Globalization and MNCs. By using concepts such as systems, competition and connectivity, we can get very close to an understanding of what globalization

Globalization and MNCs

• By using concepts such as systems, compe-tition and connectivity, we can get very close to an understanding of what globalization is and how it works.

• We can look at maps of airplane routes, shipping routes, or Facebook communica-tions across the globe. We can look at the undersea cable system that makes the inter-net possible.

Globalization

• A process that promotes profits around the world in various markets.

• Surveillance of the world‘s electronic com-munications by intelligence agencies.

• A way to implement rules and regulations that will reduce poverty and labor exploita-tion,prevent the overfishing of the oceans, and slow the relentless warming of the Earth's atmosphere.

How do we see globalization?

• International arrangements called for close cooperation between nation-states, as op-posed to the destructive economic competi-tions between nations of the 1930s.

• New international financial agreements and institutions, such as the International Mone-tary Fund and the World Bank, provided a new kind of global financial stability.

Post WW11 globalization

• The expansion of the welfare state has been made possible by government regulation that created a balance of power between gov-ernments, large corporations, and the finan-cial sector.

Post WW11 globalization

• Neoliberal market globalism.• This is based upon a deregulation of the

corporate sector, the privatization of public enterprises and institutions, tax reductions for businesses and individuals, the setting of limits on the powers of labor unions, reduc-ing the role of government in the formulation of social policies, and deregulating capital flows.

Post 1970s globalization

• NGOs, such as Human Rights Watch, Amnesty International, Transparency Interna-tional, and Greenpeace, among many oth-ers.

• Global responsibilities to poor and vulnerable people as well as to the endangered planet we all inhabit.

Post 1970s globalization

• Why are global financial regulation and deregulation such important issues?

Discussion question

• Maritime - there are about 100,000 large ships carrying cargo and passengers on the oceans of our planet. State-owned Chinese companies control one fifth of the global con-tainer fleet.

• Air - it is estimated that air travel accounts for up to 5% of the warming effect of green-house gas emissions.

Transportation networks

• Thomas Friedman argues that technological connectivity could accomplish nothing of value in the absence of social, political, and cultural connections that create some real understanding across these boundaries.

Media and the internet

• How could global media do more to create a greater sense of global community and re-duce conflict between different cultures and societies?

Discussion Question

• The goal of cyber censorship is the devel-opment of a domestic internet--a self-con-tained world that offers, for example, Chi-nese versions of many of the online services and entertainments offered by major social networking sites like Facebook.

• The non-democratic states, at the World Conference, defended state control of elec-tronic media.

Cyber control

• Many governments feel that like the phone network, the internet should be administered under a multilateral treaty.

• ICANN, in their view, is an instrument of American control over cyberspace.

• Its private sector approach favors the United States, while Washington retains oversight authority.

Cyber control

• Political conflict over the nature of media freedom.

• Google in China• China – Internet being used to make unjust

accusations against China. The important thing is the preservation of social stability

Global communications governance

• Should national governments control the ac-cess their citizens have to the global Inter-net?

DISCUSSION QUESTION

• NSA (US), GCHQ(Britian) combined opera-tion exercises a control over global commu-nications traffic that makes the powers of ICAN look almost insignificant.

• Connectedness is often identified with the presumed benefits of cultural exchange or community cohesion.

• Connectedness can also be synonymous with invasion of privacy.

Cyber surveillance

• How do the revelations in 2013 about elec-tronic data collection by the U.S. National Security Agency (NSA) involve the relation-ship between the nation-state and multina-tional corporations?

Discussion Question

Governance

• Global markets frequently undermine the capacity of governments to set independent national policy objectives and impose their own domestic standards.

• Therfore we should accept the decline of the nation state as a sovereign entity.

The nation-state

1. Global market for commodities and cultural products.

2. Global markets for corporate enterprises.

3. Global markets can reward a small group of citizens while inflicting hardship on a larger group.

4. MNCs lack of loyalty to the state. E.g. Colgate, GE

5. Global labor market.

6. Unrestricted movement of investment capital not con-cerned with social consequences.

7. MNCs tax avoidance schemes

Challenges to nation states

• Greider – a redefinition of national interest, at least for the United States, in which gov-ernment policy assumes that advancing the well being of shareholders in global firms as opposed to the general population,workers, and communities, provides the highest over-all benefit.

Balance of power

• It is nation states, not corporations, that are charged with protecting their citizens from crime, discrimination, the abridgment of basic rights, un-employment, and impure food and drugs, among other hazards to safety and well being.

• A Euro barometer survey released in May 2008 showed that nine out of 10 of

• those interviewed identified with their native coun-tries, while only half felt a similar attachment to the EU.

Balance of power

• Can multinational corporations inspire the same degree of loyalty in most people as na-tion-states can? What can the nation-state do for its citizens that multinational corpora-tions cannot do?

DISCUSSION QUESTION

• The European Union could be seen as a kind of prototype of a globalized world in which nation states are required to accept a great deal of regulation and standard-setting by a central authority.

• Regulations, directives and decisions, rec-ommendations.

The EU

• Environmental Policy, Privacy rules, Humans rights.

• Loss of national sovereignty.

The EU

• State capitalism can mean direct state own-ership and management of companies or the promotion of national champions that are privately owned but receive overt or covert support from the government in power.

State capitalism

• In addition to creating laws, rules, and regulations, governments have aided the private business sector through loans, bailouts, and legislation that benefits domestic corporations at the expense of their foreign competitors.

• During the financial crisis of 2007/2008, the US gov-ernment invested well over $1 trillion in the auto indus-try, the two federal mortgage companies, "too big to fail" banks, the "too big to fail" insurance company, AIG, and the Troubled Asset Relief Program.

State Capitalism

• State capitalism has become an attractive al-ternative to the recent failures of liberal capi-talism to maintain global economic stability.

• The Chinese state is a majority shareholder in the largest Chinese companies, and the regime's politicians exercise tremendous in-fluence over economic policies and prac-tices. E.g. Most bank loans go to state com-panies.

State capitalism

• The government makes a decision that special re-sources are going to be invested in this particular corporation because it represents a promising en-terprise, and one that is going to be able to com-pete well in the international market with other big multinationals.

• It is likely to be better developed, wealthier and technologically more sophisticated than most other corporations.

A national champion

1. It appears to be a safer alternative to the stresses and strains and risks of market globalism.

2. It appears to offer a way to accelerate economic de-velopment in societies they're far behind in terms of being able to invest in social and economic develop-ment.

3. It hands a great deal of power to politicians in authori-tarian governments who are used to exercising unchecked power.

4. It makes it easier for emerging economies to learn from the rest of the world

Reasons for state capitalism in emerg-ing economies

1. Lack of incentives for managers to invest well.

2. Lack of incentives for the state to regulate.

3. Opportunities for cronyism and corruption.

4. Lack of openness to innovation and foreign thinking.

Reasons against state capitalism

• What are the advantages and disadvantages of state capitalism as an economic strategy?

• Do state capitalist enterprises tend to in-crease or decrease the power possessed by nation-states?

DISCUSSION QUESTIONS

Globalization and MNCs (2)

• Globalization is said to promote, among other good things, economic growth, job creation, democracy, the global market, information flows, cultural con-tact, and travel.

• Disadvantages are said to include the enriching of the privileged and the im-poverishing of the rest, poor working conditions, environmental degradation, the erosion of social safety nets, and outsourcing.

Capitalism and social justice

- Social justice is he achievement of de-cent living conditions, gainful employ-ment, civil liberties, and social oppor-tunity for all people, rather than for a particular social class or elite.

- Origins and consequences of extreme types of inequality are included in the globalization process.

Social justice

• “Globalization has harmed the develop-ing world by promoting destabilizing loans and investments, by failing to stop the growth of poverty, by export-ing to rich societies many of the best-educated members of poor societies, and by maintaining agricultural subsi-dies in rich countries where the average European cow gets a daily subsidy greater than what more than half of the people in the developing world have to survive on.”

Joe Stiglitz

• The offshore world is not a bunch of in-dependent states exercising their sov-ereign rights to set their laws and tax systems as they see fit.

• It is a set of networks of influence con-trolled by the world's major powers, no-tably Britain and the United States.

Offshore tax havens

• Britain's financial elite makes big prof-its from the expired empire's assort-ment of island statelets, such as Bermuda and the Caymans, and a micro territory like Gibraltar.

Offshore tax havens

• They are places, whether it's on an is-land or whether it's in the middle of the city, where people are allowed to con-duct financial transactions essentially in secret, keep things off the books, of-ten be untraceable, and not be vulnera-ble to the collection of taxes.

Offshore tax havens

• 2013, the Tax Justice Network, a reform group based in Britain, released an es-timate of the wealth that is hidden off-shore. Their overall figure for the end of 2010 was $32 trillion.

Offshore tax havens

• UBS handed over 4,450 client names to the US Department of Justice and paid a fine of $780 million for having enabled US clients to evade paying taxes on their Swiss deposits.

• Recently Credit Suisse paid a fine of $2.6 billion

• http://www.bbc.com/news/business-27478532

Offshore tax havens

• The International Consortium of Inves-tigative Journalists, a Washington-based group, released 2.5 million files documenting the offshore bank ac-counts and shell companies of wealthy clients and tax dodging corporations.

• This WikiLeaks-like action produced in-stant results in forcing states to be-come more proactive in stopping for tax avoiders. E.g. Luxembourg said its bank secrecy policy would expire in 2015.

Offshore tax havens

• Prime Minister David Cameron, tried to make a 10-point plan to combat global tax evasion for the G8.

• However in 2011 Cameron's govern-ment had passed a law that excused UK-based corporations from paying tax on their offshore earnings, an action one commentator called a corporate coup d'etat.

Offshore tax havens

• No G8 country supported Britain's call for registries of beneficial ownership of companies to be made public.

• He could not get Russia and Germany to publish national action plans to combat tax evasion.

• And he failed to get the G8 leaders to agree that an agreement on automatic exchange of tax information should be open immediately to developing coun-tries.

Offshore tax havens

• Prime Minister Cameron did manage to get all 10 of Britain's Overseas Territo-ries and Crown Dependencies to sign on to a set of core principles for the shar-ing of tax information.

• The G8 declaration, that called on global officialdom to fight the scourge of tax evasion, rang hollow.

Offshore tax havens

• In the US the tiny state of Delaware has enjoyed legendary status as the ulti-mate and tax shelter for corporations.

• As of 2012, Delaware was home to al-most a million corporate entities, public and private.

Offshore tax havens

• Developing countries, according to Shaxson, lost up to $1 trillion dollars in illicit financial outflows just in 2006.

• $10 for every dollar of foreign aid flow-ing in.

• Many Africans see the globalization project as a form of colonialism in dis-guise.

Offshore tax havens

• African Policy Group had proposed three topics for the G8 agenda, a global system of tax information sharing, the identification of the real owners of bank accounts, and public reports by multi-national corporations about their tax payments in all of the countries in which they conduct business.

• G8 misgivings about handing over sen-sitive tax details to countries not deemed competent or trustworthy enough to handle it with care

Offshore tax havens

• Why do offshore tax havens represent a form of social injustice?

Discussion Question

• Time will tell whether public outrage over offshore tax evasion will eventu-ally force the hands of the Western politicians who have shown so little in-terest in consigning the offshore sys-tem to the dustbin of history.

Offshore tax havens

Global Regulation

• Regulation is a process that occurs over stages that include agenda setting, ne-gotiation, implementation, monitoring, and enforcement.

Regulation

• Global regulatory initiatives can origi-nate with international organizations such as the United Nations, the World Health Organization, the International Whaling Commission, or the World Anti-Doping Agency.

Global regulation

• Specialized agencies of the United Na-tions having regulatory responsibilities include the International Maritime Or-ganization, the International Civil Avia-tion Organization, the Food and Agricul-tural Organization, the International Labor Organization, the International Telecommunications Union, and the Universal Postal Union.

Global regulation

• Global regulation can also be under-taken or supported by various Non-governmental Organizations, or NGOs, such as Greenpeace, Amnesty Interna-tional, Human Rights Watch, or Trans-parency International.

Global regulation

• Regulatory ambitions are often associ-ated with value systems, ethical judg-ments, and standards of decent con-duct.

• International organizations such as the United Nations were created to repre-sent ideal norms of this kind.

Global regulation

• A practical regulatory function might be assumed to be the administration of a global technology-based system, such as shipping or aviation or telecommuni-cations.

• An idealistic regulator would presum-ably be concerned about human rights or human health.

Global regulation

• Global regulation is a necessary idea that possesses neither an infallible uni-tary doctrine nor an absolute mandate to impose itself on international dis-putes.

Global regulation

• Which kinds of organizations sponsor global regulations, and why do they do so?

Discussion Question

• About five million people die each year due to tobacco-related illness. In short, there appear to be grounds for declar-ing tobacco a global menace that should not be tolerated anywhere on Earth.

Global regulation - Tobacco

• The story of how the global tobacco in-dustry has prospered despite the regu-latory measures enforced by the WHO and by many countries is a lesson in how political power is exercised in the age of market globalism.

• It is where the goals of a set of multina-tionals are clearly in conflict with public health and welfare, and where global-ization of values such as accountability and corporate responsibility are under severe pressure.

Global regulation – Tobacco

• The tobacco industry's defense of the global smoker has taken the form of lawsuits filed against countries that try to pass anti-smoking legislation.

• Australian Packaging Law of 2012 – British American Tobacco and Japan To-bacco International, filed suit against the Australian government claiming that the Tobacco Plain Packaging Act amounted to an acquisition of property.


• In 2010, for example, Philip Morris In-ternational sued the government of Uruguay on the grounds that it was over-regulating tobacco.

• The Philip Morris lawyers claim that Uruguay's placement of disturbing pic-tograms and expanded health warnings on cigarette packages violated a bilat-eral investment treaty.


• Tobacco companies had made efforts to pre-vent implementation of public health policy and efforts to reduce funding of tobacco con-trol within UN organizations.

• The industry's strategies included discrediting key individuals, lobbying journalists. Cultivat-ing relationships with WHO staff, consultants and advisers, placing industry consultants in positions at WHO, thereby compromising

• the integrity of policy making at WHO. Manipu-lating the scientific and public debate about the health effects of tobacco, and secret moni-toring of WHO meetings and conferences.


• The history and politics of the Antarctic whaling dispute present us with a par-ticularly interesting case study in the complications of global regulation.

Global regulation - Whaling

• The international whaling commission, or IWC, was formed in 1946 in accor-dance with the International Convention for the Regulation of Whaling.

• After decades of inaction, whale popu-lations were drastically declining, and the IWC adopted a moratorium on commercial whaling.


• Greenpeace, according to a 2008 statement, will continue to act to de-fend the whales, but will never attack or endanger the whalers.

• Greenpeace takes partial credit for the 1982 moratorium on commercial whal-ing that put an end to the whaling activ-ities of the Soviet Union, Brazil, Peru, Chile, and Spain, thereby saving thou-sands of whales from harpooning and death.


• The International Whaling Commission, like many other transnational regula-tory bodies, is an international organi-zation whose 89 members are all nation states, its transnational authority de-rives from the authority conferred on it by nation states.

• The 1982 United Nations Convention on the law of the sea operates on the same principle, since it confers authority to take action in defense of marine life only on sovereign states.


• Since a moderate NGO like Greenpeace can be challenged by a radical NGO like the Sea Shepherds, there are styles of global regulation that correspond to a variety of temperaments and a variety of regulatory ambitions that are rooted in ethical or spiritual values.


• International bureaucrats who fly first class to meetings and five star hotels are not likely to be eager reformers.

• Less privileged idealists will be less at-tached to the status quo, and will be more willing to shake things up. Think Greenpeace.

• The radical idealist, like Paul Watson, or think Julian Assange, are in a class by themselves.


• Does the performance of the Interna-tional Whaling Commission legitimate the aggressive tactics of the Sea Shep-herd Conservation Society that are di-rected against the Japanese whaling fleet in the Antarctic Ocean?

DISCUSSION QUESTION

• ADA, is a non-governmental organiza-tion. It's a world anti-doping code is a non-governmental document.

• Neither WADA nor the National Anti-Doping Agencies possess the police powers that governments do.

• This situation has motivated WADA to pursue relationships with governmental police agencies that have the power to make searches and arrests.

Global regulation - Sports

• The founding of WADA represented a cooperative arrangement between the IOC and a number of interested gov-ernments.

• Its declared objectives are to provide compre-hensive leadership in the anti-doping cam-paign, to persuade anti-doping in international sports organizations to comply with the WADA code, to promote the involvement of public authorities and leaders in the anti-doping struggle, to encourage anti-doping education, to create a scientific research program in sup-port of anti-doping, to ensure that anti-doping laboratories meet international standards.


• In other words, WADA's function as a world agency is to play an inspirational role, to motivate people and institu-tions with real power to do their part to combat doping.

• David Howman – “We cannot win the war – that’s just not possible. we can win battles along the way.”


• Nationalism, the idea that nations gain in stature by developing world class athletes has subverted doping control for decades in two ways.


• How can anti-doping officials persuade elite athletes that they are duty bound to abstain from this rising tide of en-hancements?

• How can these officials convince them that they have an obligation to compete drug free to preserve the integrity of their own subculture


WADA's alliances with law enforcement agencies against international drug traffickers are not an effective strategy to control doping by elite athletes, be-cause there are too many global traf-ficking networks to keep track of.


• WADA's regulatory objectives are being undermined by the dramatic expansion of pharmacological enhancements throughout modern and emerging soci-eties.

• We are currently experiencing an ex-pansion and a normalization of pharma-cological enhancements along with the resulting favorable attitudes.


• How would you estimate the chances of success for the global anti-doping cam-paign against the use of performance-enhancing drugs by elite athletes? What do you think are the principal ob-stacles to success?

Question

Human rights and MNCs

• National institutions, including national courts, often apply international human rights norms directly to the acts of pri-vate parties.

• This may be developed at the interna-tional level in order to overcome the in-ability or the unwillingness of States to control non-State actors.

• Threat of economic globalization to regulatory capacity of States.

Introduction

• Developed countries are in favor of a Code protecting MNCs from discrimina-tory treatment.

• Emerging countries are trying to ensure that MNCs would be better regulated, and in particular would be prohibited from interfering either with political in-dependence of the investment-receiv-ing States or with their nationally de-fined economic objectives.

Developed Vs Emerging countries

• International Labor Organization - Tri-partite Declaration

• OECD Guidelines• These impose on States certain obliga-

tions of a procedural nature. Under the OECD Guidelines, States must set up national contact points (NCPs) in order to promote the Guidelines and to re-ceive ‘specific instances’, or complaints by interested parties in cases of non-compliance by companies.

Current international agreements

• The Global Compact - based on ten principles

• By 2013, more than 10,000 companies had joined, from some 130 countries, which makes this by far the broadest corporate social responsibility initiative measured by its number of participants.

• http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/in-dex.html

Current international agreements

• UN Guiding Principles on Business and Human Rights

• This is a soft law instrument, clarifying certain expectations for States and companies, but doesn’t impose new, binding obligations.

Recent developments

• Focused on gaining broad consensus across the different stakeholder groups for a normative framework and authori-tative policy guidance to bring greater coherence, larger-scale effects, and cumulative change than the prior patchwork of limited and uncoordinated business and human rights schemes was able to generate.

UN Guiding Principles on Business and Human Rights - Objective

• The GPs comprise thirty-one principles, each with commentary elaborating its meaning and implications for law, pol-icy, and practice. They encompass all internationally recognized rights, and they apply to all states and all business enterprises.

UN Guiding Principles on Business and Human Rights

• 1. The state duty to protect against human rights abuses by business, through appropriate policies, regula-tion, and adjudication.

• 2. An independent corporate responsi-bility to respect human rights, which means that business enterprises should act with due diligence to avoid infring-ing on the rights of others and to ad-dress adverse impacts with which they are involved.

• 3. Greater access by victims to effective remedy, judicial and non-judicial.

UN Guiding Principles on Business and Human Rights

• On 13 September 2013, calling the Guiding Principles on Business and Hu-man Rights a 'first step' on which fur-ther initiatives should be build, the permanent representative of Ecuador to the UN, Luis Gallegos, on behalf of a group of States, presented a declara-tion calling for the adoption of a legally binding instrument within the UN for regulating MNCs and holding them ac-countable for human rights abuses.

Case

• Requires States Parties to monitor and regulate the operations of business en-terprises under their jurisdiction, in-cluding when acting outside their na-tional territory.

• Requires States Parties to provide for access to an effective remedy by any State concerned.

• Provides for an international monitoring and accountability mechanism.

• Provides for protection of victims, whis-tle-blowers and human rights defend-ers.

Ecuador's proposal

• The key issue is that the category of business and human rights is complex e.g. human rights law, labor law, anti-discrimination law, humanitarian law, investment law, trade law etc.

• The point is that the human rights treaty would have to be so abstract that it is hard to imagine it providing a basis for meaningful legal action.

John Ruggie’s answer

• Inadequate enforcement is the main shortcoming of the current system. Would it require establishing an inter-national court for corporations? Or would it be enforced by states?

• Developed and emerging economies disagree that the treaty would apply equally to MNCs and domestic compa-nies.

John Ruggie

• What are the advantages and disadvan-tages of these proposals – the classic route of an intergovernmental, legally binding instrument proposed by Ecuador, or the route grounded in 'poly-centric governance', as advocated by John Ruggie during his tenure as the Special Representative of the UN Secre-tary-General on the issue of human rights and transnational corporations and other business enterprises?

Question

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Globalization and MNCs. By using concepts such as systems, competition and connectivity, we can get very close to an understanding of what globalization