Issue 2
October 1998

THE GENEVA BUSINESS DIALOGUE

Business, WTO and UN:
Joining Hands to Regulate the Global Economy?

Deep concerns about the emerging global economic crisis dominated the discussions of the 450 business leaders from across the world who met with representatives of international organizations in Geneva at the end of September. Captains of industry from the largest corporations on earth, businessmen from Third World countries and various political leaders agreed on the need to regulate hot money' flows, counter globaphobia' and establish a global framework for managing globalization'. Sensing a upcoming backlash against globalized neoliberalism, business leaders clearly fear that not only the financial crisis, but also the debate about how to regulate the runaway global economy could move beyond their control and turn against them.

Helmut Maucher's Finest Hour

The organizer of the Geneva Business Dialogue (GBD), as the event was dubbed, was the International Chamber of Commerce (ICC), the self-proclaimed 'world business organization'. The ICC is chaired by Helmut Maucher, also the strong man in Nestlé, and in the European Roundtable of Industrialists (ERT), and he emerged as the undisputed central figure during the dialogue.

Maucher explained in his welcome that the purpose of the Geneva Business Dialogue was to "increase mutual understanding between business leaders and international organizations", to make them "join forces to improve the situation". But apart from "socializing, networking and making friends", Maucher stressed that if the GBD was achieve to concrete results, 'action points' for how to "establish global rules for an ordered liberalism" were needed. Two days later, he concluded that "the ICC is in the front of the discussion, as the voice of business, dialoguing with the WTO and the UN". He explained that "to deal with global problems, powers need to be delegated to that level". Maucher called for a strengthened WTO, and an overhaul of the UN's structure to facilitate a stronger involvement of business. "A strong UN", he stressed, "is good for business". In a satellite address to the GBD, UN Secretary-General Kofi Annan agreed that "the UN and the private sector need each other". Annan pledged to "build on the close ties between the UN and the ICC".

Financial Domino

The question of how to "build a truly global framework for cross-border investment and worldwide business activities"[note 1] was the central issue discussed in Geneva, but the financial crisis -- spreading from East Asia through Russia, Latin America and the rest on the world -- almost stole the show. On the first day of the conference in particular, it was clear how seriously business takes the financial crisis and how the consensus for deregulated global capital flows is crumbling.

Ricardo Perissich of Pirelli warned against assuming that the situation will improve quickly: "In the medium term, we might all be dead because of the current crisis in globalization".[note 2] He called upon the EU and US to restore investor confidence and "stop the domino effect" from reaching Latin America "where the governments have followed precisely the model prescribed by the EU and US". It would raise "huge questions", he felt, "if these countries collapsed". Latin America, incidentally, is a major growth market for Pirelli, accounting for 20% of the company's turnover.

Indonesian businessman Hashim Djojohadikusomo described the grave social impacts of the current crisis in Indonesia. Between thirty and forty billion US dollars left Indonesia between November 1997 and April 1998 -- "sucked out like blood" according to Djojohadikusomo -- due to the refusal of exporters to repatriate profits. Djojohadikusomo, who is also the new Indonesian government's special envoy to Europe, blamed the "dramatic deregulation" that took place around 1990 and concluded that "we need new thinking: we may have to reverse away from unfettered capital flows". He plugged US economist Paul Krugman's 'Plan B'[note 3] -- the model for capital controls currently being tested in Malaysia, saying that "now we have to swing the pendulum back and go against the forces of globalization for a couple of years, in order to survive". Speakers from China and Egypt presented their countries as models for a more controlled, gradual opening of markets, an idea which was eagerly welcomed by Helmut Maucher and others. "Globalization can go on," a speaker from McDonald's tried to reassure the audience, "with the Chinese and Egyptian models".

'Responsible Globalization'

Maucher himself stressed the need for "a social framework" to avoid "turmoil", but emphasized that the end goal should be a global 'free market'. "Now we have learned", Maucher said, "that it has to happen in a controlled, managed and orderly way". He distanced himself from "the portfolio guys" and "the hedge funds and trade in derivatives that have made it all too volatile". During the final press conference, Maucher went a step further when he said that he "would like some rules on capital flows" and that an "additional tax on 'hot money' is a good idea". He specifically referred to the Argentinian model, where 'hot money' or foreign investor profits have to stay in the country for at least six months. He called the practical implementation "a very tricky question", and announced that the ICC would start to develop practical ideas.

There are several reasons why Maucher and the ICC emphasize the difference between such short term capital flows and the foreign direct investment carried out by companies like Nestlé. "Capital controls targeted at the portfolio people and hot money will not affect people like us", Maucher told the press. Nestlé is known as a company working with a long term strategy, including a presence in virtually every market of the world, rather than one focusing on short term profits. He explained that the crisis had not had much impact on Nestlé, as "consumption goes on"; moreover, "investments have never been so cheap". He encouraged business to continue investing, as the crisis will ultimately increase the competitiveness of companies in developing countries. As TNCs move into newly-opened markets, "local industry should not be scared -- it might be tough at first, but later they will be stronger and more competitive". The ICC press team subsequently sent out a press release with Maucher's message: "Business can rebuild the crisis economies". There can no doubt that the business leaders at the Geneva Business Dialogue share a deep fear that the emerging debate on regulating capital will spread more generally to trade and investment. This has much to do with the second major recurring theme during the Geneva Business Dialogue: the emerging backlash against globalization.

'Globaphobia'

"Business takes popular anxieties about globalization seriously. We are aware of the plight of the unskilled and the risk that some people will be left out. At the same time, globaphobia must be opposed by improving understanding of globalization and its true impact on jobs and wealth."

- Helmut Maucher and his assistant Oberhänsli in the Geneva Business Declaration.
 
ICC Secretary-General Maria Livanos Cattaui introduced the debate titled "Globalization: Managing the Irresistible" by pointing out that "it seems lately there is a feeling that it is resistible". "But we know that globalization has given millions hope", she stressed. "Business and government need to explain it better". Robert Lawrence of the Brookings Institute concluded that "the overwhelming tide in favour of globalization seems to be ebbing", pointing to the recent US government defeats on fast track negotiating authority on trade and expanded IMF funding issues. He called for a counter strategy against "globaphobia" and proposed a "global pledge for full free trade in 2020".

John M. Weekes, chairman of the General Council of the WTO, pointed out that "trade is no longer seen as an arcane subject of no interest to the public". He referred to the demonstrators outside the conference building and to the large manifestations against the WTO in May. He called for business to go on the offensive, and to be "prepared to explain why trade liberalization is good for all countries". Otherwise, he explained, "governments might take decisions that business dislikes". Pirelli's Perissich stressed that the next round of trade liberalization "is going to be very difficult -- resistance will be bigger than before and the calls for clauses on labour and environment will increase".[note 4]

Ruggiero suggested that the Geneva Business Dialogue should send a clear message to the world "that protectionism would be a tragic mistake". Keeping markets open, in his view, is the only chance for recovery. "Trade is like the blood of a sick patient", he metaphorized, "if it doesn't flow, the medicine will not work". He insisted that the crisis makes it necessary to move ahead with trade liberalization at an even faster rate by including the 32 new candidate countries (including Russia and China) and beginning negotiations on a Millennium Round within the WTO.

Soothing Words

On the second day of the Geneva Business Dialogue, Maucher made a strenuous effort to alleviate the worried atmosphere of the first day. He stressed that the financial crisis makes the need for a global regulatory framework apparent, and that he was "moderately optimistic" that the Asian crisis would not last more than two or three years. "Globalization is already a success", Maucher claimed. "There will always be losers, like everywhere in life, but globalization is almost win-win". Regarding the new estimates from the International Labour Organization (ILO) that the financial crisis has already caused 10 million job losses in Asia, Maucher compared this with the "500 to 600 million people" whom he claims have been lifted from poverty thanks to globalization. So, he concluded, "percentage-wise the 10 million unemployed is not so much".
 
 

 "ICC recognizes how societies are changing, with citizens speaking up and expressing their deep-felt concerns. However, in some respects, the emergence of activist pressure groups risks weakening the effectiveness of public rules, legitimate institutions and democratic processes. These organizations should place emphasis on legitimizing themselves, improving their internal democracy, transparency and accountability. They should assume full responsibility for the consequences of their activities. Where this does not take place, rules establishing their rights and responsibilities should be considered. Business is accustomed to working with trade unions, consumer organizations and other representative groups that are responsible, credible, transparent and accountable and consequently command respect. What we question is the proliferation of activist groups that do not accept these self-disciplinary criteria".  
                                      & nbsp;                           - From the "Geneva Business Declaration" 
 

Maucher and His Critics

Maucher drew attention to the fierce and omnipresent critics of globalization even in the opening session of the meeting. "Let me take the bull by the horns", he said. "We have heard the last days about people opposing and criticizing the Geneva Business Dialogue, just because for the first time business gets involved in talking with the UN. It is disgusting that some people say that Annan and the UN are dominated by business". "I am used to it as head of Nestlé", Maucher explained, "but it has been astonishing that they attacked Annan, calling him 'nes-Kofi Annan'. This goes too far, his moral authority is well established". These people, according to Maucher, "have disqualified themselves from objective dialogue".[note 5]

Maucher has a long history of conflict with citizens organizations, primarily due to the decennia-long consumer boycott against Nestlé due to its unethical promotion of infant formula.[note 6] His dislike of citizens' movements was repeatedly and unexpectedly revealed during the dialogue, for instance when he complained about "exaggerations and irrational arguments in environmental politics, due to single issue groups that know nothing and have no responsibilities". At the final press conference, he complained to journalists about demonstrations by citizens groups the previous night. "We have commented on that in the declaration: we feel that these groups realize that the ICC is now organised more efficiently as the business voice in contact with the UN ... It is difficult for them to digest that the business voice is also important". More aggressively, he asserted that NGO activities should be transparent. "How are they financed and what do they stand for? We will insist on answers, and that they follow the normal democratic process and stick to the rules".

Maucher's question about the funding of protests against the Geneva Business Dialogue is symptomatic of his elitist detachment from the public. The very colourful protests 300-400 people enjoying music, food, banners and speeches were organized by enthusiastic volunteers on a low, almost non-existent budget. Obviously well beyond the imagination of an industrialist from a corporation with a global advertising budget of around two billion dollars, and for whom multi-million dollar acquisitions of competing companies is a regular occurrence. It is also remarkable that Maucher emphasizes the difference between 'responsible NGOs' and 'activist pressure groups'. Clearly, the ICC feels seriously threatened by these less tangible, grassroots-based movements and is taking action to marginalize them. When the ICC met with Tony Blair in May to present its message to the G-8 Summit, it suggested a similar 'weeding out' of certain NGOs. The ICC statement to the G-8 proposes that it would "be useful for the UN and other intergovernmental bodies to establish rules to clarify the legitimacy and accountability of many new non-governmental organizations engaged in the public policy dialogue which proclaim themselves to represent particular interests or significant sections of civil society".[note 7]
 
 

"Global governance and the adequacy of international organizations require priority consideration. Competences -- supranational, national, subnational and global -- must be reorganized according to a broader overall view. Currently, too much duplication and inadequate coordination are preventing intergovernmental bodies from handling effectively the complex and interrelated problems of the late 20th century. Intergovernmental organizations will need additional authority, but with the proviso that they must pay closer attention to the contribution of business and competition to wealth creation, recognize the need for less bureaucracy, and bring a clear focus to really important global problems. These reforms have now started, but they are of course a long-term undertaking. 

Once the UN's own structure is overhauled, it and its General Secretariat would be the natural choice to assume responsibility for coordinating international decision-making more efficiently. It is in this perspective that we think that a strong UN is good for business. A more substantive involvement of business must be part of the reform. Here, ICC has confirmed and strengthened its position as THE voice of business through a close working relationship with the WTO and constructive consultations with the UN Secretary General and the heads of UN agencies. ICC is able and willing to contribute to agenda-building, to substance and to a contributive follow-up. Our positioning in the dialogue reflects the key function of business -- to create wealth". 
                                      & nbsp;                            - From the "Geneva Business Declaration"

 

ICC-UN Cooperation in Practice

Practical cooperation between business and UN agencies like the UN Conference on Trade and Development (UNCTAD) and the UN Development Programme (UNDP) is already taking shape. UNCTAD Secretary General Rubens Ricupero provided an example during the Geneva Business Dialogue when he pointed out how many Africa countries have liberalized their economies, but still do not receive any foreign investments. As a result, he said, UNCTAD and the ICC have started working on a set of guidelines for Less Developed Countries (LDCs) to attract more investments. The project has been launched with five countries (Mali, Uganda, Madagascar, Ethiopia and Bangladesh), each country having a large TNC sponsoring the effort.

The cooperation between UNCTAD and business is becoming increasingly controversial. During a two-day consultation meeting with NGOs and trade unions in June, UNCTAD was sharply criticized for "losing its direction and spirit" and particularly for its close cooperation with the ICC.[note 8] Angry NGOs quoted from an UNCTAD document outlining that: "UNCTAD also intends to work with the ICC to develop joint initiatives in trade facilitation measures. Studies and reports on competition law and policy and consumer protection are made available to interested parties, including NGOs and the private sector, through the ICC. There is close cooperation with the ICC in helping countries to formulate competition and consumer protection law and policy, and in institution-building". The NGOs moreover criticized several specific UNCTAD projects, for example the project on biotrade which facilitates "transnational corporations making deals on access to biodiversity resources with developing countries".

What more the new partnership between the ICC and international organizations will bring probably became clear during the "discussions over lunch with international organizations" which took place on the second day of the Geneva Business Dialogue. These luncheon meetings took place at the headquarters of UNCTAD (on the theme "Can Trade Transform Less Developed Countries?"), the WTO ("The Next Big Issues Facing the WTO: What Impacts for Business?"), the World Meteorological Organization ("Trading in Emissions: a Solution for Climate Change?"), the ILO and at the UN's Palais des Nations, with some 30-50 industrialists visiting each organization. Sadly, these lunch meetings were not open to the press. After initially arguing that there was a space problem, an ICC official explained to surprised journalists that these lunches were "of a private nature".

When criticized about this lack of transparency, an ICC press spokesperson said that the lunches were "the only part that is totally closed off". As described in the last issue of Corporate Europe Observer, Maucher has in his two years as head of the ICC worked on a major relaunch of the organization in order to increase its visibility and influence. The building of an efficient policy-oriented corporate coalition on the global level follows the success of similar groupings on the national level (for instance the Business Council on National Issues in Canada and the US Business Roundtable) and the regional level (the European Roundtable of Industrialists, APEC Business Forum, etc.).

As Maucher explained at the final press conference: "The Geneva Business Dialogue is part of an effort to reposition and refocus the ICC, the only business voice representing companies from all continents, sectors and of all sizes". He continued: "In a way, it is surprising to read about the alleged unrestricted power of world business, and to see how poorly it has been organized on the international level to make its voice heard. As I said, the situation has improved, but there is still some way to go". The day after the Geneva Business Dialogue, Maucher stepped down as president of the ICC, leaving the position to Mr. Kassar, head of the Lebanese Fransabank Group. Maucher remains one of the three members of the ICC presidency".[note 9]

The ICC's ambitions behind wanting to establish a 'partnership' with international institutions like the WTO, UNCTAD and the UN General Secretariat are multiple. Firstly, there is the obvious potential of gaining control over global rule setting and influencing global regulatory institutions so that the business agenda is promoted and liberalization locked in. In encouraging the setting of global rules, the ICC hopes to avoid the emerging backlash against globalization which could well turn against its members. Secondly, this strategy would proactively prevent the positioning of these institutions against business, which according to the ICC has been successfully accomplished by NGOs with various UN institutions in the past. The ICC's attempt to establish strong working relations with UNCTAD, for example, is an effort to discontinue the historical role of this organization in promoting the interests of Third World people and citizens movements. A third advantage of working closely with international organizations and particularly the UN is the legitimacy gained by the ICC in working with these respected organizations.

The Geneva Business Dialogue left little doubt that the UN is entering into a formal cooperation with the ICC. "Building a stronger relationship with the business community" is part of Kofi Annan's "'quiet revolution' to renew the United Nations for the twenty-first century", as the UN's Department for Public Information puts it a recent leaflet.[note 10] The big question is why the UN is so willing to enter into such a partnership, which has already proven to be controversial. The support of the ICC might help the UN to regain a central position in global policy making. Working with the ICC diversifies the UN's image, which in some countries, including the United States, is not ideal. The ICC has already returned some favours by asking the G-8 leaders for new funding for the UN: "In its statement to the G-8 Summit of major industrialized countries in May 1998, the International Chamber of Commerce advises Heads of State that the UN and other intergovernmental organizations 'require sufficient resources and more authority to handle complex global problems'".[note 11] Still, it is interesting that Annan himself did not attend the Geneva Business Dialogue, but instead spoke through a satellite connection. The question how far the UN wants to take its new affair with the ICC is a burning one.
 
 

A Striking Parallel  

There is a striking historical parallel to the emerging cooperation between the UN and the ICC. The way that these two parties have entered a partnership to achieve mutual and individual goals strongly resembles the way the European Commission and the European Roundtable of Industrialists (ERT) worked together, particularly in the 1980s and early '90s. The ERT used European unification as a tool to transform European society into a more 'business-friendly' arena. The Commission used industry's support to convince governments of the desirability of grand projects like the European single market and the Euro, thereby boosting European unification and the its own powers. In the process, democracy, social justice and the environment in Europe lost out dramatically. 

 

Notes
 
1. "Business and the UN: Common Ground", Maria Livanos Cattaui, The Journal of Commerce, 3 August 1998. |Back to Text|

2. Perissich, the former assistant of EU Commissioner Bangemann, is currently director of Public and Economic Affairs at Pirelli and also a member of the advisory board of the European Policy Centre. |Back to Text|

3. Krugman, Paul, "Saving Asia: It's Time to Get Radical", Fortune, 7 September 1998. |Back to Text|

4. Perissich left no doubt that attempts to introduce such clauses within the WTO should be resisted. Along similar lines, director general of the WTO Renato Ruggiero said that "the trade system cannot ignore these vital concerns, but the WTO cannot solve all the problems of globalization. Social and environmental problems need social and environmental answers, not trade answers". Ruggiero suggested that "the environment community get its own house, within the UN Environment Programme". |Back to Text|

5. See "Corporate Takeover of the United Nations Continues", Corporate Europe Observer, Issue 1, April 1998. |Back to Text|

6. See "Nestlé and the United Nations: Partnership or Penetration?", Corporate Europe Observer, Issue 1, April 1998. |Back to Text|

7. "Business and the Global Economy", ICC Statement to the G-8 Summit, 15-17 May 1998. |Back to Text|

8. South-North Development Monitor (SUNS), 17 June 1998. |Back to Text|

9. Mr. Kassar was already vice-president of the ICC. He headed the ICC delegation that met with UN Secretary General Kofi Annan and other senior UN officials in February 1998, the meeting at which the increased UN-ICC cooperation was launched. The third person in the ICC's presidency is Richard D. McCormick. CEO of US West Inc. and chairman of the US Council for International Business. |Back to Text|

10. "Business and the UN: An Overview", by the UN Department for Public Information, June 1998. |Back to Text|

11. Ibidem.|Back to Text|



  |Home| | About CEO | | Corporate Europe Resource List | |Contact Us|
| Corporate Europe Observer #1 | | MAIgalomania | | Europe Inc. |

This page was installed on October 23, 1998