Power, National Sovereignty, and the Rule of Law in a Global Economy
Globalization has brought about a "paradigm shift" from a world of independent sovereign states to a world of diminished state sovereignty and increased inter-state linkages. The nation state is acquiring a new dimension – one of interdependence and heterogeneity.
Meanwhile multinational corporations (TNCs) have acquired great power: many of them have total assets that exceed the GNP of the countries in which they operate. Amongst the hundred largest concentrations of wealth in the world, fifty one percent are owned by TNCs; only forty nine percent by independent sovereign states! The fact that TNCs operate across borders makes them more independent of nation-states, and more difficult to control.
The decades of the eighties and nineties witnessed an emphasis on protection of TNCs and formulating rights for them; this was part of a universal effort to promote free trade and "foreign direct investment." The World Trade Organisation's (WTO) rules and the the OECD-sponsored Multilateral Agreement on Investment (MAI) launched in September 1995 are more favorable to commercial freedom of TNCs than in restraint of them.
And independently of WTO, there was put in motion fifteen years ago a strong silent current operating in the sphere of multilateral trade relations. It was based on "law" – not statute law, but "law" in the international sense – i.e. treaty-making. This law was in the form of BITs (Bilateral Investment Treaties): there are almost one thousand such BITs in existence today. Many of these BITs have been signed in the last five years in new areas of emerging markets. They have given a stimulus to the globalization of world economy – by providing increasing investment opportunities to the developed world, with (of course) compensating advantages and benefits to the developing countries.
Meanwhile there has been considerable activity worldwide in the development of voluntary codes either with organizations concerned by the activities of TNCs, or by the TNCs themselves or by other non-regulatory agencies. For instance, a text of principles for Global Corporate Responsibility has been recently released and published by the ECCR. It contains fifty-five detailed principles supported by more than seventy-six set of criteria for assessing company policies and practices, and more than sixty-six benchmarks or reference points for assessing the performance of TNCs: a good beginning. There are also at least 20 generic codes available for TNCs to choose and adopt. A number of major companies have voluntarily announced internal policies and procedures for dealing with social issues in the countries in which they do business. In the absence of binding transnational regulations, voluntary codes do play a positive role.
In the end whether we like it or not, "globalization" is not only the buzz-word of the New Millennium, it is going to be the watchword of the twenty-first century. The challenge of globalization is not to stop the expansion of global markets, but to find rules and institutions for stronger governance – local, national, regional and global: to ensure that globalization works for people – not just for profits.