Under globalization, big corporations operating across borders have lost their soul. Trade unions complain that transnational corporations (TNCs) are engaged in a global Race to the Bottom, a race characterized by the search for the cheapest, malleable and non-unionized labor, which often leads to a squeeze on wages and suppression of workers’ rights. Civil society organizations (CSOs) complain that the race means exploitation of the land and natural resources of a host country without regard to the environment and the disruptive and dislocating impact of TNC operation to the host community. This is a common lament of indigenous people affected by large-scale open-pit mining operations.
There are also complaints from governments that some TNCs leave the host country once local resources are exhausted and cheaper production platforms are found elsewhere. The phenomenon of “footloose capital” is amply illustrated by the experience of the Philippine garments industry. Many of the original garments investors in the 1970s-1980s transferred to China in the 1990s and then moved to Vietnam and Cambodia at the turn of the millennium; some are now based in Myanmar, Bangladesh and Sri Lanka.
The above complaints are not new and have been aired by trade unions and CSOs in numerous global, regional and national forums for at least half a century. Yes, half a century. As early as 1972, there were formal resolutions filed in the United Nations seeking the adoption of a Code of Conduct to govern the behavior of TNCs. At that time, big national firms in developed countries had become global and began shaping a new international division of labor through their network of global suppliers and producers. These networks are now commonly referred to as the “global value chains” of TNCs.
One notable outcome from the early campaign for rules was the adoption in 1977 by the International Labor Organization of the “Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy”. The Declaration states that all Parties should “respect the sovereign rights of States, obey the national laws and regulations, give due consideration to local practices and respect international standards” such as the ILO Conventions on Freedom of Association and Collective Bargaining.
The main message of the Declaration: For the TNCs to observe “good practices” in employment, compensation, training, health and safety and industrial relations when they operate in developing countries. The Declaration states that the TNCs “should provide the best possible wages, benefits and conditions of work, within the framework of government policies”. Further, these wages and benefits “should be at least adequate to satisfy basic needs of the workers and their families”.
The 1977 ILO Declaration is fairly comprehensive in scope. The problem is that the Tripartite recommendations are non-binding. A subsequent “Addendum” to the Declaration put it bluntly as follows: “In keeping with the voluntary nature of the Declaration all of its provisions, whether derived from ILO Conventions and Recommendations or other sources, are recommendatory…”
Being non-binding, the Declaration has been ignored by many TNCs. There is no system for the filing and processing of any complaint or abuse. Nor is there any system of remediation or arbitration.
Meanwhile, the trade unions, CSOs, Church and consumer groups in the developed countries have joined the global campaign to curb TNC abuses by pressuring their own home-grown TNCs to stop violating labor, human and environmental standards in countries where the TNCs operate. The global campaign intensified in the 1980s-1990s when Asia became the workshop of the world for the production of labor-intensive products such as garments, footwear, toys, furniture, semiconductors, transistors, etc. These products are usually manufactured in “union-free” export-processing zones under international outsourcing arrangements.
The campaign for TNC rules metamorphosed in the 1990s into a strong consumer movement in the developed countries. The power of the consumer movement was demonstrated in l997-1998 when sales of Nike’s shoes collapsed in North America and Europe when an American TV channel exposed the anti-labor practices of Nike’s contractor partner in Vietnam. The business of some American garment retailers was also affected when it was discovered that they were using Saipan as a base for low-cost production, using imported Asian workers housed in dingy dormitories and paid extremely low wages. There were other high-profile cases that were documented by consumer movements like the “No-Sweat Campaign” in the United States and the “Clean Clothes” in Europe.
It is against the above historical backdrop that a number of TNCs began adopting their respective Codes of Conduct that contain guidelines on how TNC subsidiaries, contractors and sub-contractors should behave in foreign climes. Thus, in the case of Levi Strauss and Co., its l991 Global Sourcing and Operating Guidelines state: “We will only do business with partners whose workers are in all cases present voluntarily, not put at risk of physical harm, fairly compensated, allowed the right of free association and not exploited in any way”.
The phrase “corporate social responsibility” or CSR has also become part of the TNC vocabulary. A global cottage industry on CSR audit and monitoring of compliance with various Codes of Conduct has blossomed, led by institutions such as Bureau de Verite and Societe General de Surveillance or SGS. Strange-sounding acronyms and terms have also crept into the corporate vocabulary — ISO 14000, SA 8000, OSHAS 18000, WRAP, GCI, ethical outsourcing, ethical consumption, ethical trading, and so on. Today, every act of corporate kindness and generosity such as contribution to charity, assistance to street children, participation in the Habitat, clean-up of dirty canals, donation of old computers to impoverished schools and so on is considered CSR.
However, these individual Codes of Conduct cannot substitute for a global binding standard to govern TNC behavior. In 2000, UN Secretary-General Kofi Annan tried to promote a “Global Compact Initiative” (GCI) that sought the commitment of TNCs to respect basic labor, human and environmental rights wherever they operate. But like the 1977 ILO Declaration, the GCI was still non-binding.
In 2011, the UN Human Rights Council (HRC) adopted the PRR Framework advanced by the UN Rapporteur on Business and Human Rights, Prof. John Ruggie. The framework declares that — it is the “Duty of States to Protect Human Rights”, it is the “Duty of Business to Respect Human Rights”, and it is the “Duty of All Stakeholders to Find Remedy” if there are violations of human rights. The UN HRC came up with 30 or so guidelines on how business, government and other stakeholders can satisfy the “three pillars”. But again, these are still recommendatory and non-binding.
And now, the latest news: The UN is debating a proposed UN treaty on TNCs and human rights. The proposal, originally submitted in 2014 by Ecuador and South Africa, seeks to elaborate an international binding instrument to regulate the activities of TNCs and “other business enterprises” (OBEs).
Will the UN be able to adopt this? Will the Philippines, mired as it is on human rights issues at home, join the global community in voting for the adoption of this treaty? Or will everyone wait for another half a century before a binding one is finally adopted?