The Multinational Monitor

February 1984 - VOLUME 5 - NUMBER 2

N E W S   M O N I T O R

Conumer and Corporate Codes Widen North-South Spilt

by Josh Martin

In late December 1983, the U.S. announced its intention to withdraw from the United Nations Educational, Scientific, and Cultural Organization (UNESCO), citing the agency's "politicization" and "hostility" toward "a free market and a free press." Coupled with the recent statement by a U.S. diplomat that the U.N. headquarters "seriously consider moving [itself] from the soil of the United States," the announcement underlines the Reagan administration's new combative attitude toward the U.N.-and the extreme to which it will go to punish the international body.

Now the administration is embroiled in another test of wills with the U.N. over proposed codes that would offer governments guidelines for regulating the behavior of private companies: the Code of Conduct for Transnational Corporations, and the U.N. Guidelines for Consumer Protection. Both have been the subject of bitter debate in the U.N., with the split along clear North-South lines.

The Code of Conduct for Transnational Corporations, commonly known as the corporate code, is more than a guide for corporate etiquette; it sets standards on matters as specific as disclosure of information about parent companies and subsidiaries, contract negotiations, and the treatment of corporations by host governments.

Some support for the corporate code has come from an unexpected source: the International Chamber of Commerce, an organization representing private sector interests from 50 countries. H.F. van den Hoven, the organization's representative at the U.N. Commission on Transnational Corporations, the legislative committee in which negotiations have been taking place, believes that "a practical and balanced code would be useful for the international investing climate by outlining the responsibilities of both business and government." "By providing equitable rules for all parties concerned," he says, the code could spur global economic development.

In other words, the Chamber wants the code to be incorporated into national and international law so that governments can't arbitrarily disrupt corporate activity, and so that there is prompt payment in the event of confiscation or nationalization, according to testimony and private interviews with Chamber officials.

In contrast to its acceptance of the corporate code, however, the Chamber has opposed adoption of the consumer guidelines, which in its view, represents a dangerous "trend toward over-regulation. "

Third World countries, which originally introduced the proposed corporate code in 1976, have their own reasons for supporting the corporate code. A primary objective is to restrict the kind of corporate intervention evident in the overthrow of Salvador Allende of Chile. Thus a key clause of the code states, "Transnational corporations shall not interfere in the internal political affairs of the countries in which they operate by resorting to subversive and other illicit activities aimed at undermining the political and social systems of those countries."

While many of the general principles expressed in the corporate code have been approved by the Transnational Commission, there are still some difficult hurdles to cross before the code can come before the General Assembly for approval. One of the most difficult is the passage condemning corporate tolerance of apartheid practices in South Africa. Debates on this passage-the only one in which a specific country is mentioned-have generally divided along North-South lines, although European states with no investments in South Africa have tended to support the Third World position. Similarly, the language on corporate compensation in the event of confiscation or nationalization has yet to be worked out.

Member states of the Transnational Commission will try to iron out their differences at a special session in late January. If all goes according to plan, it is expected that the Economic and Social Council, an interim body, will pass the code during the next several months and refer it to the U.N. General Assembly for ratification by late 1984 or early 1985.

The consumer guidelines dovetail with the corporate code, in that they would provide governments and individuals with a set of minimum standards for consumer protection regarding the products of multinational corporations. The guidelines call for governments to encourage product safety, fair price, quality controls, consumer protection, and "measures enabling consumers to obtain redress." They also make specific recommendations on the marketing of food, pharmaceuticals, and water.

Passage of the consumer guidelines by the U.N. General Assembly during its 1984 session is nearly assured. They already have the support of a majority of U.N. member states. Particularly important is endorsement from non-aligned nations, who have been especially concerned about provisions protecting consumers' economic interests, education and information programs, and product marketing.

The guidelines have also been championed by the International Organizations of Consumer Unions (IOCU), an umbrella organization that includes 110 member associations in more than 50 countries of the developed and developing world. Esther Peterson, IOCU representative at the U.N. and former advisor to Presidents Lyndon Johnson and Jimmy Carter on consumer affairs, believes that, "The guidelines show the growing awareness by consumers throughout the world of the need for health and safety standards. 'It's amusing that opposition comes more strongly from business interests in countries where these guidelines already, exist as laws or regulations."

"It will be the first time we have a global coordinated system of principles," says Dorothy Willner, Peterson's predecessor as IOCU representative to the U.N. "It is an important leap forward to harmonize consumer principles and practices in a framework for international action."

The Reagan administration has put up strong resistance to the consumer guidelines, looking upon them as the distasteful result of growing consumerism within the U.N. One outspoken opponent has been Murray L. Weidenbaum, former chairman of President Reagan's Council of Economic Advisors. Although no longer an administration official, Wiedenbaum has testified against the guidelines in congressional hearings, and was invited by the American mission to the U.N. to attack the guidelines to a group of business organizations. In a New York Times article, Weidenbaum charged that the U.N. "is in a growth phase in its regulation of business," and is trying "to play international consumer cop." He claimed that by considering the guidelines, the U.N. is exceeding its charter mandate "to maintain international peace and security."

Dennis Goodman, deputy to Jeane Kirkpatrick and representative to the United Nations Economic and Social Council, called both the corporate code and the consumer guidelines "a Pandora's box for ill-conceived meddling in the affairs of member states." He added: "They offer rationale for all sorts of wrong-headed interference in domestic economies, and permit massive interference in foreign trade."

Like other U.N. legislation, both the corporate code and the consumer guidelines lack the "teeth" of enforcement. But they set strong standards on which member states could model national laws that would have the power of enforcement. And, despite the belligerence of the Reagan administration, the U.N. appears unlikely to be swayed from its present role as a promulgator of such standards. As U.N. Assistant Secretary General Peter Hayes noted in a reply to Weidenbaum's charges, the U.N. charter gives the U.N. a specific obligation to seek "solutions of international, economic, social, health, and related problems."

Josh Martin is Multinational Monitor's United Nations correspondent.

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