SUMMARY OF DISCUSSION

B. DISCUSSION OF DRAFT CODE ON MULTINATIONAL ENTERPRISES

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Mr. Gibbons briefly reviewed the events over the last few years during which participants in these meetings had cooperated in producing the draft code of principles on multinational enterprises and governments which had been drafted by Mr. Lange and himself. The draft had been circulated both in the U.S. Congress and in the European Parliament. Unfortunately Mr. Lange was unable to be present in view of unexpected and pressing electoral commitments in Germany.

Mr. Gibbons drew particular attention to the recent addendum containing paragraphs 48-54, and also the corrections to paragraphs 19, 21 and 32, and invited discussion of them as some members had not yet seen them.

In view of Mr. Lange's absence it would not be possible to hold an indepth discussion on the paper on this occasion, but he hoped that he would be able to reply to any questions put by members of the two delegations and expressed the wish that suggested amendments or changes should be sent in writing to Mr. Lange or himself so as to permit full debate of the revised draft code, and possibly a vote on it, at the spring 1977 meeting.

Sir Peter Kirk asked what relationship there was between paragraphs 7 and 52.

ILLEGAL PAYMENTS

Mr. Gibbons said that paragraph 52 was not limited by paragraph 7. A U.S. subsidiary would be affected by paragraph 52 when acting anywhere in the world. He then discussed provisions of the revised U.S. Tax Code recently passed by Congress which dealt with disallowing as a tax deduction any illegal payment by a U.S. corporation.

Mr. Cousté said that he had been asked by Mr. Lange to convey his apologies to the two delegations. He had been obliged to accept unforeseen commitments in the German electoral campaign. Mr. Lange maintained his full interest in moving ahead with the code on multinationals and hoped that the two delegations would be able to agree on a final text at the next meeting on the basis of suggestions sent in by participants.

APRIL DISCUSSION NOTED

Mr. Hougardy remarked that comments made by Mr. Archer and himself at the Dublin meeting in April 1976 had not been taken into account in the revised version of the code as presented. He understood that written amendments could be submitted to the two draftsmen. He wished to remind those present that at the OECD ministerial meeting held on June 21-22, 1976, important decisions had been taken on international investment and on multinational enterprises. Besides the Nine

1 See working document, p. 15.

and the United States, the OECD included countries such as Austria, Canada, Australia, Japan, Switzerland and Sweden. Both employers and trade union consultative bodies had already expressed satisfaction that the OECD text had been agreed. Would it not be dangerous to have several texts dealing with the same subject?

He emphasized that most companies quoted on the U.S. stock exchange already had to provide very detailed information in their annual report to shareholders.

He asked for clarification of the concept of transfer prices and costs. The Lange/Gibbons Code hardly mentioned governments. A code of good conduct was just as necessary for governments as for multinational enterprises. Questions like retroactive legislation and "first in first out" taxation should be covered. Should the code include only some or all industrialized countries? Should it be voluntary or obligatory? Many points still had to be clarified.

SUBSTANTIVE OBJECTIONS

Mr. Archer referred to the objections he raised in Dublin, and observed that the changes made since then were simply matters of detail and procedure, and did not answer his substantive objections. In par

ticular he criticized:

(1) The draft's lack of specificity, in particular with regard to reports of investment, the capital market, and transfers of technology;

(2) The lack of detail on the control body, in particular who was to form it, run it, how it would relate to existing bodies. Mr. Archer felt that powers of such magnitude should be reserved for elected officials;

(3) The lack of protection of individual rights, and the lack of confidentiality of information given to the control body;

(4) The irrelevance of the tax section, because such matters should be covered by national legislation, or official international agreements; and

(5) The naïvete of the draft, since it duplicated the OECD draft.

Mr. Bordu raised questions concerning competition. Would the control body in fact control the free movement of capital and technology transfers. In particular he asked whether the exchange of know-how would benefit large MNC's at the expense of smaller ones.

BASIC DISAGREEMENT

Mr. Gibbons, replying to the discussion, said that he appreciated the clarification of Mr. Archer's point of view. Quite frankly, Mr. Archer and the draftsmen of the Code seemed to be in basic disagreement. What Mr. Archer was really asking was "Do we need this Code?"

The OECD text did not exist when the two delegations had started work on their own draft code, but it should be remembered that the OECD Code was merely an expression of good faith and was not intended to be binding or to be executed..

He looked forward to receiving written comments and hoped that Congressman Archer, Mr. Hougardy and others would send Mr. Lange and himself their observations. Mr. Lange and himself would submit a new text at the next spring meeting.

Before concluding the discussion for the first day, Mr. Fraser relayed Mr. Findley's invitation to the European Parliamentarians to attend a "Soybean Fair" later in the day. He also announced the news that Orlando Letelier, former Chilean Foreign Minister and Ambassador to the United States, had just been killed in a car bombing incident in Washington.