the general rule among multinational enterprises and practices such as had occurred in the Lockheed Company were the exception. He could support most of the observations made by Mr. Archer. Finally, he noted, there is little chance of influencing the behavior of the great state corporations like those in the Soviet Union.

Mr. Badillo felt that too little attention had been paid in the debate to the demands of the Third World. If some speakers felt that the working document went too far, it should be remembered that the demands of Third World countries were usually much stiffer. The LatinAmerican countries would not be content with, for example, the provision that "enterprises must allow residents of a host country to acquire their shares" (in a subsidiary of the foreign company) (paragraph 44). These countries demanded the right to buy out the entire subsidiary on conditions that were acceptable to them as host country. The working document by Mr. Lange and Mr. Gibbons therefore seemed more relevant to the industrialized countries.

MNC'S AVOID COMPETITION

"

Mr. Bordu felt that scandals such as those that had recently come to light were inherent in the nature of the multinational enterprise. They were the direct consequence of attempts by these enterprises to avoid the pressures of competition. It would be a good thing if committees of enquiry were to be set up that could go into the matter in much greater depth than had so far been done.

It was true that the multinational enterprise had stimulated technical progress, but it had also led to the demise of the small and mediumsized firm.

The measures proposed by Mr. Lange and Mr. Gibbons were necessary but incomplete. Investments should not only be reported; the employment opportunities they provided should also be examined.

Mr. Cousté, chairman of the European Parliament delegation, referred to the special nature of the day's debate in that, for the first time, a document drawn up jointly by reapporteurs from delegations from the United States Congress and the European Parliament has been the basis of discussion. This was all the more remarkable since the topic under discussion was an extremely difficult one.

It was undeniable that international production was a logical development of the present economic system; it was, however, one that led to the decline of certain economic and political structures.

POLITICAL STRUCTURES LAG

Mr. Lange felt that at the root of the problem was the principle that freedom must never mean licence. Everyone was in favour of freedom, but freedom could be abused. Enterprises engaging in international operations had made decisive contributions to technological progress, but this did not entitle them to positions of political power.

Political integration was lagging behind economic integration. The gap had to be closed, and this would have to be done through an international agreement. It would probably be sensible to proceed

gradually, confining initial action to an international agreement on cooperation between competition and taxation authorities; a gradual extension of the geographical area covered could also be considered.

A NEW KIND OF GATT NEEDED

There was no question of the two rapporteurs wanting new government authorities to be set up. All that was necessary was that eventually-not necessarily in the first stage-an international body should be created with responsibility for implementing an international agreement on multinational enterprises. Its function, in its own field, would be comparable to that of GATT in the field of international trade. All the data that the rapporteurs wanted to have published could be made public without delay.

It was certainly useful to bear in mind what had been accomplished through the OECD, but it was clear that at best this organization could achieve only limited success and was in no position to bring about a binding agreement.

Mr. Pisoni called for improved safeguards of the rights of employees.

CODE REVISIONS PROPOSED

Mr. Scott-Hopkins accepted that something had to be done along the lines suggested in the working document by Mr. Lange and Mr. Gibbons. The thought of creating a new international organization did not, however, appeal. He wondered if the task could not be taken on by GATT.

He supported Mr. Prescott's proposal on introducing methods of investigation by the European Parliament similar to those used by the American Congress.

Mr. Gibbons proposed that he, together with Mr. Lange, should undertake some revision of the working document so that an agreement in principle could be worked out at the next meeting.

Mr. Hougardy observed that the delegations were not competent to adopt decisions.

The chairman, Mr. Fraser, suggested that the rapporteurs should incorporate a proposal in their working document as to the subsequent procedure to be followed; this was approved, and the meeting closed.

PAPERS

A DRAFT CODE OF PRINCIPLES ON MULTINATIONAL ENTERPRISES AND GOVERNMENTS

1. The internationalisation of production is a logical consequence of the development of our economies; as such, it is a positive phenomenon, contributing to economic growth and increasing prosperity.

2. Nonetheless, the organisation of operations beyond national borders by multinational enterprises may lead to undesirable concentrations of economic power and to conflicts with national policy objectives.

3. Therefore, it is appropriate to seek to encourage the positive contributions which multinational enterprises can make to economic and social progress and minimise and resolve the difficulties and problems which may arise from their operations.

4. Just as it is normal for firms increasingly to carry on activities beyond the frontiers of their own country, so it is normal and necessary for an international framework to be set up for these international activities obliging the firms in question to respect certain basic rules and at the same time offering them the necessary legal security.

5. Economic integration, as embodied in multinational enterprises, has stolen a march on politics, for which in most cases the national frontiers remain the relevant framework. Although far-going economic interdependence can be a useful stimulus toward political integration, it is nevertheless essential in international relations too for public policies to take precedence over economics; that is, the framework in which the multinational enterprise operates must be under political control. This condition is not being met at present. Accordingly, certain rules need to be laid down in an international agreement.

6. The problems connected with the activities of multinational enterprises (MNEs) can no longer be dealt with only in a national context and cannot yet be solved on a world scale. Agreements on MNE activity among industrialised nations would represent a great step forward. The delegation of the U.S. Congress on the one hand and that of the European Parliament on the other can in the first instance help to bring about an agreement between the United States and the European Community, to which Japan, Canada, and other industrial countries may later accede.

7. The agreements to be concluded, initially between the United States and the European Community and subsequently expanded and extended to the whole world, must be binding on all parties-that is, have the force of law in all the States party to them and impose legally binding obligations on firms based in or operating in those countries.

8. Multinational enterprises are companies of private, state or mixed ownership established in different countries and so linked that one can exercise a significant influence over others.

9. Multinational enterprises are to obey national and international laws and respect the national policy objectives of parent and host countries.

10. Governments which are a party to these agreements are to treat multinational enterprises according to international law and are to deal with conflicts of national laws as they affect MNES; in case of disputes, host countries are to prevail. However, when necessary, governments are to use international dispute mechanisms to settle investment and other disputes involving MNEs.

11. These international agreements are to be implemented and enforced through the mutual cooperation of government authorities and through existing institutions of international law. If the need develops for an international secretariat to administer these international agreements, it should be established with due regard to the population and economies of the parties involved.

12. Before wide-ranging agreements of this kind are drawn up, either as a whole or even in stages, the States that intend to be party to them should from the outset consult and conclude agreements on administrative aid and on the mutual recognition and enforcement of court judgments, etc., in order to acquire a measure of control over the international activities of these enterprises until effective international agreements have been worked out. Prior to such international agreements or the harmonisation of national laws and policies, better cooperation among government authorities will do much to prevent the circumventing of national laws and policies.

13. The agreements to be concluded must be binding on all firms. There must be no discrimination against multinational enterprises as compared with national enterprises.

INFORMATION

14. The annual public reports of multinational enterprises are to give governments and the public a clear picture of their activities, of their financial situation and of their connections with other enterprises. At least the following information is to be published, broken down by specific operations and countries of establishment:

(a) The financial and overall structure of the enterprise and financial and personal links with other firms;

(b) The funds invested, reinvested and transferred to the country of the parent company;

(c) The origin and composition of capital, existing and new;

(d) The number of employees, the number of jobs created and abolished, the number of host country nationals working at various levels;

(e) The balance sheet and profit and loss account, including gross sales, with taxes paid shown as a percentage of sales;

(f) Expenditures on research and development; and

(g) Income from royalties, licenses and management contracts.

15. The same information is to be provided by comparable national enterprises. 16. Governments are to cooperate in efforts to establish an internationally agreed upon system of standardised annual accounts and reports for enterprises of a significant size.

COMPETITION

17. Multinational enterprises, along with other large enterprises, frequently have technical or financial advantages over their competitors, which means they enjoy a certain position of power. Competition policy should be aimed at checking abuse of this position.

18. To achieve this, the first essential is much more intensive cooperation between the antitrust authorities of the United States and the European Community. Controlling multinational enterprises is made difficult not so much by the shortcomings in national legislation on competition as by the problems in implementing it. The antitrust bodies are frequently unable to prove abuse by an MNE because the necessary evidence is in the hands of another of its establishments abroad. An international agreement should therefore authorize bodies to have access to all relevant information. Moreover, the rapid exchange of information between the antitrust bodies and mutual support in investigations of restrictive practices must be guaranteed. Finally, it must be made possible for antitrust bodies to take joint action against restrictive cartels and against abuses of power.

19. Governments are to agree on safeguards and penalties to prevent the inappropriate or indiscriminate use of antitrust information, for instance, to bring a competitive advantage for another firm.

20. Multinational enterprises are to avoid action which would adversely affect competition, such as price fixing, restricting the freedom of operation of subsidiaries and licensees, acquiring interests in competitively significant enterprises, or engaging in restrictive cartels or agreements. They are also to cooperate with government competition enforcement authorities and provide information requested by these authorities.