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NGOs and Corporate Power: is there a win-win solution?

By John Braithwaite - posted Saturday, 15 September 2001

In 1995 for the first time, the majority of the world’s largest economies were not states but multinational corporations. Bill Gates owns more wealth than a number of the poorest states combined because of his Microsoft shares. In part, that situation exists because Microsoft has managed to control critical aspects of the architecture of the emerging information super-highway.

An industry joke goes "How many Microsoft engineers does it take to change a light bulb. None. Bill Gates simply declares darkness the industry standard". The US antitrust case against Microsoft is a step in the direction of some regulation by the US state. But that gives developing countries little assurance that the architecture of global information systems will be designed to give them a chance to share fully in the benefits of these new opportunities.

Obligations of multinational corporations to transfer technology to developing countries were part of the draft UN Code of Conduct for Transnational Corporations which the US finally killed in 1995. Work on that Code started in the environment of the mid-1970s after ITT’s involvement in the Coup to overthrow the democratic government of Chile (to install General Pinochet) and after Lockheed and other US defence corporations were found to be bribing defence ministers all over the world to sell more military hardware.


The US killed the Code because it imposed a large set of ethical obligations on multinational corporations without giving them sufficient rights to invest wherever they wanted. The Multilateral Agreement on Investment, which NGOs and developing countries killed in 1998, did just the opposite. It gave corporations a lot of new rights to free movement of investment (and protection from expropriation) without imposing obligations on investors to protect the environment, honour consumer protection standards, guarantee equal employment opportunities for women and other core labour standards, respect human rights and assist the development of the countries in which they invest through transfer of technology to locals.

After the failure of an Agreement that imposed lots of obligations on multinationals and gave them few rights to a more liberal investment regime and the failure of another that offered them lots of rights and no obligations, after win-lose and lose-win for the developing countries and multinationals, is it not time for win-win? Time for an agreement that imposes heavier development, human rights and environmental obligations on multinational corporations in return for a more liberal global investment regime. An enforceable Code of Conduct for Multinational Corporations.

Such an agreement was never a prospect with the Multilateral Agreement on Investment because of the secretive way the negotiations were conducted, keeping NGOs and developing countries in the dark. The OECD was the wrong place for the MAI to be negotiated because it excluded developing countries. Developing countries are those most in need of socially responsible investment. Investment that creates sustainable development as opposed to the kind of investment BHP provided at OK Tedi - decimating the sustainability of agriculture around the Fly River system in Papua New Guinea - or the kind of investment Esmerelda Mining afflicted on the major rivers of Eastern Europe.

How can it make sense to exclude the stakeholders most in need of ethical investment and most at risk from unethical investment? The lesson of the MAI is that the developed economies can no longer be so arrogant as to hand the developing countries a fait accompli on something so vital to their futures.

During the Cold War, even though developing countries had very different interests from the Soviet Union, a coalition of the Second and Third Worlds could sometimes defeat the First World in international forums. Since the Soviet bloc collapsed, the demise of that option has weakened the geopolitical position of developing countries. However, post-MAI, post-Seattle, the new possibility is that joint resistance from developing countries and global NGOs might be just as effective against conspiracies of North Atlantic corporate power. Again, this may be true notwithstanding the fact that Northern NGOs and developing countries often have different interests.

Win-win outcomes on matters like investment will only happen when developed and developing countries, multinational corporations and NGOs can all shape the result.


However, for there to be win-win between NGOs and big business, sometimes it will be necessary to divide and conquer business. This can be done. An example is the Montreal Protocol on Ozone Depleting Substances. It's a pleasure to be on the platform with Cam Walker of Friends of the Earth. Twenty years ago I had a slight involvement in a successful campaign with Friends of the Earth against McDonalds in relation to ozone-depleting substances in the form of its styrofoam packaging. That was a few years after green groups in the US successfully lobbied for amendments to the Clean Air Act in respect of ozone-depleting substances. The US and Sweden were the only countries that banned Chloroflourocarbons in the 1970s.

The US environmental movement succeeded on this in 1977 while the European groups failed because US industry opposition was simply less fierce. Why? Well the dominant US manufacturer of CFCs, DuPont, also had global leadership in developing CFC substitute technology. DuPont rightly wondered if European competitors would be forced to buy the DuPont technology if they rolled over on the ozone campaign. Once the US environmental groups had won the ozone campaign, it was definitely the case that US business, and therefore Ronald Reagan, were now on the side of the greens. They had a strategic trade interest in forcing European and Japanese business to move up to the standards they had already been forced to meet and in doing so buy the US CFC-substitute technology. And we know the history. The Montreal Protocol was signed in 1987. It still stands I suspect as the most effective global environmental agreement ever signed, making a real difference to the closing of the ozone hole.

The lesson is that it is possible for NGOs to use strategic trade thinking to divide and conquer business. While unified global business will almost always defeat a unified green movement, an alliance of a unified green movement and American business can defeat European business. The other way round, an alliance of united greens and European business can defeat American business. My new book with Peter Drahos, Global Business Regulation, gives examples of both.

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This paper was first presented to the Australian Council for Overseas Aid’s "Development Challenges in the Global Economy 7th September 2000" Conference in Melbourne, September 7, 2000.

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About the Author

Professor John Braithwaite is a Professor in the Law program at the Research School of Social Sciences and Chair of the Regulatory Institutions Network, Australian National University.

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