banking Committee chair and the Senate Finance Committee chair, create the appearance that these campaign contributions were designed to guarantee access to or buy the action or inaction of elected officials." It also asserts that "the large sums of money received by President Bush in the months prior to his election also creates the appearance that Federal regulators were acting on behalf of special interest campaign contributors--in this case, the acquirers of the insolvent S&Ls." Rather than alerting the taxpayers to the S&L crisis by shutting down insolvent thrifts and paying off insured depositors, the Reagan-Bush administration's Federal Home Loan Bank Board (FHLBB) seized the S&Ls and sold them to private buyers. Though the deals were often far more expensive than a traditional thrift rescue, the costs were not borne by the S&L insurance fund, and the administration was able to conceal the emerging crisis during the 1988 presidential election year. The "sweetheart deals" which the government made with the S&L acquirers included guarantees of profitability, huge tax breaks and subsidies. The report identifies several individuals involved in the "sweetheart deals" who made large contributions to political campaigns. The report lists significant political contributions by corporations and individuals who acquired S&Ls, including donations from the political action committees (PACs) of Citicorp, Barnett Banks and Ford and generous gifts from S&L acquirers Jay Van Andel, Edgar D. Prince of Michigan National Corporation and Ronald Perelman, who contributed a total of $164,500 to federal campaigns. "Let's Make A Deal" documents 14 individuals,led by Perelman, who acquired S&Ls and donated to at least three, and as many as seven, presidential candidates. Thirty-three other individuals gave to two presidential candidates and twelve gave to a candidate from each political party. Several of these individuals, including Perelman, were involved in the acquisition of First Gibralter, which itself cost taxpayers over $8.8 billion. The report also identified 44 federal candidates who accepted a minimum of $10,000 in contributions from corporations and individuals which acquired S&Ls. The top eight incumbent recipients were the leading Republican presidential candidates, George Bush and Robert Dole, the chairs of the Senate Finance and Senate Banking committee, and four Republican senators. Both Republican and Democratic political committees received sizeable contributions from those acquiring the failed S&Ls. The Republican National Committee obtained $284,000 and the Democratic National Committee received more than $102,000. In compiling the study, the authors had to overcome the refusal of agencies such as the Office of Thrift Supervision (OTS) to release crucial documents. The OTS withheld executive summaries and bid analyses for the acquisition of failed S&Ls; "without this information," says the report, "neither Congress nor the public will know exactly how the 1988 deals were arranged." The report's authors charge that the government agencies' secrecy concerning the 1988 bailout suggests they have something to hide. One of the report's co-authors, Joseph Belluck, says that "the actions of the OTS and the Resolution Trust Corporation call into question the propriety of the Reagan/Bush regulators in negotiating these deals." OTS spokesperson Janice Smith angrily denies the report's charge, however. She says that the OTS was not subject to political pressure in making its determination to withhold information and maintains that since the Keating Five incident, government officials are especially careful not to do or say anything that might be interpreted as exerting political influence. "The Information Services Division is and was in no way dictated to by politics," she says. Based on its findings, the report's authors call for congressional campaign finance reform, publicly financed campaigns to eliminate special interest political influence and an immediate congressional review of the S&L deals to determine if campaign contributions affected the disposition of the failed S&Ls. It also urges Congress to immediately request that OlE release all records pertaining to the 1988 S&L deals. These steps are necessary, the report holds, to address questions "about the government largesse that [large campaign contributors] received through the so-called 1988 "sweetheart deals." -Erika Shaker