Code of conduct for TNCs reappears

by Gustavo Gonzalez

Santiago, Jul 26 (IPS) -- Through the early 1980s, the United Nations (UN) advocated the creation of an international code of conduct for transnational corporations, a proposal that became heresy with the advent of globalisation. But, in an ironic twist, the code issue has resurfaced due to globalisation itself.

The Human Development Report 1999, released earlier this month by the UN Development Programme (UNDP), includes the role of transnationals in its judgement against a globalisation process that it says has increased disparity between rich and poor countries, and people.

"Globalisation With a Human Face," as the UNDP report title suggests, is a plan that would reverse the global trend of the continued expansion of business in order to direct the benefits of globalisation toward society.

The UN proposes a "reinvention of the world government structure," to focus on people's concerns and human rights, and within that context, incorporate the creation of a world code of conduct for transnational companies.

Governability, a concept that has been primarily an aspiration of national governments, now must be extended to the global arena in order to restore the basic economic conditions that were devastated by globalisation.

According to Jose Antonio Ocampo, executive secretary of the Economic Commission on Latin America and the Caribbean (ECLAC), "improved governability" is essential to prevent the negative forces of globalisation from prevailing over the benefits of the process.

Free trade, the free movement of capital, legal protection of intellectual property and investment, are dominant issues on globalisation's economic agenda, said Ocampo at the regional launching of the Human Development Report in Santiago.

"Other equally important issues are absent," added Ocampo, listing among them the international mobility of the labour force, agreements to guarantee adequate taxation of capital and to punish tax evasion, as well as mobilising financial resources to help countries marginalised by globalisation.

It is equally necessary, said Ocampo of the UNDP proposal, "to establish anti-monopoly regulations at the international level and a code of conduct for the large multinational firms."

The idea of creating a code of conduct for transnationals was debated at the United Nations (UN Centre for TNCs) in the 1970s, triggered by primarily political issues at the time. In parallel at UN Conference on Trade and Development a code for transfer of technology was addressed.

One of the catalysts of the TNC code was the joint activities of International Telephone and Telegraph (ITT) and U.S. intelligence forces in Chile. They tried to prevent the socialist Salvador Allende from acceding to the presidency and, later, helped destabilise the Allende government, opening the way for the 1973 coup d'etat.

The Chilean case also provided the example of the copper mining companies, which Allende nationalised. Protests by the multinationals led to international embargoes and other pressures that contributed to the creation of conditions for Gen. Augusto Pinochet to install his dictatorship.

Transnational corporate intervention in the politics of the developing world had several precedents in Latin America before Chile.

According to Jaime Galarza of Ecuador, the 1941 war between his country and Peru originated in the disputes for petroleum concessions between Shell and Esso oil companies.

In 1954, United Fruit Co forced the overthrow of the Jacobo Arbenz government in Guatemala, giving rise to decades of violence in this Central American country, which left 200,000 victims, either dead or disappeared.

But in the 1980s, with the foreign debt crisis, neo-liberal economic prescriptions were increasingly accepted by developing nations and, along with them, a wave of privatisation. Meanwhile, technological advances opened channels for the global circulation of capital.

By the early 1990s, UNCTAD (to which the UNCTC had been transferred as a unit, and had reinvented itself to promote the TNCs) proclaimed that transnationals had become the agents of foreign direct investment (FDI) in the world and, as such, were the largest suppliers of capital for developing nations.

As the world enters the new millennium, the outlook for this process is not very promising. The UNDP report states that 58% of FDI in 1997 went to industrialised nations.

But FDI in the developing South was extremely concentrated, with 80% going to just 20 countries, and most of it to China.

The globalisation process has resulted in rich countries holding 97% of all patents in the world through their transnational corporations. The process also allowed the 200 richest people on the planet to double their wealth between 1995 and 1998, each of them fortunes of at least a billion dollars.

International monopolisation, says the report, occurs in the trans-border joint ventures of companies, which represented 59% of FDI in 1997, compared to 42% in 1992.

Total sales by General Motors in 1998 were greater than the gross domestic product (GDP) of countries like Thailand or Norway.

Sales by Sumitomo, Exxon and Toyota were higher than the GDPs of Malaysia, Colombia or Venezuela, the UNDP shows in its graph on transnational power.

One of the measures proposed by the UNDP is to standardise systems of social auditing for transnationals. Such systems have been successfully applied in some areas of China and have been accepted by companies like Nike, the sports clothing manufacturer that had been accused of exploiting child workers in Asia.

The above article by the Inter Press Service appeared in the South- North Development Monitor (SUNS) .