Trade with Countries That Have a Bad Human Rights Record - Article Example

1. Do you agree with the notion that governments should discourage trade and investment with countries that have a bad human rights record Introduction The concept of ethics, social responsibility and accountability in business is inherently complex and has fuelled polarised debate as to the parameters of its role in practice. Furthermore, this has been compounded by the integration of the globalisation phenomenon into international business; with the increased is movement of capital, commodities, cultural imaginations and practices (Brah et al, 1999:3). A concomitant result of this has been the proliferation of international expansion opportunities for businesses, which has brought the issue of ethics and corporate responsibility to the fore. To this end, some commentators argue that governments should discourage trade with countries having bad human rights records. Indeed, in the British Government body “Headsup” 2008 debate “Human Rights or Poverty? Should the UK only trade, send aid or money to countries with a good human rights record?” (www.headsup.org.uk); MP Shahid Malik argued that continued trade and aid to countries with poor human rights records was problematic and that “there is evidence that too much of the wrong sort of aid, going to governments, may actually discourage and paralyse development” (www.headsup.org.uk). This begs the question as to whether governments should block trade with countries with poor human rights records. On the one hand, a common method utilised for business expansion internationally is the use of the Multinational Enterprise (MNE) paradigm. However, MNEs have been criticised for often being susceptible to corruption as part of their entry strategy. Additionally, whilst the UN Global Compact aims to introduce ethics into corporate responsibility, its lack of enforcement at global level has lent further support to the argument that governments should discourage trade with countries with poor human rights records. On the other hand, there are clearly disadvantages of such an approach and Weede refers to the danger of implementing “negative” or “protective human rights (2008, 35). For example, in certain war torn countries, where human rights have been abused under international law resulting in Western government imposed trade bans, Chinese companies have had no such reservations about entering the same market; which begs the question as to whether trade bans are the correct approach to addressing human rights. Accordingly, in this paper it is submitted there are cogent arguments in favour of governments discouraging trade with countries with poor human rights records; ultimately the potential disadvantages tip the balance, thereby suggesting the need to consider a different approach for protection of human rights under international law. It is further submitted that directly correlated to this proposition is the fact that trade embargos can actually result in infringement of human rights as evidenced by the US embargo in Cuba. Section 2: MNE Entry Strategy, Corruption and the Global Compact The United Nations (UN) describes the Global Compact as “a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption” (www.unglobalcompact.org accessed 26 May 2009). The UN Global Compact is voluntary and the underlying objective is stated to be the introduction of social responsibility into international business and the code embodies ten core principles (www.unglobalcompact.org accessed 26 May 2009). In essence, the UN Global Compact is a voluntary corporate citizenship network geared towards the mainstreaming business activity ethics worldwide and preservation of UN human rights’ objectives (Macintosh et al, 2004 at p.11). However, the Global Compact does not impose sanctions or implement an enforcement framework and is not a regulatory instrument. Indeed, Macintosh et al highlight the fact that “the Global Compact relies on public accountability, transparency and the enlightened self interest of companies…. To initiate and share substantive action in pursuing the principles” (Macintosh et al, 2004 p.11). In the absence of any regulatory code, Slaughter further refers to the UN’s assertion of information sharing requirements and the chief architect of the Global Compact’s declaration that “the core of its change model is a learning forum. Companies submit case studies of what they have done to translate their commitment to the GC principles into concrete corporate practices” (In Slaughter, 2004 at p.11) As such, there is an assumption that information sharing and self regulation will fuel a dynamic process towards human rights compliance (Slaughter, 2004, p11). However there is a distinct lack of government authority for enforcement of the network and the efficacy of the UN Global Compact is inherently reliant on voluntary participation and compliance by non-state corporate entities in UN member states, which has fuelled debate as to its efficacy and purpose in practice. Additionally, this lack of enforcement of the Compact at international level highlights the inherent problem of governments imposing trade blocks vis-à-vis countries with poor human rights records. The Compact itself lacks any effective sanctions and one government’s sanction will not prevent the embargoed country trading with other countries, with a prime example being China’s increasing economic activity in Africa. Therefore, if one government discourages trade against another country, it is questionable how far this actually improves human rights in the said country. The underlying basis of the UN Global Compact is rooted in the principles that human rights issues are intertwined with corporate issues and therefore corporate organisations have a duty to ensure that human rights objectives are not impeded by corporate objectives. To this end, principle 1 of the UN Global Compact provides that “businesses should support and respect the protection of internationally proclaimed human rights within their sphere of influence” (available at www.unglobalcompact.org accessed 26 May 2009). The overriding objective of asserting the primacy of human rights in business is undoubtedly a positive factor in acknowledging the various stakeholder interests affected by the institutional framework within which corporations operate. However, it is evident that the inherent flaw of the Global Compact is the naïve assumption of corporation compliance (Fellner, 2008 p.223). Fellner highlights the point that significant opposition from powerful member states to the Center’s proposals led to its dissolution and therefore the subsequent Global Compact effectively acts as a compromise by implementing a self regulatory guidance framework “with no outside verification or oversight” (Fellner, 2008: p.223). Moreover, whilst theoretically these human rights apply to private corporations, the inherent weakness in the UN Global Compact is that furtherance of the objectives extrapolated in the Principles are inherently dependent on voluntary compliance. Additionally, the Global Compact principles are drafted in wide terms and the exact nature of the correlation between businesses and human rights remains unclear and has provided a source of contention as to the extent to which businesses can apply human rights principles in practice (Kent, 2007:48). This is further compounded by the fact that corporate cultural norms are invariably disparate from state to state of the participating companies, which will further widen the scope for disparity in how national institutions apply the principles of the UN Global Compact in the absence of consistent enforcement mechanisms. As such, this intrinsic flaw of the Global Compact assumption of voluntary compliance appears to undermine the efficacy of imposing trade embargoes on states with poor human rights records. Additionally, whilst the Global Compact’s Tenth Principle provides that businesses should work towards combating corruption, this arguably ignores the complex relationship between government level corruption and corporate strategy of non state sectors both at operational and market entry level (Beneria & Bisnath, 2004: 47). For example, if we consider corporate strategy entry modes for Multinational Enterprises (MNEs) in the international marketplace, Rodriguez et al’s arguments centre on state corruption as the central point in impacting entry stage whereas the issues regarding the effective lack of governance of MNEs under the law clearly raises the controversial issues regarding MNE corruption as part of its entry level strategy through exploitation of the lack of effective governance measures (Rodriguez et al, 2005: 383). Accordingly, the lack of effective governance through the legal framework clearly impacts business strategy to a degree that is ignored in the corruption debate as evidenced by Rodriguez et al’s arguments. Moreover, Rodriguez et al’s arguments further highlight the flaws of the Global Compact principles in failing to provide incentives to corporations to apply its objectives in practice. Moreover, in introducing the issue of corruption, Rodriguez et al argue that government infrastructure and the relevant arms of state will inherently be influenced by the government in power, which can lend itself to corruption (Rodriguez et al, 2005: 383). To this end, they argue that it is necessary to consider how the interrelationship between these factors impact MNE entry strategy and business operations in general. However, it is important to note that the notion of corruption is inherently complex and Rodriguez et al highlight the importance of appreciating this and refer to a leading study of Shleifer & Vishny (1993) which highlighted that “the experience of operating in a corrupt environment is substantially characterised not only by the amount of corruption but also by the uncertainty associated with corrupt transactions” (Rodriguez et al, p.383). To this end, the assumption of compliance of the Global Compact is clearly naïve. This is further evidenced by the Rodriguez et al’s reference to the polarised debate regarding the nature of corruption. They hypothesise that the correlation between the corruption and political behaviour in terms of causative effect is vital to management strategy when considering entry level against a corrupt framework (Rodriguez et al, 2005, p.384). As such, Rodriguez et al highlight that government corruption can have a concomitant effect on the organisational legitimacy of the MNE which in turn can impact the “entry mode decisions of multinationals” (Rodriguez et al, 2005, p.383). Accordingly as highlighted above the central deficiency of the UN Global Compact is the failure to address enforcement and compliance along with the broadly drafted principles, which arguably lack complete appreciation of the nature of corruption and the influence of government level corruption on national corporate structures. This creates an inherent paradox with the Tenth Principle of the Global Compact and further enables corporations to utilise the Compact to provide a veil of legitimacy in its business operations. Nevertheless, in addition to the wide terms of the Global Compact, this is compounded by the fact that the position remains uncertain as to the extent corporations should be responsible for the preservation of human rights. For example, Macintosh et al comment that “much of the global debate about business and human rights has focused on preventing violations attributed to companies. Considerably less attention has been given to the opportunities companies have to contribute to the positive enjoyment of human rights” (Macintosh et al, 2004:95). The naïve assumption of the Global Compact in terms of voluntary compliance is further evidenced by the statements of Annan on his third visit to the World Economic Forum, where he commented that “our challenge today is to devise a similar compact on the global scale, to underpin the new global economy. If we succeed in that, we would lay the foundation for an age of global prosperity, comparable to that enjoyed by the industrialised countries in the decades after the Second World War” (in Macintosh et al, 2004 at p.16). As such, Kell and Levin posit that the UN Global Compact is effectively a measure to address the deficiencies of capitalism and born out of the initial objectives at inception of the UN in the aftermath of the Second World War (Kell and Levin (2003) in Macintosh et al, 2004 at p.16). Nevertheless, it is submitted that the Global Compact is important as an experimental measure in testing the boundaries of corporate initiative in self regulatory moves towards corporate social responsibility. If anything, the inherent weakness is the assumption regarding the concept of “partnership” between the UN and corporate organisations. The central problem is the compromise pertaining to self regulation and the broadly defined principles of the Compact. These facilitate disparity in corporate strategy due to the inherent variables in state institutional framework. This lack of consistency further perpetuates ad hoc measures with little incentive for compliance. As such, it is the lack of regulatory measures at UN level in practice has effectively undermined the objective of corporate social responsibility and highlights the point that protest trade embargoes ignore the wider issue of the need to implement a cohesive international legal framework to enforce meaningful sanctions for human rights violations. 3. US Embargo on Cuba The United States embargo against Cuba operates at commercial, economic and financial level and from a political perspective has remained a stagnant issue in the United States due to the voting preferences of pro-embargo Cuban American exiles in the election battleground state of Florida (Haney & Vanderbush, 2005). However, Purcell et al comment that “US policy towards Cuba may be frozen in time, but on the island, things have changed dramatically since the end of the Cold War” (Purcell et al, 2000: 2). Indeed, the collapse of the former Soviet Union proved disastrous for a reliant Cuba’s economy, which has been forced to implement economic policy changes (Purcell et al, 2000:2). Moreover, it is submitted that whilst the current Cuban regime inherently operates to undermine civil liberties and fundamental freedoms; the US economic embargo whilst recently veiled in being “morally” necessary and justifiable, ignores the hypocrisy of its moral high ground particularly by comparative analysis with the US stance vis-à-vis China. . On this basis, the question as to whether the embargo should be abolished arguably becomes secondary behind the myriad of interrelated political and internal factors shaping US foreign policy. To this end, Haney and Vanderbush highlight the point that the current contextual background pertaining to the current position of the US towards Cuba highlights the fact that “the embargo has some holes in it, and sooner or later the embargo will fall.” (Haney and Vanderbush, 2005:2-3). Interestingly, the previous Bush administration asserted that “the sanctions against the United States enforced against the Castro regime are not just a policy tool, but a moral statement. It is wrong to prop up a regime that routinely stifles all the freedoms that make us human. The United States stands opposed to such tyranny and will oppose any attempt to weaken sanctions against the Castro regime until it respects the basic human rights of its citizens, frees political prisoners, holds democratic free elections, and allows free speech”. As such, George Bush’s statement suggests that the central underlying rationale is the contravention of fundamental freedoms and liberties under the Cuban regime. Whilst the Cuban regime has indeed been in breach of fundamental rights and civil liberties, the moral justifications for the continued US embargo are somewhat questionable in context of its business relationship with China, which has become its fourth largest trading partner (OECD, 2002). Indeed, if we contrast the US position as regards economic relations in China, the influx of US FDI fuelled rapid economic growth, creating jobs and technological change to the country. The figures in 2000 coupled with China’s desire to close the economic gap with other developing nations led to the Government driven “Western Development Strategy” as part of the tenth fie year plan (2001-2005) covering six provinces.. If we further contrast the moral argument behind the US embargo on Cuba and contrast the position with previous Cold War enemy China, it is evident that Cultural Revolution in China and Deng Xiaoping’s ambitions to modernise China, brought the issues of legal reforms and the rule of law to the fore (Clarke, 2008). Indeed, Chinese media propaganda continually refers to the rule of law as an entrenched part of Chinese culture (Clarke, 2008). However, the concept of China and its relationship with the rule of law has fuelled academic debate with many Western scholars finding the notion hard to grasp. On the one hand, investors and human rights activists advocate a critical indictment of the distinct absence of the rule of law in China. Indeed Pei extrapolates the concept of a “trapped transition” whereby the political strategy impedes the necessity of moving towards a true rule of law in order to achieve the modern economic goals China has set itself, particularly the flourishing economic relationship with the US (Pei, 2008). In contrast to China’s move towards cooperation with the West insofar as economic goals are concerned, Castro’s Cuban socialist paradigm has remained a consistent attack on US authority, undermining its ability to crush enemies through unilateral foreign policy initiatives. This in turn has fuelled the political stalemate within the US internal framework in terms of the embargo. Accordingly, economic embargo on Cuba symbolises a myriad of complex, interrelated factors. From a simplistic moral viewpoint, the continued hardship of the Cuban people as a result of the US enforced embargo clearly undermines the efficacy of trade embargoes against countries with human rights concerns. 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Routledge The Norms on the Responsibility of Trans-national Corporations and Other Business Enterprises with Regard to Human Rights UN Doc E/CN.4/Sub.2/2003/12/Rev.2 The UN Global Compact and Ten Principles available at www.unglobalcompact.org accessed 26 May 2009 Universal Declaration of Human Rights (UDHR) adopted by the UN General Assembly in 1948 (available at www.un.org/en/documents/udhr Websites and Sources www.UNHCR.org/HighCommissioner Read More