Globalisation: How Multinationals are Taking over the World

The rationale behind each of these international agreements is the same - to promote a new world order with deregulated 'free' trade and capital flows. In this way, claim the advocates of neoliberal economics, the market will stimulate economic growth which will gradually trickle down to all sections of society, creating new consumers worldwide enjoying a higher standard of living.

The question Rising Tide has to ask is: can we have all this growth and still save the climate?

It is quite clear where the priorities of the international decision makers are. At the beginning of the Framework Convention on Climate Change, amongst the aims is a promise to only take action on climate change if it does not harm international trade. The Kyoto Protocol contains a similar promise. So if it turns out that the current dogma of global economic growth is not compatible with saving the climate, then there's not that much hope for us!

And the likelyhood is, the two things aren't compatable. Economic growth historically has tended to imply increased consumerism, which in turn implies increased resource use. This correlation has certainly been the pattern in the West over the last few hundred years since the industrial revolution.

Yet, in corporate circles, this relationship is disputed. Propaganda from multinational companies often claims that not only is global economic growth compatible for sustainable development, but actually necessary for its realisation. Neoliberal economists argue that the globalised free market is good for the environment because the market provides incentives for the development and transfer of technology which has a lesser impact than existing systems.

Without a doubt, certain of the world's economies are moving towards this situation. Growth is taking place in sectors of the economy which do not depend on resource use, ie service industries. In addition technological improvements are making many industrial processes and products much more energy-efficient, yet the new technology contributes to economic growth. So no longer is there such a linear relationship between growth and resource use. But that does not mean that growth has divorced itself from consumption completely, nor is it ever likely to do so.

If an example is needed, consider the agricultural sector. Traditional agriculture produces no CO₂ whatsoever - local produce for local markets. The globalisation of agriculture means food is now grown for the global market by large corporations. Energy is used in transporting it around the globe, in mechanical harvesting and processing , in the production of fertilisers and pesticides, in disposable packaging and so on. In fact it has been estimated that for every calorie of food produced, three calories of energy are used. But much of the world's food is still grown locally, and the increase in energy it would take to incorporate all this into the global economy would vastly outweigh energy savings by improved efficiency.

In every other sector too, as economic growth promotes consumerism, it will be hard to avoid in increase in the need for energy. Increases in technological efficiency are currently being made, but still the world energy requirement is increasing each and every year. Can future technological improvements make as much of a difference?

Electricity generation can move from fossil fuel based generation to renewable alternatives. But there is currently no viable alternative to the use of fossil fuels for transportation. The nature of global free trade means more and more goods will need to be transported, and over longer distances, implying that it will be very difficult to prevent an increase in this sector. The IPCC suggests that greenhouse gas emissions will need to be cut by at least 60%. Transportation currently accounts for typically 20 to 30% of greenhouse gas emissions in developed countries. Source: National Communications to FCCC

It is often quoted that action on climate change must not jeopardise the 'legitimate needs and aspirations of developing countries to improve their standard of living' Surely the truth of the matter is that Western countries obtained their obscenely high 'standard of living' on the backs of the Third World, and if the rest of the world is to reach those levels, then it will still require vast numbers of people to be oppressed. The world struggles hard enough to support 1 billion consumerists; that everyone could reach these level is an ill-thoght out fantasy. In addition, 'standard of living' is not the same as 'quality of life' - security, liberty and independance are much more important to a fulfilled life than a high level of consumption.

It is important that we redress the disparity between first and third world, but that needs to be done by developed countries reducing their consumption, not by developing countries increasing theirs. The greatest challenges to globalisation have come from the South: from the Zapatistas of Mexico to the landless farmers of Karnataka in India or Brazil, millions of people are resisting corporate rule and reclaiming their future. They do not see globalisation as providing them with endless consumer luxuries, rather taking away their land, their rights and thier freedoms in a sacrifice to the global free market.

Globalisation Agreements and their Effect on the Earth's Climate

A whole array of international institutions seek to speed up the globalising process. They include regional agreements such as the European Single Market, NAFTA and APEC, and so-called development institutions such as the IMF and the World Bank. However, two of the most sinister, partly because of their global dimension, are the current World Tade Oraganisation (WTO), and the proposed Multilateral Agreement on Investment (MAI).

The WTO aims to remove the barriers to international trade and so to promote economic growth. The twenty thousand pages of WTO agreements are predominantly constraints on the actions which governments can take to limit international trade. If a government is challenged over some measure which is then found not to be in the interests of free trade, then that country faces trade sanctions from other WTO members. Hence it is a huge transfer of power to those doing the trading, ie. multinational companies. The environment is seen as a lesser priority than trade, and in previous disputes, trade interests have been judged favourably over environmental concerns.

Even more worrying for environmentalists is the MAI. Although the negotiations on this agreement recently failed in the OECD, it will shortly re-emerge as a part of the WTO, and there is no reason to believe that it is any less worrying because of this move. The MAI is in many respects a sister agreement to the WTO, deregulating foreign investment in the same way that the WTO deregulates trade. Signatories to the MAI are obliged to treat foreign investors at least as well as domestic producers, effectively giving countries no choice other than to let multinationals in to the economy.

Under the MAI companies are given the power to sue governments which take actions which they beleive 'expropriate' their current, or potential future earnings. The definition of expropriation is very far reaching, as can be shown by a recent decision made within the North American Free Trade Agreement, which has almost identical wording to the MAI. The Canadian Government banned MMT, a petrol additive which is a dangerous neurotoxin. But American multinational the Ethyl Corporation, who make MMT, decided to sue, claiming their potential future profits had been expropriated. Canada was ordered to pay $13 million and revoke the ban.

Another important facet of the MAI are the clauses which refer to 'standstill' and 'rollback'. Countries can make exceptions, for existing laws or measures which they do not wish to be covered by the MAI, but after this they must not introduce further measures which act as barriers to investment and so contradict the MAI. The references to 'rollback' state that over time, the exemptions must also be gradually dismantled, so there are no longer any remaining barriers to investment. Clearly, many environmental regulations can be construed as barriers to investment, whether they are controls on pollution, or protected status for environmentally sensitive areas.

The Implcations of the MAI and WTO on the Climate Convention and Kyoto Protocol

There is potential conflict between the both the MAI and the WTO and the Kyoto protocol. The first point is a technicality, that under emissions trading and joint implementation, trade between certain countries (currently annex 1 countries),is given incentives which do not apply to all WTO or MAI signatories.

But, more fundamentally, many of the measures which governments might wish to take in order to meet the demands of the Kyoto Protocol would not be allowed under the WTO or MAI, if they were claimed to be barriers to free trade or investment.

At present, neither the WTO nor the draft text of the MAI contain any exemptions for the Kyoto Protocol or any other Multilateral Environmental Agreement (MEA). The WTO's Committee on Trade and the Environment (CTE) recently rejected a proposal from the European Union that would have enabled MEAs to override WTO rules. There has also been some indications that the negotiators of the MAI (when it was at the OECD) might have been prepared to consider a specific exemption for MEAs, but there is expected to be some opposition to this also.

It is important to draw a distinction between measures directly mentioned in the text of MEAs (such as emissions trading, JI and the like in the case of the Kyoto Protocol), and domestic measures taken by a particular government to meet the requirements of an MEA. If the WTO or MAI were reformed to exclude only the first group of measures then the ability of governments to choose how they wanted to meet their commitments would be restricted. This could be seen as a compulsion on governments to use only market-based instruments to meet the requirements of the Kyoto protocol.

The Race to the Bottom and the Globalisation of Environmental Protection

It is more or less agreed that this 'race to the bottom' is an inevitable consequence of globalisation. At their annual meeting in Davos last February, the 1000 heads of transnational corporations that make up the World Economic Forum were warming to the idea that in the globalised world of the future, social and environmental elements should go hand in hand with economic ones. There was confidance that an eventual global agreement on climate change would be a market-driven way to incorporate environmentalism into the new world order.

Good news then? Not really. Because environmental and social issues can be tackled in a global economy, but only at the global level. Nations or regions are deterred from taking a strong environmental stance for fear of losing inward investment. In addition the WTO and MAI will effectively prohibit many of the possible options for environmental protection available to governments. Countries on their own will find it hard to sustain ethically sound policies.

Because of this, Multilateral Environmental Agreements are, to a large extent, the only possible solution countries can take if they wish to remain competitive in the global market. Because they bind competing nations equally, they remain immune to being sacrificed in the name of economic growth.

Climate change is a global problem, but it would not necessarily have needed a global solution in a non-globalised world. Environmentalists traditionally prefer to 'think globally and act locally' - people who are in touch with the source of the problem are usually in the best position to find the solution. But because unilateral action on the environment is percieved to have a negative effect on the economy, a globally agreed solution must be found.

This is the globalisation of environmental protection - a global economy needs global agreements. But there are several shortcomings of the MEA approach, for example:

• MEAs are easily influenced by big business. Hundreds of representatives of business lobby organisations attend each UNFCCC meeting, have the money to spend on producing and promoting their reports, and enjoy easy access to decision makers in a way that they simply could not have with a more decentralised approach to environmental protection. The international arena is ideally suited to multinational companies; other interest groups such as environmentalists, trade unions, and even small business, are not used to organising on a global scale.
• MEAs are a blunt instrument. Despite the best efforts of the globalisers at cultural homogenisation, the world still consists of a wide variety of different cultures ecosystems, political circumstances etc, - it would be foolish to imagine that any one agreement would be the best approach in each case.
• MEAs result in a 'lowest common denominator' approach. Because a consensus has to be reached amongst all the parties to an agreement, the agreement gets watered down until it is acceptable to all.
• MEAs can never be the solution to all problems. Many environmental problems are local - for example, a new and unwanted development, localised traffic pollution,
• MEAs simplify situations, and need to reduce the environment to a set of quantified statistics. For example, a new road may destroy areas of natural beauty, rip apart communities, cause accidents, asthma and noise, but the as far as the climate convention goes, it is merely a new source of CO₂emissions
• MEAs tend to focus on individual issues, rather than tackling the underlying causes that lie at the heart of so much ecological destruction and social disintegration.

Emissions Trading, Joint Implementation and Globalisation

We have already argued above that market based mechanisms such as emissions trading and joint implementation may not on their own have much effect in countering climate change, as there is a need to tackle the whole economic system with its prevailing assumption that growth is necessary We should also be aware that to some degree, they also support and further globalisation and corporate power?

Joint implementation, in addition to being a means for rich countries to avoid domestic action, is a prime weapon for western corporations keen to open up and dominate markets in the South and in economies in transition. JI projects are typically based on high technology, and will in many cases involve transnational companies. Since joint implementation projects will in almost every case constitute foreign direct investment, the terms of the MAI will give the host country little or no control over who carries out the project, and therefore have little defence against corporate aggression

Emissions trading is expected to also play a key role in exporting neoliberal corporate capitalism to those parts of the world that are so far escaping it. Only emissions trading between countries is contained in the Kyoto Protocol. However, Western countries at least are likely to share out their emissions quota amongst polluters, and introduce emissions trading between companies. The thinking behind this is that it provides a market incentive for companies to make energy savings in their own activities. A recent UNCTAD report on trade explains this: "Allowing private entities to trade appears to be important if the efficiencies of trading are to be realised." These efficiencies of trading refer to the way the free market is expected to automatically cut emissions under a trading regime.

In theory, there is no compulsion on any country to allocate its quota in this way. But since failure to do so could be construed as a 'barrier to investment', the WTO and MAI, will probably ensure they all do in practice.

The ill effects of globalisation go far beyond climate change - more localised pollution, resource depletion, job insecurity, human rights abuses of indigenous populations, welfare cuts, destructive developments and so on can all be attributed to the insensitivities of the global free market. Any solution to global warming which speeds up the rate of globalisation by aggressively opening markets to multinational companies is exacerbating all of these other problems.

Joint implementation and emissions trading do not constitute a formal transfer of power from nation states to multinational corporations in the same way that agreements like the MAI or WTO do. But the means by which it encourages corporations to establish themselves as major players in economies nevertheless constitutes an increase in corporate power.

So What's The Answer?

Undoubtedly action must be taken urgently to solve the problem of climate change. However, solutions which do not address the underlying problems inherent in a global capitalist economy is not a solution at all. Climate change is certainly not the only problem facing the Earth, and treating it in isolation can serve to exacerbate other environmental and social problems. The only solutions which can be sustainable in the long term are those which place the climate at a higher priority than economic growth.