Originally published on the CGS blog on February 15, 2016.
Nestlé’s report on harmful labor practices in Thailand’s seafood industry has recently gained public attention. While many may admire the company’s transparency regarding this, it’s worth noting that Nestle is also fighting a U.S. Supreme Court lawsuit for its alleged use of child slaves in the Ivory Coast. This is all taking place as the European Union drafts legislation requiring multinationals to disclose profits and taxes paid in member countries as an attempt to combat corporate tax avoidance.
Representing a large portion of global trade and an even larger portion of the world’s GDP, multinational corporations (MNCs) are the ideal depiction of globalization and free trade. And while we may all agree these things are great, supply-chain slavery, aggressive tax planning, and other harmful corporate practices continue to be a despicable reality in the global economy.
The capitalist economic model is built on the notion of free markets unregulated by states. Often idolized as the vehicle for economic fluidity, capitalism is so geared toward business retention and expansion that it avoids market regulation at all costs. The essential permanence of labor and human rights abuses at the hands of multinationals, as well as practices such as profit shifting and transfer pricing, desperately call for intervention. While it is understandable that too much regulation may hurt business growth, the total lack of market regulation leaves millions vulnerable to the often arbitrary and destructive corporate practices that have become a venomous norm.
The time has come to establish a fair global financial system, not just a functioning one
The International Criminal Court addresses individuals, and the International Court of Justice addresses states; yet multinational corporations seemingly run rampant in the global market, free from regulation and accountability. MNCs aren’t just harming individuals in vulnerable communities, but the governments and economies of states as well. A 2013 Congressional Research Service report found that the annual revenue loss for the United States alone as a result of aggressive tax planning ranged from $30 to $90 million. One can only imagine the damage tax avoidance can cause for smaller, developing economies, reinforcing inequality as multinationals run off toward the sunset with billions in tote.
There is a blatant lack of authority and accountability surrounding MNCs. Yet the endless worship of economic growth and free trade deter state actors from addressing the evident need for structural reform in the global market.
Multinationals must not only operate within the law, but with a sense of accountability regarding the critical role they play in the face of labor and human rights and developing economies globally. With the Trans-Pacific Partnership currently securing itself into reality despite inherent inequities built into the agreement such as the death clause, which threatens to worsen the already soaring prices of pharmaceuticals, and the overall avoidance of prioritizing climate change and improving labor conditions globally–it is evident that economic gain continues to take priority over basic human rights and economic justice.
As a global community we can no longer turn a blind eye to the obvious need for conceptual, practical, and sustainable approaches to addressing corporate lawlessness. This is something that requires a collaborative approach on behalf of states, intergovernmental organizations, and nongovernmental organizations for the sake of humanity, the environment, and developing economies globally. We can no longer allow the autonomy of multinationals to shape the terms of engagement in international trade. From both a human rights and an economic perspective, structural reform can no longer be avoided.
