Are transnationals taking over the world?


By Kim Moody

If someone told you that the leaders of 125 nations had agreed to let 1000 or so transnational corporations take over the world and legitimise forced child labour, industrial home work, sweat shops and maybe even the "foreign regulation of America", you'd probably think they were some kind of conspiracy freak, or at the very least Ross Perot.

Actually, the line about the "foreign regulation of America" is from Ralph Nader writing about the newly ratified General Agreement on Tariffs and Trade (GATT). In his own narrowly nationalistic way, Nader has a point.

The new World Trade Organisation (WTO), established under the GATT and administered by three appointed officials, will have authority to overrule national social or protective legislation if they see it as a "non-tariff barrier" to trade. And if the naughty nation doesn't comply, these three guys can impose sanctions — probably some form of trade embargo. This gives the WTO more power than any recent UN "peace keeping" force has displayed.

Regulating governments

The purpose of the new GATT is not to regulate trade, but to regulate the potential regulators, i.e., governments. Its rules and procedures tell governments what they may not do to control or influence trade and investment. Since trade and investment reach into the hearts of most national economies, even "domestic" legislation or policies are fair game.

This is one of the new features of GATT, the worldwide free trade agreement first reached in 1947 and renegotiated seven times since. The latest renegotiation began in 1986 and, with a few loose ends still open, concluded with its signing in Marrakesh in April 1994. By now, 125 nations have signed on.

Until now, GATT dealt primarily with the reduction of tariffs on trade in goods. The new agreement will further reduce tariffs by one-third. But the new GATT also aims to reduce all kinds of non-tariff barriers, like quotas, domestic content laws or even social legislation, and covers "services" as well as goods. It also protects investments through what are called Trade-Related Investment Measures (TRIMS) and guarantees corporate control over technology through Trade-Related Intellectual Property Rights (TRIPS).

By all accounts, the top multinational corporations played a disproportionately enormous role in drafting the new GATT, with US companies leading the way on most matters. It is not unreasonable, therefore, to assume that these same global players will have more influence over the WTO than the average trade union, or small-to-middling government. So, while it isn't exactly a takeover, like R.J. Reynolds buying out Nabisco, it is clear the multinationals will gain economic and political power at the expense of most nations.

Although the new trade regime will have plenty of negative effects on the US work force, it isn't pointed so much at the United States or other major industrial powers as at the Third World. It's really these nations that still have high tariffs and many of those annoying non-tariff limits on multinational corporate freedom.

It is also obvious that the WTO's sanctions for violators will have more leverage over poorer, export-dependent nations than over major developed economies.

Look at the business press these days and you can see America's busy entrepreneurs counting up the number of people in China and elsewhere who can afford anything American corporations make. For China, the latest estimate is about 5 million out of that nation's one billion plus population. A small percentage, to be sure, but still a group with the consumer potential of suburban New York City. Throw in similar percentages from other Third World countries and you've got, not a global village, but a global mall.

But there's more to it than planetary niche marketing. For every million happy consumers, there are many millions of desperate Third World workers and peasants. The agreement's TRIMS, which prohibit most national limits on investment, vouchsafe the investment that will put a tiny percentage of these workers to work at a tiny percentage of what workers in the developed nations earn. It is for this reason that GATT has determined that labour rights have no place in a "trade" agreement.

GATT covers trade in services as well as goods. Services in this case are not like your neighbourhood dry cleaner. It is a neutral word for things like banking, insurance, stock markets and high tech telecommunications, which are the enablers of the big ticket investments to which capitalism is addicted.

High tech, low wage

Much of this investment builds today's international production systems with their "competitive" combination of dazzling technology and sweated and starved labour. Overseas investments in these production systems are also the major engine of world trade. About 40-50% of world trade in goods takes place within the channels of the multinational corporations. In the classical sense, it is not trade at all. It is mostly the transfer of capital and intermediate goods from one corporate site to another.

This is really what the protection of "trade-related investment' under the GATT is about.

As Richard Blackhurst, the GATT's research director, says, "It will now be less risky to source parts from several different countries".

So you can make wire harnesses for cars in Mexican maquiladora plants and blouse collars in a Guangzhou export zone, ship them (barrier-free) to Detroit or New York and assemble the final product in the US market.

This, of course, is where things like child labour and industrial home work come in. Somewhere down the production or commodity chain are not only the low-wage maquila [assembly] and export-zone workers, but the women and children labouring at home, under patriarchal supervision, often for nothing but subsistence.

The ILO (International Labor Organisation) estimates there are 200 million child labourers around the world.

Together these low-wage and no-wage workers are one of the secrets of the "efficiency" of international "lean" production.

In the negotiations leading up to the signing of GATT, the benevolent rulers of the world's nations and their corporate advisers agreed not to draft rules against child labour, patriarchal sweat shops in the home, etc., which, they said, are "traditional" folkways in many countries.

But the cultural neo-relativists down at the WTO are likely to be less tolerant of such non-folkloric, investment-inhibiting and trade-strangling traditions as laws governing the hours and conditions of work, minimum wages, subsidised food for the poor, state-sponsored health care, limits on investment activity, "unreasonable" health and safety standards, strong environmental rules and state-owned enterprises.

Today's international production systems and their ever-changing products, of course, also depend on technology. On the matter of reserving this technology for themselves, the corporate designers of global free trade found most nations under-regulated. That is, their copyright and patent laws don't offer the multinational corporations the full monopoly control over "their" technology that global businesses consider prudent.

This is the final new feature of GATT: trade-related intellectual property rights or TRIPS. These are meant to prevent "technology transfers" to the host (Third World) country.

They also give corporations potential "ownership" of entire living species through TRIPS on biotechnology — a possibility that led tens of thousands of farmers in India to riot at the time of GATT ratification.

Altogether, the GATT is a neat package for the multinationals: protected investments (TRIPS and TRIMS) in unprotected labour markets.

Under the rules of the new GATT, the state-driven, technology-borrowing South Korean model of late development becomes virtually impossible. So, the First-World based multinationals have also succeeded in limiting future competition from such upstart nations. Instead, the developing countries will retain their status as enclave production sites for multinational subsidiaries or subordinate contractors. They will not be doing much "developing" at all.

As claimed, the new GATT will increase world trade — and, thereby, intensify international competition even more. In the context of the deregulated world it hopes to achieve, the GATT will thus encourage a new round of worldwide competitive downsizing and subcontracting that destroys and fragments jobs everywhere.

It will continue the development of what is, in effect, a global labour market in which labour standards are increasingly set in Indonesia or China.

Not all of this will happen overnight or at once. Nevertheless, when organisations the size of many multinationals make profit-oriented investment decisions, they affect entire nations as well as individuals and communities. When they do so free of national regulation, the impact is likely to be negative for the vast majority affected.

For businesses of this size, the distinction between rational competitive behaviour and conspiracy is becoming moot. In the emerging global business order, it is getting difficult to be too paranoid.
[Slightly abridged from Independent Politics (US).]

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