Global firms need codes, not lawsuits

As the International Monetary Fund and World Bank gather for their annual meeting this week in Prague, they will be joined by another group that is becoming a fixture at global gatherings such as this: thousands of protesters.

Some are marching to support the rights of workers in developing countries, some to protect human rights and the environment. But even as some activists are winning support from politicians and reforms from businesses, others may be endangering these gains by targeting multinational corporations and the foreign investments they provide.

In one of the biggest recent victories for reformers, 45 multinational corporations last month entered into a UN-sponsored Global Compact, pledging to follow nine principles of corporate conduct in human rights, labor, and the environment. On a smaller scale, McDonald's announced last month that it would require the farmers who supply it with 1.5 billion eggs annually to adopt more humane methods of raising hens.

Political leaders, too, have begun demanding that corporations take responsibility. The Clinton administration has been boosting its "model business principles" - another corporate code of conduct - as one of the hallmarks of its human rights policies. Al Gore's acceptance speech before the Democratic convention urged: "We must set standards to end child labor, to prevent the exploitation of workers and the poisoning of the environment. Free trade can and must be ... a way to lift everyone up, not bring anyone down to the lowest common denominator."

Despite this progress, some activists are not content with incremental steps toward corporate reform. Rather, they want wholesale labor, human rights, and environmental changes, not just by multinational companies but by foreign countries as well. If they can't deter bad behavior and achieve reforms immediately, these activists would rather see companies abandon parts of the developing world and deprive the offending countries of desperately needed foreign capital.

For example, activists opposed to particular regimes are trying to drive multinational companies out of those countries by filing lawsuits. Such lawsuits have been filed in American courts against energy companies doing business in Burma and Nigeria, alleging complicity in the human rights violations of those countries.

Last month, a federal judge in California ruled in favor of Unocal and the other defendants, despite finding that the company knew the Burmese military was brutally forcing villagers to work on a pipeline co-owned by Unocal - the legal equivalent, the court held, of modern-day slavery.

If the appellate court reverses the district court, Unocal may yet be held liable. But the goal of the plaintiffs was not just to compensate the victims or even punish Unocal; it was also to drive Unocal and other foreign corporations out of Burma. According to the district court's decision, one prominent human-rights group told the company point blank that it could not condone any investment in Burma because of the regime's pervasive practice of forced labor.

Is it really in the US interest, or even that of the developing world, for self-appointed activists to use US courts to influence which countries benefit from foreign investments and which are deprived of such capital?

Ironically, the Supreme Court last term struck down a Massachusetts law that prohibited its state agencies from contracting with companies that do business in Burma because the state law interfered with a federal statute that already imposed economic sanctions on Burma.

Should activists be able to erect a de facto boycott by means of federal lawsuits when the Commonwealth of Massachusetts cannot?

The truth is, although companies can be pressured into refraining from certain actions themselves, corporations rarely can achieve wholesale changes in a country's policies or laws.

Activists must ask whether it really advances the cause of worker rights to sue an oil company whose joint venturer, a Middle Eastern country, does not afford women equal rights in the workplace. And what ultimate good will it do to sue a company doing business in the People's Republic of China when Chinese workers can't organize freely because independent labor unions are banned?

While it's sometimes counterproductive to sue via US courts to deprive certain foreign regimes of investment capital, a growing hostility toward the overseas investments of multinational corporations poses an even greater danger to the people of the developing world.

To be sure, a recent World Bank report casts significant doubt upon the success thus far of free trade, foreign capital, and technology transfers to help the plight of the developing world's poorest people. But the failure of some countries to share their increased wealth with their neediest citizens does not mean foreign investments must necessarily hurt the poor.

Of course, no laborer should have to toil in an unsafe factory; no woman should have to endure demeaning or exploitative conditions in order to keep a job; and no child should have to labor under any circumstances. A growing body of international law forbids these practices.

But those people who see globalization and multinational corporations as inherently exploitative of workers and the environment rarely stop to consider the alternatives for workers in these foreign corporations. They should see what it's like to spend 12-hour days pushing a plow behind a water buffalo while walking knee-deep in stagnant water that's home to malarial mosquitoes.

There are reasons why people throughout the world are abandoning their traditional ways of life in favor of factory jobs, just as Americans did during the early 20th century.

If this week's protesters in Prague want corporations and politicians to continue with reforms, then realistic goals - not wholesale rejection of foreign investment -will be the key.

-- Peter C. Choharis practices international law at Mayer, Brown & Platt, in Washington.

(c) Copyright 2000. The Christian Science Publishing Society