Non-accountability of transnational enterprises

Name(s):

Ineffective international regulation of transnational corporations

Nature

While transnational corporations (TNCs) are subject to the jurisdiction of individual governments in respect of their activities within specific countries, the global character of these corporations has not been matched by corresponding coordination of actions by governments, nor by an internationally recognized set of rules, nor a system of information disclosure. For example, even though international production has become as important a fact of life as international trade, there exists today no international institution dealing with the activities of transnational corporations comparable with the [General Agreement on Tariffs and Trade] (GATT) and the United Nations Conference on Trade and Development (UNCTAD) which are concerned with international trade.

Despite the considerable and transnational power which transnational enterprises possess they, unlike governments, are not directly accountable for their policies and actions to democratic electorates. Nor, unlike purely national firms, are the transnational corporations subject to control and regulation by a single authority which can aim at ensuring a maximum degree of harmony between their operations and the public interest. The absence of an international forum makes it very difficult to work towards the international arrangements and agreements which would harmonize relevant national policies and laws and provide a framework within which the global strategies of transnational corporations should operate.

Background

Efforts to establish a UN system for accountability for corporations began in the early 1970s when the then Chilean president Salvatore Allende appealed to the General Assembly to establish legally enforceable rules to counter TNC-sponsored political destabilization. Partly in response to international outrage in response to the role of USA corporations in the Chilean coup (during which Allende was murdered), the UN established a Commission on Transnational Corporations charged with drawing up a code of conduct. Successive drafts of the code have been diluted at the insistence of industrialized countries since that time.

Incidence

In 1992, the aim of the industrialized countries was to have all discussion of the linkages between trade and environmental sustainability transferred to the [GATT Uruguay Round] where TNCs successfully negotiated a model for environmental deregulation such that unrestricted free trade takes precedence, under GATT rules, over environmental policy. All references to TNCs were deleted from the [Agenda 21] arising from the Earth Summit in exchange for a promise of self-regulation by TNCs in the interests of sustainable development. Efforts by the UN towards a code of conduct were abandoned in 1992 as part of this process.

Claim

Without effective international regulations governing TNC investment and production policies, Agenda 21 will remain a set of empty rhetorical commitments. The world's largest 500 TNCs account for almost one third of the global GDP and control some 70% of world trade, with over 40% being carried out within TNCs. Consequently the way in which goods and services are produced and marketed is dictated by an increasingly smaller group of powerful corporations which frequently seek to turn low environmental standards into increased profit margins.

Broader

Lack of control

Abuse of commercial confidentiality

Unaccountability of institutions degrading the environment

Narrower

Delocalization of production facilities

Unaccountability of international financial institutions

Aggravates

Refusal to market new drugs

Erosion of regulatory provisions

Lack of environmental accountability

Unethical practices of transnational corporations ^{[in 2 loops]}