Transnational Corporations (TNC) and Violations of Human Rights

Following the acceptance of resolution 1998/8 of the Sub-Commission, the Europe-Third World Center (CETIM) would like to provide its first contribution to the Working Group by transmitting some reflections which would be worth to be considered within the framework of its activities. They accentuate in particular the economic, social , cultural and environmental consequences of working methods and activities of transnational companies, especially in Southern countries.

Furthermore we consider it useful to annex one of our interventions dealing with the progressive loss of sovereignty of States following the massive establishment of transnational companies on a world scale. Given their objective to maximise profits, they have a large range of means -legal or not- at their disposal in order to favour their interests and to influence social and economical policies of countries in which they operate. It should be clear that their presence is real and should therefore not be left out of our reflexions.

Finally note that even if some of these reflections don’t consider the consequences of working methods and activities of transnational companies on civil and political rights, they certainly deserve to be taken into consideration within the Working group.

The Europe-Third World Center (CETIM) would like the final recommendations of the Working Group to concentrate on the elaboration of basic guiding principles within the United Nations in order to adopt binding rules and standards where transnational companies have to stick themselves to in order to respect the entirety of human rights.

Economic consequences

· Elimination of numerous enterprises, national productions, and disappearance of traditional subsistence economies caused by unequal competition, especially in Southern countries (particularly agro-food industries against small country farms)

· Looting of national (human and natural) resources caused by a disproportionate repatriation of profits (a derisory percentage of profits is given to the Government and/or to the development of the country)

· Explosion of speculative investments to the detriment of the productive sector

· Control and monopoly of technology: obstacles and restrictions to transfer technology; acquisition of patents on life; abduction of the genetic heritage of Southern countries

· Control of information by media monopolies and exclusion of independent medias

Social consequences

· Increasing inequality and insolvency of citizens : limited access to products and basic services which used to be granted or subsidised by the public authorities (food, drinking water, health, education)

· Rural exodus emphasised by the destruction of the living environment and of the traditional ways of production

· Displacement of populations caused by projects, especially, the implementation of dams and the exploitation of mines, oil industries and tourist resorts

· Health damage by an unsuitable commercialisation of pharmaceutical and nutritional products

· Precarious working conditions, especially in free trade zones ( non respect of international ILO standards)

· Collective dismissals following restructurings, buybacks and/or mergers

Culturel consequences

· Conditioning the way of life of populations by means of advertisements and transnational media

· Standardisation on a world scale of products (food, clothes, music, cinema) to the detriment of local production and consumption

· Damage to the distribution of knowledge by the intellectual property rights

Consequences for the natural and living environment

· Destruction of ecosystems and reduction of the biodiversity caused by an intensive exploitation of resources and land or by the establishment of large projects

· Pollution and toxic waste resulting from industrial activities (nuclear, petrol, chemical)

Extract of an intervention pronounced in the framework of :

Sub-Commission on Prevention of discrimination and protection of minorities.
49th session August 1997
Economic, social and cultural rights

Mister Chairman,

Article 2 of the Charter of economic rights and obligations of States stipulates that each State holds and exerts freely the entire and permanent sovereignty over all its wealth, natural resources, and economic activities, including the possession and right to use them and to have them at its disposal. It is important to note that the phenomenon of globalisation, characterised by the liberalisation of markets, deregulations and privatisations, deprives States of their national sovereignty. This reality follows essentially from three factors: On the one hand the policies imposed by the Bretton Woods institutions, in particular the measures dictated in the frame of structural adjustments, on the other hand policies of international commercial institutions, in particular by the adaptation of national legislation to the terms stipulated in the GATT agreements, and finally the physionomic change of the leaders of the world economy, especially the more and more dominating role of transnational companies.

In reference to the last factors, the Europe-Third World Center (CETIM) and the Movement against Racism and for Friendship between People (MRAP) would like to bring to the fore the devastating effects on the constitutional unity of the State and on the national capital, which follows from the more and more numerous establishments of transnational companies. Irreversible way of organisation of the world economy, they regulate the entire production and exchange system on a world scale, by subordinating the role of the sovereign State, and this in blatant contradiction with the resolutions 2626 (XXV), 3201 (S.VI) and 3281 (XXIX) this last one stipulating that each State is in charge of the regulation and monitoring of activities of transnational companies within the limits of its national jurisdiction. With the creation of the World Trade Organisation promulgating notably policies in favour of the activities of transnational companies, should one conclude that the resolutions adopted by the general Assembly of the United Nations become void and insignificant?

In order to define better the loss of national sovereignty, without however judging the choice of a national development policy retained by one or another State on our earth, it is necessary to look at the instruments and means with which they have endowed themselves while facing foreign direct investments (FDI).

Actually, until the 1980’s, when a transnational company wanted to set up a subsidiary company outside its original country, it was submitted to restrictions of the host country, like a prior investment authorisation, exchange control, support to local companies by an industrial policy, transfer of technology, rules for the protection of the environment, limited profit repatriation, creation of local employment accompanied by professional training programs, restrictions on the employment of expatriats, price controls as well as the security and national sovereignty over especially telecommunications and public services. Furthermore the host countries imposed a participation of local capital, private or public, in the subsidiaries established by the transnational companies on their territory. This local participation made that between 1960 and 1976, 1,369 subsidiaries of transnational companies were nationalised, whereas since 1985 none of them has followed.

On the contrary, the privatisation programs, together with the creation of free trade zones, are since then used to attract foreign direct investments (FDI). It happens even that transnational companies are invited, in particular in certain Southern countries, to take part in the privatisation, and this, by means of conversion of external debt titles into titles of local enterprise ownership. This bitter fact related to privatisation is the result of imposed policies by the World Bank and the IMF who however have the obligation as specialised organisations of the United Nations system, to favour the execution of economic and social rights stipulated in the articles 57, 58, 63 and 64 of the United Nations Charter.

At the present time, the balance of power has been inverted between the host countries and the transnational companies. It need to be noticed that the prerogatives, mentioned before, with which the States had endowed themselves, have been put offside. The actual ideological climate denies the right of States to lay claims to the national development policy. Within this context CETIM and MRAP both support the remarks of Professor Ricardo Petrella: This logic of war reduces the role of the State to one of a large engineering legal, bureaucratic, and financial system, used to serve the commercial performance of the enterprise. The State is no longer the political expression of the collectif public interest. It becomes an actor among others, responsible for the creation of favorable conditions for the competitiveness of enterprises. The general interest comes down to that of the large companies contesting the world markets. It is clear that this ideology is contradictory to every form of participative democracy.