Time to revive the UN commission for multinationals?

By the Editor

Fifty years ago the United Nations was at the forefront of global debates about how to respond to corporate power. As the world stumbles out of the neoliberal age, perhaps it should be again.

The UN Commission on Transnational Corporations (UNCTC) and its research hub produced dozens of ground-breaking reports on problems of corporate power between 1975 and 1992, as Matti Ylönen has written for Critical Takes. 

The gist of this work was that the power of transnational corporations would need to be constrained in certain ways to ensure that their activities would contribute to countries’ development rather than undermining it.

But as neoliberalism became global orthodoxy during the 1990s, the UNCTC was downsized, refocussed on encouraging investment flows and left to fade away. Critical thinking about corporate power did not disappear from the UN system – it continued to feature in research reports - but these ideas were no longer in the political mainstream.

It’s striking, if you look back at the report of the UNCTC’s first session in 1975, how far-reaching its mandate was at that time. A list of “priority areas”, on which UNCTC wanted to collect more information, included (in my words):

· Transfer pricing and taxation

· Restrictive business practices

· Alternative forms of ownership, management and control

· Market concentration and mergers

· The impact of transnational corporations on politics, society, trade union rights, labout standards and working conditions and the investment climate.

The full list of issues that the UNCTC wanted to look into was longer than this and included, among other things, accounting standards, technology transfer and consumer protection. Another of its concerns was to strengthen the bargaining power of states versus investors.

This first report even floated the idea (on Page 12) that:“anti-trust measures and taxation were matters on which international agreements might be possible at a future date.”

Fifty years later, a UN convention on taxation is now being negotiated. As Alex Cobham of the Tax Justice Network has written for Critical Takes, this negotiation marks a revival of the reformist agenda represented by the UNCTC.

As for a global anti-trust agreement, that hasn’t happened yet. It might well be needed to tackle concentrated market power across borders. Kate Sievert, Phil Howard and their colleagues have written for Critical Takes about the case for such an agreement with reference to the global meat industry, and the same concern applies to other industries.

 

The Code of Conduct

An important product of the UNCTC would have been a piece of international soft law called the Code of Conduct on Transnational Corporations. The Code is too long to summarise here but it’s instructive to read the draft document (the version referred to here is from 1988) and see what a finalised Code might have covered.

Some of the problems it raised have since been addressed, at least on paper: for example, laws around the world now prohibit corporate bribery, which wasn’t the case at that time. (How these laws are actually enforced is another question).

But other issues are still very much live. For example, the draft Code from 1988 says that transnationals “should avoid practices which adversely affect the international flow of technology, or otherwise hinder the economic and technological development of countries, particularly developing countries.”

Yet as we saw with with vaccines in the Covid pandemic, and as we’re seeing in the digital economy; exclusive control over knowledge and information, in order to extract rents from customers, has become key to the business models of some of the largest corporations.

A noticeable absence from the draft is the climate crisis, which at that time was just starting to rise up the global agenda: the Intergovernmental Panel on Climate Change was created in 1988 and the UN Framework Convention on Climate Change was signed in 1992. 

A still-relevant aspect of the draft is that a multinational corporation is defined (on Page 4) as a network of commercial entities linked by common decision-making and not by its legal form.

This expansive definition is a useful one because if a given reform assumes that an enterprise takes a particular legal form, then it is likely that some big businesses will change their legal form in order to avoid it. As Clair Quentin has pointed out on Critical Takes, multinationals frequently control smaller firms by means other than ownership.

The draft Code extended to state-controlled as well as private firms: still a relevant point in a world whose largest corporation by earnings is Saudi Aramco.

 

Investment on whose terms?

Perhaps more striking to modern eyes than any provision of the draft Code is its framing language, which injuncts corporations to “carry out their activities in conformity with the development policies, objectives and priorities set out by the Governments of the countries in which they operate” (italics added).

The novelty here is not the argument that governments and multinationals should work together – they always have done – but that the terms of the partnership are meant to be set by the former, while “development” is understood to be something that lies beyond and above the field of corporate activity.

So, for instance, the draft Code talked about the need to “maximise the contributions of transnational corporations to economic development and growth and to minimise the negative effects of the activities of these corporations.”

That’s quite a different emphasis from what we see at the moment in much of the global North: the notion that governments should use their power and resources to protect the profits of private capital in the hope that good things for society (such as jobs and “innovation”) will flow from it. As for “minimising the negative” – well, not so much these days.

 

The neoliberal turn

The ambitious thinking behind the draft Code faded away in the early 1990s. The comments of governments from both North and South from this period show how the earlier emphasis on state-led development had given way to a preoccupation, which endures to this day, with smoothing the path for private capital flows and profits.

The approach of the Code softened into the Global Compact of 2000, which rests on voluntary commitments by multinationals. The Global Compact is still running, somewhere in the background of the world economy, but it feels irrelevant in an era of expanding corporate empires and deepening climate crisis.

By the time of the UN’s Sustainable Development Goals in 2012, the category of “multinationals” had almost disappeared into the much wider category of “the private sector” which also included micro-enterprises and cooperatives, as if Shell were in some sense equivalent to a small farmers’ collective in the Niger Delta.

The understanding of corporate power as a potentially dangerous force, needing to be channelled and controlled for the sake of society, had almost vanished.

 

Time for a new UN Commission?

There’s a case for recreating the new UN Commission in a troubled and fast-changing world in which the massed power of multinational corporations has become a serious problem for democracy and justice which existing governance frameworks are struggling to control. The UN is a far-from-perfect institution but no other has its global reach and legitimacy.

The phenomenon of corporate power is so big and complex that it’s hard to envisage a single legal instrument which could cover all aspects of it, although there can, should and will be global treaties to govern problems which are caused or exacerbated by corporate power – on business and human rights, fair taxation and plastic pollution, for example.

Existing alongside such treaties, a revived Commission could be:

· a global space for ongoing discussion about problems of corporate power which all states (as well as labour and civil society organisations) would have access to.

· a space where the scale and reach of modern corporate power could be considered as a structural problem in its own right, not just as an aspect of other problems.

· a source of soft law – as the draft Code of Conduct set out to be – which could give rise over time to hard laws on different aspects of corporate power.

Arguably a weakness of the draft Code of 1988 is that it took the nature and dominance of multinational corporations as a given. Nowadays we would need to go further and ask what the nature and purposes of the very large corporation should be in a more just world. A UN Commission could be a space for considering that question, though no doubt some governments would fiercely object to its even being asked.

A revived Commission would also need to give more explicit attention to the role of corporate power in deepening inequalities and poverty, its corrosive effect on democracy and its destructive impacts on nature.

A revival of the UN Commission on Transnational Corporations would automatically not solve any problems of corporate power, nor could it substitute for any of the international legal instruments that civil society is currently campaigning for.

A revived Commission could, however, provide a much-needed space for a serious global problem to get the global attention that it badly needs.