Section 1.

Structural Changes in the Postwar

International Order

1. Changes in the International Order

(1) Changes in the Soviet Union and Europe

(a) The Soviet Union
The rapid changes currently taking place in the international situation
are in part the culmination of long years of structural changes and global
developments. Yet the undisputed direct cause triggering the recent changes
in East-West relations has been the Soviet Union, particularly the leadership
exercised by President Gorbachev, the domestic reforms that he has pursued
(perestroika and glasnost), and the so-called "new thinking" in Soviet
foreign policy.
It is well known that President Gorbachev has undertaken these reforms
in the Soviet Union out of reflection about the conspicuous sluggishness in
the Soviet economy, the corruption and bureaucratic rigidity that have led to
economic stagnation, the economic distortions introduced by the huge
weight of military spending, and other problems. At the same time this
Soviet decision to embark upon reforms was also prompted in large part by
the solid diplomatic and defense efforts of the United States and other
Western countries, and the evident economic development achieved by the
West.
The reforms being promoted by President Gorbachev include increasing
public access to information, abandonment of the constitutional principle of
Communist Party rule, activization of the Soviet Parliament, and social
democratization, and these changes have them-selves contributed
considerably to the freeing of East-West relations from ideology-based
discord. However, the democratization and liberalization that have been
encouraged in the name of perestroika and glasnost have also brought a
number of serious domestic problems to the surface, including the moves
for independence in the Baltic countries, the declarations of sovereignty
adopted by the Russian Republic and a number of other republics, the
flaring of ethnic rivalries in an umber of areas the drift toward a split in the
Communist Party, and dissatisfaction within the military against insufficient
budget. Yet most serious of all are the grim economic difficulties currently
facing the Soviet Union.
Secretary General Gorbachev was installed as President as a result of
changes in the Soviet Constitution and outwardly appears to have
consolidated his grip on power, but his administration still faces many very
difficult problems, and this in itself is one of the factors making it difficult
to predict what will happen in international relations.
(b) Eastern Europe
The countries of Eastern Europe were the scene of 1989's most dramatic
moments. Among the factors behind these changes were dissatisfaction at
having been dominated by the Soviet Union for so long, frustration with the
suppression of civil liberties and the stagnation of their economies under
Communist rule, and popular discontent with the vast gap that had opened
up between their own standards of living and those in the industrialized
democracies. It should be noted in passing that television played a major
role both in giving rise to these changes and in spreading the tide of change.
Another factor encouraging the impetus for reform in Eastern Europe
was that domestic reforms have been continued in the Soviet Union, and
that the Soviet Union took a hands-off position because of the "new
thinking" in Soviet foreign policy.
With the moves for democratization in Eastern Europe, free elections
have been held, governments have been installed having a democratic
power base, and it seems that there can be no turning back to the old regime,
although the transformation to market economies will demand long-term
efforts. Because the policies to promote this transformation of the economic
structures must be basically tight policies with frugality on both the fiscal
and the financial sides, and because these policies will necessarily entail
unemployment, bankruptcies, and other economic difficulties, it is clear that
economic reforms may well prove very difficult even for popularly elected
new governments. At the same time, long-suppressed ethnic rivalries are
already heating up. Thus it is essential that these countries be supported so
that there is no turning back in their efforts to introduce democracy and
market economies, this being essential not only for European stability but
for the stable development of the entire international community.
Indeed, this realization underlay the 1989 Arch Summit's decision to
extend support to Poland and Hungary, the subsequent establishment of the
European Bank for Reconstruction and Development, the decision in the
Group of 24 for Economic Assistance to Central and Eastern European
Countries (G-24) ministerial-level meeting on support for the East European
countries to expand the number of countries eligible for such assistance, and
the Houston Summit's support for thisG-24 decision. At the same time,
Japan has resolved to play an activerole in these support measures because
of the realization that by doing so is part of Japan is making an effort to
fulfill its responsibilities and play its due role in the international
community.
(c) German Unification
German unification is another one of the biggest changes to come out of
the whirlwinds of 1989. In July 1990 the two Germanys achieved currency,
economic, and social union and full unification will be realized on October
3 when East Germany joins West Germany.
German unification is bound to have a major impact not only on the
situation in Europe but on worldwide political and economic situations.
Already Europe has begun discussing the ramifications of German
unification from a variety of perspectives, including unified Germany's
relationship with the North Atlantic Treaty Organization (NATO), the
strengthening of political integration within the European Community (EC),
and the strengthening of the Conference on Security and Cooperation in
Europe (CSCE).
On unified Germany's relations with NATO, the Soviet Union agreed to
have unified Germany remain in NATO after the July 1990 NATO Summit
Meeting's appeal to Warsaw Pact member countries as explained later and
the various German initiatives toward the Soviet Union.
One other difficult problem accompanying German unification was that
of the border between Germany and Poland, and on this issue it was agreed
that post-unification Germany and Poland would conclude a treaty in which
both countries pledged to maintain their current borders unchanged.
(d) Building New International Relations in Europe
With the democratization in Eastern Europe and the start of the withdrawal
of Soviet forces, the Warsaw Pact's military significance has been greatly
diminished. At the same time, with the enhanced independence claimed by
the countries of Eastern Europe, the Warsaw Pact is also losing political
significance. In addition, with many of the East European countries hoping
for associate membership in the EC and the expectation that trade among
the Communist Economic Conference (COMECON) members, including
the sale of oil and other resources from the Soviet Union, will be conducted
at international prices starting in 1991 the basic meaning of the COMECON
arrangement is being undone.
In dealing with these changes in the security climate, as well as to create
conditions in which the Soviet Union could condone having unified
Germany remain in NATO, NATO has conducted a review of its role and
strategy. The declaration issued by the July 1990 NATO Summit Meeting
was in line with President Bush's early proposals in providing for enhancing
NATO's political component, in proposing a joint declaration of non-
aggression between the NATO countries and the Warsaw Pact countries,
and in other innovations emphasizing the desirability of structuring "new
partnerships" between East and West in line with a "new, promising era." At
the same time, however, this declaration was explicit on the need for
deterrent policy to use a mix of nuclear and conventional weapons and for
the United States to maintain a presence in Europe to contribute to the
maintenance of European peace and stability, thus reaffirming that there
was no change in NATO's basic strategy.
Consistent with these moves to create a new order for European
security, there have also been a number of proposals made on strengthening
the CSCE. While the United States and the West European countries
contend that the CSCE cannot substitute for NATO in the security field, it is
increasingly argued that the CSCE, as a pan-European forum with a broad
membership ranging from the United States and Canada to the Soviet Union
and Eastern Europe and also including the neutral countries of Europe,
should be able to play some role for European stability, and it is expected
that the CSCE will be strengthened and probably institutionalized to some
extent.
 One of the other major developments in the move for the formation of a
new order in Europe is that of EC political integration. Along with the
movement for market integration by 1992, France and other countries are
stepping up their efforts to promote and accelerate EC political integration
in light of German unification. For the future, it is expected that the EC will
be the political and economic core of Europe and that, drawing in the
European Free Trade Association (EFTA) and the countries of Eastern
Europe, will have a decisive say in the formation of a new European order.

(2) American-Soviet Relations

Closely linked to these changes in Europe, American-Soviet relations have
also developed in new directions over the past year. With the impetus of the
December 1989 Malta Summit, American-Soviet relations have transcended
the Cold War approach and are moving toward a new relationship in which
the two countries search for a new international order in the spirit of
dialogue and cooperation. The May 1990 Washington Summit was a
continuation of this process and reached agreement on a number of issues,
including agreement in principle on the Strategic Arms Reduction Talks
(START) providing for the first massive reduction in nuclear arsenals in
history. There is also a heightening momentum for the United States and the
Soviet Union to take initiatives and to cooperate in the solution of regional
conflicts.

(3) Regional Conditions

The impact of the changes in the Soviet Union and Eastern Europe is
also evident in conditions elsewhere. For example, the abandonment of the
dictatorship of the Communist Party in the Soviet Union and Eastern
Europe and the provision made to tolerate political pluralism has had a
major impact on other countries that had maintained similar political
systems. Likewise, as the Soviet Union and the countries of Eastern Europe
seek for diplomatic relations with a wider range of countries, they are also
reevaluating their military and economic assistance to fraternal countries. In
addition, the popular demand for democracy is growing louder in an ever-
increasing number of countries.
 Conflicts grounded in the ideological rift between East and West are
being defused and, as noted above, the United States and the Soviet Union
are starting to take concerted action for the solution of regional conflicts and
there has been considerable activization of the United Nations'
peacekeeping and other activities. This trend has been conspicuous in the
moves by the United States and the Soviet Union behind attainment of the
independence of Namibia and peace in Nicaragua through the efforts by the
United Nations, the U.S.-Soviet joint criticism of Iraq for its invasion of
Kuwait, their Summit Meetings, and the adoption of the United Nations
Security Council resolutions establishing sanctions against Iraq.
Nevertheless, there has been no abatement in regional conflicts based upon
religious differences, ethnic rivalries, historical territorial disputes, or other
causes, and the possibility of new outbreaks of conflicts remains
undiminished.

(4) The World Economy

Helped by the greater interdependence accruing as a result of the rapid
developments in information and communications technologies as well as
by the coordination of international financial trade and macroeconomic
policies in the Summit Meetings and other gatherings, Japan, the United
States, and the EC are enjoying the longest postwar expansion in history and
the world economy is continuing to do very well.
However the free trade system that underlies this development is facing
major changes on two fronts. First is the way trade and investment patterns
have changed with the globalization of corporate activity, the expansion in
service trade the increase in direct overseas investment, and other
developments; and second is the structural change in the world economic
structure with the progress made toward EC integration by 1992, the
economic reforms in the Soviet Union and East European countries, and the
emergence of the dynamic Asian economies (DAEs). (Note)
There is also cause for concern in the world economy. For example, the
massive external imbalances persist between nations and the rising tide of
protectionism as seen in the drift toward unilateralism epitomized by the
Super 301 clause of the Omnibus Trade Act and the existence of
regionalism that could easily turn into the formation of economic blocs both
pose major challenges to the free and multilateral trading system under the
General Agreements on Tariffs and Trade (GATT). At the same time, there
are calls for further promoting policy coordination among the leading
nations in an effort to reduce the external imbalances and to promote stable
world economic development.
In seeking to respond to this situation, it is important both that all
countries make appropriate contribution from a global perspective and that
greater efforts be made for international coordination. Specifically, it is
indispensable that all countries cooperate in adept policy management to
ensure non-inflationary and sustained growth for the world economy and
work on policy issues such as reducing the external imbalances, stemming
protectionism, generally maintaining and strengthening the free and
multilateral trading system for the 21stcentury. It is of the highest priority
for the world economy that the GATT Uruguay Round negotiations
scheduled to be concluded by the end of 1990 be successfully concluded.

2. Developments in the Asia-Pacific Region

(1) The recent changes in the Soviet Union and the radical changes in
Europe since 1989 have also had an impact on the Asia-Pacific region. The
improvement in Sino-Soviet relations, the start of the Soviet military
withdrawal from Mongolia and Cam Ranh Bay, the summit meeting
between the Republic of Korea and the Soviet Union, and the
democratization in Mongolia are all related, directly or indirectly, to the
changes in the Soviet Union and Fastern Europe.
Yet the Soviet occupation of Japan's Northern Territories, a result of the
same Soviet expansionism that sparked the Cold War, continues, and in the
Korean Peninsula, having felt very strongly the impact of postwar East-
West relations, the confrontation between North and South remains. In
addition, although it is not directly related to East-West relations, there is no
solution yet in sight for the Cambodian problem, a major source of anxiety
for Southeast Asia. In Southwest Asia, there are fears of an escalation in the
conflict between India and Pakistan over Kashmir.
 At the same time, while there has been some reduction in Soviet
military forces in Asia and the Far East, the Soviet Union persists in
modernizing its military systems and retains a massive military capability,
including its nuclear force.

(2) The socialist countries of Asia have responded in different ways to the
changes taking place in the Soviet Union and Eastern Europe, and there is
no unformity of direction such as is seen in the Soviet Union and Eastern
Europe. As a result of the rapidly escalating demands for democratization in
Mongolia, there was a change in party leadership, a shift to a plurality of
parties, and major opposition gains in the Small Khural elections in July
1990. However, other countries have tended to clamp down internally.
The Chinese leadership, while maintaining that reforms and the open-
door policy are unchanged, has made the maintenance of domestic stability
its priority and is emphasizing political and ideological education and
stressing the relationship between the party and the masses. In its foreign
relations China has reaffirmed anew the Five Principles for Peaceful
Coexistence as governing its relations with other countries and is making a
multifaceted diplomatic effort centering on the developing countries. At the
same time, moves have been made that would seem to be taking Western
opinion into account, including the lifting of martial law and the freeing of
demonstrators.
North Korea is said to be increasingly apprehensive about the changes
in the Soviet Union and Eastern Europe and feeling increasingly isolated as
a result of the Summit Meeting between the Soviet Union and the Republic
of Korea. While there have been calls for North-South dialogue, and the
remains of some American soldiers have been returned, there are no clear
signs of any major change in their foreign policy.
Vietnam and Laos took the lead in promoting economic openness and
other reforms even before the changes in Eastern Europe. However both of
these countries are still very cautious about implementing political reforms.

(3) Faced with massive fiscal deficits, the United States has started to work
on plans to gradually adjust its forces in Japan and elsewhere in East Asia.
While the United States maintains that there is no change in its position to
fulfill its responsibility for the stability of the region as a Pacific country by
pursuing both a forward deployment strategy and by maintaining security
treaties with the other countries of the region, it is expected to be
increasingly insistent that its allies "share the burden" to maintain this
military presence.
In May 1990, the United States government started negotiating with the
government of the Philippines on maintaining the U.S. bases in that country.
These bases in the Philippines are extremely important to U.S. military
operations in the Asia-Pacific region, and the outcome of these negotiations
is expected to have a major impact upon the American presence in this
region.

(4) As epitomized by the fact that Pacific trade exceeded Atlantic trade in
1985, the flow of goods, services, and capital in the Asia-Pacific region has
now become vital to world economic growth. In 1989, the developing
countries of this region achieved 5.1% growth, well in excess of the world
average of 3.0% (Note) and once again demonstrating why it has been said
that the 21st century will be the Asia-Pacific century. This development was
sustained by the Asian newly industrializing economies (Asian NIEs) - the
Republic of Korea, Hong Kong, Taiwan, and Singapore - and the members
of the Association of Southeast Asian Nations (ASEAN). The region's rapid
growth has been helped considerably by the fact that these economies have
attracted direct investment and expanded their trade in accordance with
market principles.
At the same time, these economies' own development bas been helped
by the existence of a vast and open American market and by assistance
direct investment, and technology transfer from Japan.
The Asia Pacific Economic Cooperation (APEC) ministerial-level
meeting made a start in November 1989 to facilitate exchanges among these
economies and to further promote their development. At its second meeting,
in Singapore in July 1990, APEC announced its determination to do more to
promote and expand intraregional cooperation.
The China-Japan Rivalry
Renewed: Will Asia's Geopolitical
Balance Shift Once Again?
Forty years after China and Japan first commenced normalized diplomatic
relations, a group of islands – known as Diaoyu and Senkaku respectively – is
now threatening to reignite past rivalries, including both nations’ claims to
geopolitical power in the region. Behind the dispute lies several considerations,
including handling internal and international political relationships, which both
countries must now resolve in order to avoid a military conflict.

September 29 will mark 40 years of normalized diplomatic relations between

China and Japan, two countries that spent much of the 20th century in mutual
enmity if not at outright war. The anniversary comes at a low point in Sino-
Japanese relations amid a dispute over an island chain in the East China Sea
known as the Senkaku Islands in Japan and Diaoyu Islands in China.

These islands, which are little more than uninhabited rocks, are not particularly
valuable on their own. However, nationalist factions in both countries have used
them to enflame old animosities; in China, the government has even helped
organize the protests over Japan's plan to purchase and nationalize the islands
from their private owner.

Contest for East Asian Supremacy

China is struggling with the new role of the military in its foreign relations, while
Japan is seeing a slow re-emergence of the military as a tool of its foreign
relations. China's two-decade-plus surge in economic growth is reaching its
logical limit, yet given the sheer size of China's population and its lack of
progress switching to a more consumption-based economy, Beijing still has a
long way to go before it achieves any sort of equitable distribution of resources
and benefits. This leaves China's leaders facing rising social tensions with fewer
new resources at their disposal. Japan, after two decades of society effectively
agreeing to preserve social stability at the cost of economic restructuring and
upheaval, is now reaching the limits of its patience with a bureaucratic system
that is best known for its inertia.

Both countries are seeing a rise in the acceptability of nationalism, both are
envisioning an increasingly active role for their militaries, and both occupy the same
strategic space. With Washington increasing its focus on the Asia-Pacific region,
Beijing is worried that a resurgent Japan could assist the United States on
constraining China in an echo of the Cold War containment strategy.
We are now seeing the early stage of another shift in Asian power. It is perhaps
no coincidence that the 1972 re-establishment of diplomatic relations between
China and Japan followed U.S. President Richard Nixon's historic visit to China.
The Senkaku/Diaoyu islands were not even an issue at the time, since they were
still under U.S. administration. Japan's defence was largely subsumed by the
United States, and Japan had long ago traded away its military rights for easy
access to U.S. markets and U.S. protection. The shift in U.S.-China relations
opened the way for the rapid development of China-Japan relations.
The United States' underlying interest is maintaining a perpetual balance
between Asia's two key powers so neither is able to challenging Washington's
own primacy in the Pacific. During World War II, this led the United States to lend
support to China in its struggle against imperial Japan. The United States' current
role backing a Japanese military resurgence against China's growing power falls
along the same line. As China lurches into a new economic cycle, one that will
very likely force deep shifts in the country's internal political economy, it is not
hard to imagine China and Japan's underlying geopolitical balance shifting again.
And when that happens, so too could the role of the United States.

Cold War Renewed With A

Vengeance While Washington Again
Lies — Paul Craig Roberts
The Cold War made a lot of money for the military/security complex for four decades
dating from Churchill’s March 5, 1946 speech in Fulton, Missouri declaring a Soviet
“Iron Curtain” until Reagan and Gorbachev ended the Cold War in the late 1980s.
During the Cold War Americans heard endlessly about “the Captive Nations.” The
Captive Nations were the Baltics and the Soviet bloc, usually summarized as “Eastern
Europe.”

These nations were captive because their foreign policies were dictated by Moscow,
just as these same Captive Nations, plus the UK, Western Europe, Canada, Mexico,
Columbia, Japan, Australia, New Zealand, South Korea, Taiwan, the Philippines,
Georgia, and Ukraine, have their foreign policies dictated today by Washington.
Washington intends to expand the Captive Nations to include Azerbaijan, former
constituent parts of Soviet Central Asia, Vietnam, Thailand, and Indonesia.
During the Cold War Americans thought of Western Europe and Great Britain as
independent sovereign countries. Whether they were or not, they most certainly are not
today. We are now almost seven decades after WWII, and US troops still occupy
Germany. No European government dares to take a stance different from that of the US
Department of State.

Not long ago there was talk both in the UK and Germany about departing the European
Union, and Washington told both countries that talk of that kind must stop as it was not
in Washington’s interest for any country to exit the EU. The talk stopped. Great Britain
and Germany are such complete vassals of Washington that neither country can
publicly discuss its own future.

When Baltasar Garzon, a Spanish judge with prosecuting authority, attempted to indict
members of the George W. Bush regime for violating international law by torturing
detainees, he was slapped down.

In Modern Britain, Stephane Aderca writes that the UK is so proud of being

Washington’s “junior partner” that the British government agreed to a one-sided
extradition treaty under which Washington merely has to declare “reasonable suspicion”
in order to obtain extradition from the UK, but the UK must prove “probable cause.”
Being Washington’s “junior partner,” Aderca reports, is an ego-boost for British elites,
giving them a feeling of self-importance.
Under the rule of the Soviet Union, a larger entity than present day Russia, the captive
nations had poor economic performance. Under Washington’s rule, these same
captives have poor economic performance due to their looting by Wall Street and the
IMF.

As Giuseppe di Lampedusa said, “Things have to change in order to remain the same.”

The looting of Europe by Wall Street has gone beyond Greece, Italy, Spain, Portugal,
Ireland and Ukraine, and is now focused on France and Great Britain. The American
authorities are demanding $10 billion from France’s largest bank on a trumped-up
charge of financing trade with Iran, as if it is any business whatsoever of Washington’s
who French banks choose to finance. And despite Great Britain’s total subservience to
Washington, Barclays bank has a civil fraud suit filed against it by the NY State Attorney
General.

The charges against Barclays PLC are likely correct. But as no US banks were charged,
most of which are similarly guilty, the US charge against Barclays means that big
pension funds and mutual funds must flee Barclays as customers, because the pension
funds and mutual funds would be subject to lawsuits for negligence if they stayed with a
bank under charges.

The result, of course, of the US charges against foreign banks is that US banks like
Morgan Stanley and Citigroup are given a competitive advantage and gain market share
in their own dark pools.
So, what are we witnessing? Clearly and unequivocally, we are witnessing the use of
US law to create financial hegemony for US financial institutions. The US Department of
Justice (sic) has had evidence for five years of Citigroup’s participation in the fixing of
the LIBOR interest rate, but no indictment has been forthcoming.

The bought and paid for governments of Washington’s European puppet states are so
corrupt that the leaders permit Washington control over their countries in order to
advance American financial, political, and economic hegemony.

Washington is organizing the world against Russia and China for Washington’s benefit.
On June 27 Washington’s puppet states that comprise the EU issued an ultimatum to
Russia.The absurdity of this ultimatum is obvious. Militarily, Washington’s EU puppets
are harmless. Russia could wipe out Europe in a few minutes. Here we have the weak
issuing an ultimatum to the strong.

The EU, ordered by Washington, told Russia to suppress the opposition in southern and
eastern Ukraine to Washington’s stooge government in Kiev. But, as every educated
person knows, including the White House, 10 Downing Street, Merkel, and Holland,
Russia is not responsible for the separatist unrest in eastern and southern Ukraine.
These territories are former constituent parts of Russia that were added to the Ukrainian
Soviet Republic by Soviet Communist Party leaders when Ukraine and Russia were two
parts of the same country.

These Russians want to return to Russia because they are threatened by the stooge
government in Kiev that Washington has installed. Washington, determined to force
Putin into military action that can be used to justify more sanctions, is intent on forcing
the issue, not on resolving the issue.

What is Putin to do? He has been given 72 hours to submit to an ultimatum from a
collection of puppet states that he can wipe out at a moment’s notice or seriously
inconvenience by turning off the flow of Russian natural gas to Europe.

Historically, such a stupid challenge to power would result in consequences. But Putin is
a humanist who favors peace. He will not willingly give up his strategy of demonstrating
to Europe that the provocations are coming from Washington, not from Russia. Putin’s
hope, and Russia’s, is that Europe will eventually realize that Europe is being badly
used by Washington.

Washington has hundreds of Washington-financed NGOs in Russia hiding behind

various guises such as “human rights,” and Washington can unleash these NGOs on
Putin at will, as Washington did with the protests against Putin’s election. Washington’s
fifth columns claimed that Putin stole the election even though polls showed that Putin
was the clear and undisputed winner.

In 1991 Russians were, for the most part, delighted to be released from communism
and looked to the West as an ally in the construction of a civil society based on good
will. This was Russia’s mistake. As the Brzezinski and Wolfowitz doctrines make clear,
Russia is the enemy whose rise to influence must be prevented at all cost.

Putin’s dilemma is that he is caught between his heart-felt desire to reach an

accommodation with Europe and Washington’s desire to demonize and isolate Russia.

The risk for Putin is that his desire for accommodation is being exploited by Washington
and explained to the EU as Putin’s weakness and lack of courage. Washington is telling
its European vassals that Putin’s retreat under Europe’s pressure will undermine his
status in Russia, and at the right time Washington will unleash its many hundreds of
NGOs to bring Putin to ruin.

This was the Ukraine scenario. With Putin replaced with a compliant Russian, richly
rewarded by Washington, only China would remain as an obstacle to American world
hegemony.

MNCs as governing Actors have long been able to make decisions and influence
decision-making in the international arena.
Most of the international economic and political space is largely ‘governed’ by the firms
in a given sector or geographic region. The enterprises make an enormous number of
decisions that affect the distribution of vital needs (e.g. the prices and quantities of food
supplies); set payments for labor (e.g. the push to drive wages down between different
jurisdictions); determine what products are traded in the market (e.g. the selection of
products to manufacture and their technical standards); and that create de facto local
governance arrangements (e.g. export processing zones and communities affected with
the natural resource “curse”). The net result is that control of international markets,
unlike domestic markets, remains outside any state (or inter-governmental) intervention.
In this context, GRI recognizes that if MNCs are not involved in the process of
international negotiations, the outcome of those negotiations is unlikely to be accepted
by these dominant Actors. Unlike national political processes whereby the state can
exercise regulatory authority, at the international level MNCs do not recognize an
obligation to follow interstate decisions or declarations. If MNCs are just passive non-
participants, an intergovernmental agreement or declaration may be just words on a
piece of paper, further discrediting the existing international community. The lack of
recognition by the intergovernmental community of the governance power of
multinational corporations may well be contributing to its own weakening. MNCs may
well have the final 'vote' on an intergovernmental outcome in the sense that they can
obstruct (actively or passively) its implementation. 1
In recent decades, the traditional source of government finance to implement
international decisions has eroded at the national level. The 1960s set target of 0.7% of
GDP toward development has been not been attained by most OECD countries. In the
past three decades, the range of acknowledged actions at the international level that
need significant funding has expanded exponentially. The new funding demands are
wildly expensive; it is often not even possible to estimate the order of magnitude of
outlays for a reasonable response to climate adaptation, mass population migrations,
Millennium Development Goals, or ocean degradation. The net effect is that MNCs and
private foundations have become the prime source of funding for new intergovernmental
programs. This is only possible if, of course, they agree with the proposed
intergovernmental projects and programs.
One example of this shift in financial realities is the 2009 climate financing
‘commitment.' At the Copenhagen climate conference, some key OECD Governments
declared 2 that there should be $10 billion per year available for climate-related costs
for the 2010-2012 period and $100 billion per year from 2020 onwards. The OECD
nation-states endorsed this level of funding with the ‘understanding’ that a significant
portion will come, not from their official development assistance budgets, but from the
resources of willing multinationals and other donors. WEF’s perspective is that this half
recognized reality should become a fully recognized reality by the international
community, by nation-states and the UN system.
The WEF approach diverges in a number of ways from that of the International
Chamber of Commerce, the World Business Council for Sustainable Development, and
other international business associations. WEF argues explicitly that MNCs have
already become crucial Actors in global governance. It points out that MNCs cannot
pretend that they are simply overgrown national enterprises or that they are not able to
make or break international agreements. This is a marked departure from the position of
old line business trade organizations as well as from the views expressed in
mainstream political economy and governance discussions.
WEF argues that if leading MNCs were inside the formal international decision-making
machinery, these firms may well be able to craft an outcome that will not produce
passivity or objections from other MNCs. In short, WEF wants to use the recognition of
the de facto MNC 'vote' on intergovernmental decisions to get MNCs institutionalized as
members of the formal governance system.