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Multinational Corporations

The dramatic growth in recent decades of the multi-
national enterprise has been one of the most dynamic
factors in the expansion of the world economy. Multi-
national enterprises have brought massive transfers of
capital, technology, and managerial skills contributing
to an improved standard of living in the industrialized
West and to promising growth rates in many developing
countries.

At the same time, some countries are concerned
at the growth of foreign influence in their economies
which they fear may not be responsive to national
priorities. Others are concerned that these enterprises
may evade national taxation and regulation through use
of their facilities abroad. New questions have been
raised in recent days by disclosures of illicit or

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improper financial relationships between investors and
government officials in several countries.

The United States Government understands and sympathizes with these concerns. Our experience in dealing with corporate activities and a system of regulation is as long and effective as any in the world. But experience has taught us that too much regulation -- or the wrong kind of regulation -- can be damaging and frustrate our common economic objectives.

The present climate of criticism and the increasing pressures for new national and international regulation if carried too far could undermine the efficiency of multi-national enter/ and seriously inhibit their contribution to the world economy. All members of the international community would be hurt, particularly the developing countries, whose possibilities for improved standards of

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living depend in large measure on the capital, technology
and managerial skills which these enterprises are best
able to provide.

The developing countries increasingly emphasize the
importance of trade to their future development, but the
benefits of improved access to markets will be completely
illusory unless the developing countries can attract the
foreign investment necessary to build new productive
capacity to serve those markets.

What is needed is an international consensus on the
role and responsibilities of multinational enterprises
which will permit them to make their vital contribution
to the world economy while providing assurance to
governments of host countries. Ideally, international
law would have the key role in providing a system that
would encourage investment and protect the interests of all.

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[4]

Unfortunately, the experience of the last decade shows the difficulty of obtaining agreement on an investment treaty even among like-minded states. Past efforts of this kind have failed and the present political environment is even more unpropitious for such an initiative.

For the time being, the development of law in this area can be best pursued through direct negotiation between governments to harmonize laws relating to restrictive business practices and accounting procedures.

At the same time, the prospect exists for widespread acceptance of general, non-binding principles of conduct relating to multinational enterprises. Work on such principles of conduct is going forward in the OECD, in the United Nations system, and in the OAS.

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M

The United States believes an agreed statement of principles for multinational negotiations could be beneficial. We will work constructively with the international community to see if agreement can be achieved.

But, such principles must be workable and fair.

- First, they must be addressed to all enterprises which operate in more than one country. The U.S. could not accept a code addressed exclusively to private enterprise. State-owned enterprises are a factor of increasing importance in the international economy and should be held to the same standards as private multinationals.

- Second, principles established for multinational enterprises should apply equally to domestic enterprises similarly situated. A system which discriminates in favor of the domestic competitors of multinationals is not acceptable.

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[Y]

- Third, such principles must contribute to an improved climate for investment. This requires a clear understanding that multinationals will observe the laws of the countries in which they operate and be responsive to the needs of those societies. But, equally, multinationals must be treated with fundamental fairness and in accordance with international law.

- And finally, principles to govern multinationals must seek to avoid conflicts between the regulations applied by various states and to resolve disputes relating to their activities.

A common-sense, cooperative effort based on the objective of mutual benefit is needed soon if this vital means of spreading prosperity around the globe is to continue its impressive and valuable expansion.

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## Conclusion

Since the days of the early Republic when, driven by our growing role in world commerce and seeking to perfect our new sovereignty, Americans have seen that our nation's self-interest cannot be divorced from a just and progressive international legal regime. And we have recognized its moral significance for human progress since the days of Kent and Story, who noted that the law of nations both expresses and requires "concurrence in those great principles upon which the systems of civilization rests."

The demanding realities of our age have brought a new dimension to the foreign policy of this and other nations. We now face an increasing range of problems central to our national well-being but which are by definition, global problems and can be dealt with only on a global scale.

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Closing the areas of disagreement on these issues will require patience, understanding and a willingness to reconcile national and international requirements. Agreements, however, are both possible and essential in the interest of a rational future for all the world's people.

Success in reaching agreed positions on these questions could well establish a pattern of future cooperation among nations -- a demonstration that nations are prepared to work together, compromise differences and create new dynamic methods of dealing with problems of common concern in ways of mutual benefit. Most important of these may be the Law of the Sea. Success at Geneva is an international imperative. For the alternative is a welter of conflicting national claims

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to broad expanses of the oceans and its resources, a situation
in which the concept of sovereign statehood, with all its
potential for conflict, is extended over three-quarters of the
earth's surface.

Our ability to manage all these issues diminishes with the
passage of time; our concern with the confrontations of the
present and the divisions of the past detracts from our vision
of the future.

I am confident that mankind shares the foresight, goodwill
and determination to go forward in cooperation. Our sustenance,
growth, security and survival may depend on it. To do so, the
community of nations must find a new concurrence in those
great principles upon which civilization rests.

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The United States is committed to the exercise of reason,
the development of law and the application of equity for all.
We call on others to join us in the great task of building for a
better world of harmony, stability, progress and mutual benefit
for all the world's peoples.