Category Archives: Trade, Aid, Business, Finance

[By Andrew Moravcsik. Part of the series "Global Challenges in 2030"  (Goldstein & Pevehouse), January 2010.]

Are international organizations undemocratic? Many activists, politicians, and political scientists believe that globalization and global governance are reducing citizens and their elected politicians to rubber stamps. Decisions are made behind closed doors by networks of unelected diplomats, technocrats, and judges. Neither individual citizens nor national parliaments exercise meaningful oversight. Yale law professor Jed Rubenfeld has contrasted international organizations that are “bureaucratic, diplomatic, technocratic—everything but democratic” with the U.S. Constitution’s “process of popular deliberation and consent.”

In the United States, international organizations elicit complaints from left and right alike. Conservatives criticize activist lawyers, judges, and NGOs for seeking to import interventionist foreign standards—the death penalty, global warming standards, and gay rights—without running the gamut of the normal legislative process. Progressives worry about the unchecked influence of corporate interests, which appear to use multilateral organizations such as the WTO to protect profits at the expense of social, health, safety, and  environmental standards.

Many Europeans share sociologist Ralf Dahrendorf’s view that internationalization “invariably means a loss of democracy.” The European  Union’s recent and contentious effort to promulgate a “constitution” was launched in order to bring it “closer to its citizens” and provide “better  democratic scrutiny.” Yet the impression of illegitimacy was bolstered by referendum defeats in France, the Netherlands, and Ireland before a  watered-down version finally passed in 2009 as the Treaty of Lisbon.

“Even in the European Union, the world’s most ambitious international institution, around 90% of lawmaking remains under national control.” French laws mainly govern the owner, crew, and cargo of this barge passing the European Parliament building in Strasbourg.

Critics propose two remedies.  “Sovereigntists” would reassert national  sovereignty, reinforce  domestic control, and block multilateralization of  new issues. “Cosmopolitan democrats” would establish elections, parliaments, and other popular democratic institutions at the global and regional levels. While these criticisms seem intuitively plausible, closer scrutiny reveals important counterarguments.

National institutions impose tight control over international organizations. National governments decide most important questions by consensus,  affording each member government a role in either approving or blocking an action. In nearly all bodies, international officials remain weak and secretariats are small. Each government remains responsible to its population in accordance with domestic law. Citizens in democratic societies can reward or punish their governments for the decisions they take in international organizations, just as they would for any other decision. Issues such as payment of UN dues in the United States, compliance with IMF programs in Argentina, or ratification of a new EU constitution in Britain spark spirited domestic debates.

International institutions expand the scope of democratic choice. In an increasingly interdependent world, the advancement of one country’s national interest increasingly depends on policies adopted by foreign governments. If citizens wish to defend themselves against external enemies, set an effective environmental standard, or protect human rights at home, they must increasingly do so in cooperation with foreigners. International cooperation offers governments a chance to exchange unilateral policy discretion at home for expanded influence over the policies of foreign governments, thereby realizing vital domestic policy objectives that would otherwise be unachievable. A blanket refusal to delegate authority to multilateral institutions, as sovereigntists recommend, would not only be self-defeating, but would also arbitrarily restrict national democratic choice.

International institutions can improve domestic democratic processes. International institutions may be distant, but critics of multilateralism go to the opposite extreme: They idealize local democracy. National elections and other forms of political representation often contain serious biases and flaws, which international institutions can help correct. Even in European countries, where human rights standards are well established, international courts have imposed higher human rights protection in matters such as the death penalty, gay rights, and the right of asylum. Many international institutions help promote democracy. The WTO helps overcome special interest dominance of unilateral trade policy making.

Governments reserve the issues most salient to voters to themselves. Even in the European Union, the world’s most ambitious international institution, around 90 percent of lawmaking remains under national control. These include the most salient issues to citizens: taxing and spending, social welfare provision, health care, pensions, education, law enforcement, local infrastructure, and defense spending. Even at home, we often choose to delegate issues handled by international institutions—such as human rights protection, financial and regulatory policy, nuclear proliferation—to more independent and expert officials and judges. This is as it should be.

If international decisions remain under tight democratic control, why are multilateral institutions so widely perceived as “undemocratic”? In part, this perception reflects the relative unfamiliarity of such institutions and the latent nationalism of publics. But also, many criticisms of “undemocratic” international organizations are advanced by those who are seeking a rhetorical edge in domestic debates about the content of specific decisions. At least critics seem equally divided. The fact that such criticisms appear to come equally from both the left and the right suggests that international organizations are doing something right.

ANDREW MORAVCSIK is Professor of Politics and International Affairs, and Director of the European Union Program, at Princeton University’s Woodrow Wilson School. He has authored over 100 academic publications on European integration, transatlantic relations, international organizations, global human rights, international relations theory, and Asian regionalism. He is Non-Resident Senior Fellow of the Brookings Institution, Contributing Editor of Newsweek magazine, and Book Review Editor (Europe) of Foreign Affairs magazine. His policy experience includes service as an international trade negotiator for the U.S. Department of Commerce, special assistant to the Deputy Prime Minister of the Republic of Korea, and assistant in the press office of the European Commission.

[By John Gerard Ruggie. Part of the series "Global Challenges in 2030"  (Goldstein & Pevehouse), January 2010.]

The international community is still in the early stages of adapting the human rights regime to provide more effective protection to individuals and communities against corporate-related human rights abuses—sweatshop conditions in factories supplying branded global firms; communities forcibly displaced for the benefit of oil and mining companies’ installations; food and beverage firms found with seven-year-old children toiling on their plantations; or collaboration with paramilitary forces accused of killing labor organizers.

Business is the major source of investment and job creation, and markets can be highly efficient means for allocating scarce resources. They constitute powerful forces capable of generating economic growth, reducing poverty, and increasing demand for the rule of law, thereby contributing to the realization of a broad spectrum of human rights. But markets work optimally only if they are embedded within rules, customs, and institutions. Indeed, history teaches us that markets pose the greatest risks—to society and business itself—when their scope and power far exceed the reach of the institutional underpinnings that allow them to function smoothly and ensure their political sustainability. This is such a time, and escalating charges of corporate-related human rights abuses are the canary in the coal mine signaling that all is not well.

“The governance gaps created by globalization . . . provide the permissive conditions for wrongful acts by companies of all kinds.” This 14-year-old from Mali works on a cocoa plantation in Ivory Coast in 2001, providing cheap labor to multinational corporations selling chocolate globally.

The root cause of the business and human rights predicament today lies in the governance gaps— between the scope and impact of economic forces and actors, and the capacity of societies to manage their adverse consequences—created by globalization. These governance gaps provide the permissive conditions for wrongful acts by companies of all kinds without adequate sanctioning or reparation.

Thus, the legal rights of transnational corporations have been expanded significantly over the past generation. This has encouraged investment and trade flows, but it has also created instances of imbalances between firms and states that may be detrimental to human rights. The more than 3,000 bilateral investment treaties currently in effect are a case in point. While providing legitimate protection to foreign investors, these treaties also permit those investors to take host states to binding international arbitration, including for alleged financial damages resulting from the implementation of legislation to improve domestic, social, and environmental standards—even when the legislation applies uniformly to all businesses, foreign and domestic. A European mining company operating in South Africa recently challenged that country’s black economic empowerment laws on these grounds.

At the same time, the legal framework regulating transnational corporations operates much as it did long before the recent wave of globalization. A parent company and its subsidiaries continue to be construed as distinct legal entities. Therefore, the parent company is generally not liable for wrongs committed by a subsidiary, even where it is the sole shareholder, unless the subsidiary is under such close operational control by the parent that it can be seen as its mere agent. Furthermore, despite the transformative changes in the global economic landscape generated by offshore sourcing, purchasing goods and services even from sole suppliers remains an unrelated party transaction in which the buyer is not legally liable for acts conducted by the supplier. Factors such as these make it exceedingly difficult to hold the extended enterprise accountable for human rights harm.

Each legally distinct corporate entity is subject to the laws of the countries in which it is based and operates. Yet states, particularly some developing countries, may lack the institutional capacity to enforce national laws and regulations against transnational firms doing business in their territory even when the will is there, or they may feel constrained from doing so by having to
compete internationally for investment. Home states of transnational firms may be reluctant to regulate against overseas harm by these firms because the permissible scope of national regulation with extraterritorial effect remains poorly understood, or out of concern that those firms might lose investment opportunities or relocate their headquarters. To attract investments and promote exports, governments may exempt national firms from certain legal and regulatory requirements or fail to adopt such standards in the first place.

And what is the result? A study I have conducted surveyed allegations of the worst cases of corporaterelated human rights harm. They occurred, predictably, where governance challenges were greatest: disproportionately in low-income countries; in countries that often had just emerged from or still were in conflict; and in countries where the rule of law was weak and levels of corruption high.

How to narrow and ultimately bridge these global and national governance gaps in relation to human rights is a fundamental governance challenge for the 21st century.

JOHN GERARD RUGGIE is the Berthold Beitz Professor in Human Rights and International Affairs at Harvard’s Kennedy School of Government; Affiliated Professor in International Legal Studies, Harvard Law School; and Special Representative of the United Nations Secretary-General for Business and Human Rights.

[By Beth A. Simmons. Part of the series "Global Challenges in 2030"  (Goldstein & Pevehouse), January 2010.]

International human rights have become a central feature of the international legal system. Governments have formally agreed to a bewildering array of treaties, resolutions, and reporting procedures that make them ever more responsible to each other for the way they treat their own people. They have also participated in the creation of a slew of non-binding “standards” and “understandings” about the nature of their human rights agreements. Some even allow their citizens to complain to specific international “oversight bodies” if they feel there has been a violation of the rights guaranteed by treaty. Figure 1 shows the proliferation of these regimes since World War II. Occasionally, some governments even take the views of these bodies seriously.

There is something puzzling about this state of affairs. Why should governments agree among themselves to respect the rights of their own citizens? For much of the 20th century, citizens’ rights were simply considered a domestic problem, beyond the competence of the international community to inquire. This is certainly no longer the case. Formal international rights accountability is probably stronger now than it has ever been at any other moment in history.

The challenge for the future will be to bring actual practices more in line with the promises outlined in international treaties. Despite the fact that the Universal Declaration of Human Rights says that every person is “entitled to realization . . . of the economic, social and cultural rights indispensible for his dignity . . . ,” about 3 billion people worldwide live on less than $2.50 per day. Despite the fact that 165 countries have ratified the International Covenant on Civil and Political Rights, which provides a right “to vote and to be elected at genuine periodic elections . . . guaranteeing the will of the electors,” probably no more than half the world’s population can really exercise such a right. Even though 186 countries have ratified the Convention on the Elimination of Discrimination Against Women (CEDAW), guaranteeing  nondiscrimination in employment, on average the women of the world earn only 60–70 percent of what men earn for equivalent work.

None of this means that international law has failed. In fact, some research shows that many of the most important treaties, including those discussed above, have made important contributions to better rights practices in the countries that have ratified them. But it does mean that there is no automatic correspondence between principles and practice. How can governments be encouraged to take human rights—and their obligations—more seriously?

One possibility is to strengthen international enforcement of these norms. One could start by making the United Nations a more credible body in this regard. The main forum for handling rights abuses at the United Nations has been the Human Rights Commission, but it was rightly criticized as terribly political and staffed by representatives from countries that had terrible rights records. Some improvements have been made with the new Human Rights Council, but do states really have incentives to be their brother’s keepers?

Some think that countries with a real commitment to human rights should take enforcement into their own hands by imposing economic conditionality. To a certain extent, this is already happening. The U.S. Congress, for example, can withhold foreign assistance if rights practices are unsatisfactory. The European Union conditions membership on acceptance of high rights standards, and even tries to extend its influence to trading partners outside the region through its so-called “democracy clauses” attached to trade agreements. While these kinds of sanctions can be applied to the smaller states, it is hard to imagine  applying such a strategy to China. Furthermore, imposing economic sanctions can hurt the people you are trying to help, sometimes as much as the repressive government does itself.

Perhaps human rights cannot be enforced from the outside. Perhaps people around the world should simply be encouraged to use international norms to fight their own domestic rights battles, in ways they see as appropriate, and according to their own priorities. This approach has already led to important improvements in rights practices for countries that have had some experience with or are transitioning to accountable government, but it may offer little hope for those living in the most oppressive regimes in the world. The unfortunate truth of the matter is that in some countries, to demand your rights is to invite a crushing reaction from a ruthless regime.

Addressing human rights violations worldwide is a long-term project. It probably cannot be solved in isolation from the other major human endeavors of the last century: finding a way to curb poverty, ending widespread civil and international violence, and implementing stable and accountable systems of governance. But none of these projects will be complete without the recognition that individuals have inviolable rights that must be recognized, protected, and even promoted by their governments.

BETH SIMMONS is Clarence Dillon Professor of International Affairs and Director of the Weatherhead Center for International Affairs at Harvard University. Her new book is entitled Mobilizing for Human Rights: International Law in Domestic Politics (Cambridge University Press, 2009). Simmons was elected in April 2009 to the American Academy of Arts and Sciences.