When corporations rule the world

Fight Racism! Fight Imperialism! 237 February/March 2014

Multinational corporations intend to enforce their will as law. Sovereign states and democratically elected legislatures will be little more than empty phrases if the US-European Union Transatlantic Trade and Investment Partnership (TTIP), and the Trans-Pacific Partnership (TPP) between the US and 11 other countries, are brought into force. These partnerships are vehicles through which multinational companies will remove health and safety protection, end environmental safeguards, abolish legislation providing minimum conditions for labour, scrap food safety laws, abandon efforts to slow climate change, stop campaigns against fracking and forbid attempts to rescue the National Health Service from the predations of private companies – indeed, sweep away any barrier to the unfettered pursuit of maximum profits. If you are unaware of these proposed partnerships that is deliberate because it is intended that the public remains ignorant until they are signed. TREVOR RAYNE reports.

Writing in Fight Racism! Fight Imperialism! 131 (June/July 1996) David Yaffe said,

‘Far from being a beacon of capitalist progress “globalisation” is a sign of economic decay and increasing instability in a world of obscene and growing inequality.’

We are confronting an enormous and growing concentration of wealth. As wealth concentrates into fewer private hands so the radius of their power expands. That power now extends across the globe. Karl Marx wrote, ‘The changes in the economic foundation lead sooner or later to the transformation of the whole immense superstructure.’ (Contribution to the Critique of Political Economy). In the era of multinational monopolies this superstructure now includes the world’s legal systems.

On the eve of the January 2014 Davos summit of the rich and the powerful, Oxfam said that the wealth of the richest 85 people in the world amounts to $1 trillion, as much as the wealth of 3.5 billion of world’s poorest people, half the world’s population. The wealth of the world’s wealthiest 1% of people is a staggering $110 trillion or 65 times that of the poorest half of the people. The combined assets owned by the world’s top 10 non-financial corporations amounts to $3.4 trillion; those of the world’s 100 biggest companies is $12.85 trillion. This compares with UK Gross Domestic Product (GDP) of $2.44 trillion and US GDP of $15.68 trillion. Three of the world’s ten biggest firms are British (Shell, BP and Vodafone), as are 14 of world’s top 100.

Given that they command such fortunes, it is not surprising that multinational corporations have acquired a legal status equivalent to that of a state. In 2011 Mario Monti and Lucas Papademos, both former bankers, were chosen, not by electorates, but by the International Monetary Fund (IMF), European Commission (EC) and European Central Bank (ECB) to be the prime ministers of Italy and Greece respectively. The IMF, EC and ECB represent the giant industrial and banking corporations.

Bernard Arnault, chair and chief executive of LVMH, and one of the world’s 85 richest people, said, ‘Businesses, especially international ones, have ever greater resources and in Europe they have acquired the ability to compete with states … Politicians’ real impact on the economic life of a country is more and more limited. Fortunately!’ Readers may know LVMH as Louis Vuitton Moet Hennessy, the luxury goods firm, with brands such as Dior, Donna Karan, RM Williams, Dom Perignon, Bulgari, Hublot and, of course, the famous Moet and Chandon champagne, retailing for £234 a bottle at Harrods.

Background to the Partnerships

Globalisation is only the latest manifestation of the structural crisis of capitalism that has been continuous in one form or another since the mid-1970s. The stagnation in the capital accumulation process, with the rate of world economic growth falling over the last three decades, and the re-emergence of rivalries between the rich capitalist nations at the end of the 1970s, were the result of an over-accumulation of capital in the heartlands of capitalism and imperialism.’ (David Yaffe, FRFI 150 August/September 1999)

The Financial Times ran the headline ‘Concentrated $2.8 trillion cash pile puts global recovery in the hands of the few’ (22 January 2014). It described how five non-financial companies (Apple, Microsoft, Google, Verizon and Samsung) were sitting on mountains of cash pondering where to invest it. Others named included Toyota ($39.5bn) and Volkswagen ($46.1bn). These cash mountains demonstrate the over-accumulation of capital. Capitalists are desperate to find profitable outlets for their surplus capital, hence the intensified scramble for markets and territory in the world, inter-imperialist rivalry, and the moves towards TTIP and TPP.

The origins of the Partnerships can be found in the Multilateral Agreement on Investment (MAI) which was proposed in the 1990s between 29 member states of the Organisation of Economic Co-operation and Development. It was itself modelled on the investment provisions of the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico, signed in 1992. The former director of the World Trade Organisation, Renato Ruggeiro, said of the MAI, ‘We are writing the constitution of a single global economy.’ The purpose of the MAI was to prise open national economies for multinational corporations to operate in at will. It was abandoned in 1998 after protests at its clauses and because of divisions between the intended participants. Former US Trade Secretary Ron Kirk said of the secrecy surrounding the TTIP and TPP negotiations, ‘There’s a practical reason [for which] we have to preserve some measure of discretion and confidentiality.’ That reason is the fate of the MAI and that of the proposed Free Trade Area of the Americas (FTAA), an extension of NAFTA to include much of North and South America, which has stalled following opposition from several South American states.

While MAI and the FTAA failed there has been an increasing use of Bilateral Investment Treaties (BITs) which include ‘investor protection’ clauses and these threaten the sovereignty of governments by subjecting them to extra-territorial rules that serve the multinational companies. They are written into agreements between companies and states and provide companies with the right to sue governments at investor-state dispute settlement tribunals. There were 72 BITs in the 1960s, 385 in the 1980s and 2,843 in 2012. BITs now cover two-thirds of global foreign direct investment stock. The British Department for Business said that Britain already has over 90 investor-state dispute settlements; multinational companies are suing governments for passing measures they claim result in lost profits.

Closed tribunals and no rights to appeal

The European Commission has been leading negotiations with the US over the terms of the TTIP. It proposes to establish a Regulatory Co-operation Council combining US and EU regulatory agencies with the purpose of working towards deeper ‘regulatory co-operation and increased compatibility for future and existing regulatory measures’. For example, health and safety regulations and food standards between the US and the EU will be made ‘compatible’, or more simply put, downgraded or removed. The EC claims to have been having meetings with ‘stakeholders’, interested parties, and it has done so: information obtained by the Corporate Europe Observatory reveals that of the Commission’s 130 ‘meetings with stakeholders’, 119 of them were with large corporations and their lobbyists.

The TTIP and TPP are intended to include investor-state dispute settlement clauses. When a corporation considers its expected future profits are being harmed by a government it can lodge a case before these tribunals consisting of three lawyers who represent corporate interests. These lawyers have no conflict of interest restrictions on their operations. There are no limits on the awards that can be claimed against governments and very limited rights of appeal for governments. Even if a government wins a case it must pay the tribunal’s costs and legal fees – averaging $9m a case. UNCTAD reports a tenfold increase in such cases since 2000. Any health or environmental policy that conflicted with corporate interests would be subjected to these extra-judicial tribunals. Tribunals are currently organised under World Bank and United Nations rules. The compensation is taken from the taxpayers.

Of the world’s ten biggest law firms, ranked by revenue, four are British and six are US. A golden age for corporate lawyers beckons! ConDem Coalition government Minister without Portfolio Ken Clarke explained, ‘Investor protection is a standard part of free-trade agreements – it was designed to support businesses investing in countries where the rule of law is unpredictable, to say the least.’

Legalised plunder

The following are just a few of the cases that corporations have brought to the investor-state dispute settlement tribunals:

• The Slovak Republic was forced to pay $22m damages after its government reversed liberalisation of its health insurance market.

• The British National Grid was awarded $53m in damages in 2008 from the Argentinian government after saying it had suffered damages following the 2002 devaluation of the Argentinian peso.      

• Mexico had to pay Tate&Lyle $35.5m and Cargill $77.3m for introducing an excise tax on soft drinks sweetened with high fructose corn syrup produced in Mexico, rather than by sugar cane.

• US pharmaceutical firm Eli Lilly sued Canada for $100m claiming that its intellectual property rights had been infringed, then increased this to $500m when it said that two of its drug patents were denied. Eli Lilly seeks an intellectual property rights monopoly whereby it can charge exorbitant prices for its medicines.

• European firms have launched cases against Egypt for raising its minimum wage.

• US tobacco firm Philip Morris has opened cases against Uruguay and Australia for placing warnings on cigarette packaging.

• In 2012 Ecuador was ordered to pay a record $1.77bn plus interest to the US oil company Occidental when its government said it was ending a ‘Participation Agreement’ with the firm.

• Two months after the March 2011 earthquake that wrecked Fukushima nuclear power plant in Japan, the German government said that it would not extend the life of Germany’s nuclear power plants beyond 2022. Swedish energy company Vattenfall, operating two of Germany’s oldest nuclear power plants demanded $2.2bn compensation, even though the plants were not functioning. Vattenfall’s suit was lodged at the World Bank’s International Centre for Settlement of Investor Disputes in 2012.

As the European Commission consults the stakeholders, US Restaurants International, owner of Kentucky Fried Chicken, wants ‘regulatory convergence’ with the EU so that Europeans can buy chlorinated chickens, whereby post-slaughter chickens are dipped in chlorine rather than a water and steam treatment used in Europe. Ractopamine, a drug used to promote leanness in cattle and pigs, is banned or limited in 160 countries. The US National Pork Producers considers such bans as non-tariff barriers to trade that must be removed. Airlines for America wants European emission restrictions abandoned as a ‘barrier to progress’. Banks, brokers, fund managers and insurance companies want regulations on risky speculative investments removed. Deutsche Bank wants a reduction in collateral requirements for banks.

The investor-state dispute settlement tribunals are being used to frighten governments with billion dollar law suits into dropping legislation that protects public health, the environment and workers.

Trade blocs and resistance

If these Partnership agreements are signed they will establish trade blocs of such magnitude that they will be able to force other countries to comply with their provisions, or lose markets. Former World Bank president Robert Zoellick sees the Partnerships as putting the US at the centre of two blocs and consequently better able to contain and prevent the emergence of potential rivals such as China.

In January 2014 the EC said that it was freezing negotiations over investor-state settlement procedures, although the rest of the TTIP negotiations will proceed. The December 2013 TPP talks ended without agreement as Malaysia and Vietnam opposed plans to dismantle their state-owned enterprises and Japan objected to opening up to US agricultural products.

Bolivia withdrew from the World Bank’s Centre for Settlement of Investment Disputes (ICSID) in 2007, followed by Ecuador in 2009 and Venezuela in 2012. Argentina has won an appeal in the US Court of Appeal against $185m awarded to BG Group (British Gas), originally given for devaluing the peso. Argentina has announced that it will also leave the ICSID. We must resist the corporate takeover of the world!

Sources include: Corporate Europe Observatory, John Hilary, The Poverty of Capitalism, Le Monde Diplomatique, David Korten, George Monbiot and the Financial Times.


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