Multinational Companies  Research  Pollution Havens  Exporting Environmentalism  Natural Resources and Firms: Timber in Asia- Pacific

Little research on trade and MNCs: Why? 1. History of MNC/TNC Research in IR 2. Opaque corporate structures 3. Difficult of generalize

Pollution Havens? Argument involves 5 broad parts: 1. MNCs seek out states with lower environmental & social standards, creating ‘pollution havens’ 2. Pollution havens are generally in developing countries

Pollution Havens? 3. Trade liberalization and global deregulation (as pushed by the WTO) encourages even more pollution havens “race to the bottom” 4. To entice or keep investors, states may lower standards (or resist raising standards), creating a “race to the bottom” in Third World 5. The env. conditions within pollution havens deteriorates over time

Do Pollution Havens Exist?  Common argument, especially among activists  Seems logical, but studies of manufacturing firm shows a weak correlation (stronger links may exist to natural resource firms)  While dirty industries are common in the developing world, but not attributable to MNCs

If Havens Don’t Exist, Why?  Answer is unclear: but reasons include: 1. Fear of liability 2. Risk to MNC reputation 3. Consumer demand for reasonable environmental production 4. Cost of different technologies in different areas 5. Fear of future environmental restrictions

Exporting Environmentalism  Argument of market liberals and institutionalists  That, even though MNCS are not legally required to follow home environment laws overseas (only local laws) some MNCs, esp big ones, export environmentalism two aspects: technology; ideas, management practices

Exporting Environmentalism Why does this happen? 5 Interconnected reasons: 1. MNCs are under pressure to comply (by NGOs, IOs, Gov’ts, consumers) 2. Some firms develop internal codes above host country standards 3. Some follow higher standards “accidentally”, because of better technology & management practices

Exporting Environmentalism 4. Some follow better practices to gain a competitive advantage (because better env technology can be more efficient, produce a higher quality product) 5. Some follow higher standards for risk management (so threat of intervention does not disrupt corporate activity)

Timber Firms in Asia-Pacific  Gained experience in Sarawak, Malaysia: some in Indonesia  Often under private, family control  Many are ethnic Chinese families with close ties to indigenous politicians  Moved overseas as logs became scarcer  Now in S. America, Africa, Melanesia

Timber Firms  SEA firms dominate timber in PNG and SIs (especially Malaysian firms)  e.g. Rimbunan Hijau, controls about 50% of log exports in PNG  Difficult, however, to determine extent of control: complex networks of subsidiaries, affiliates, partners  Sometimes hard even to determine the ‘true’ owner

Timber Firms and Illegalities  Illegal logging in parks and nature reserves  Illegally log outside concessions  Routinely ignore management rules  Illegally set fires to clear land for plantations (especially oil palm)  Bribe enforcement officers, landowners, and politicians

Timber Firms & Tax Evasion  Shift profits to home company, e.g., over-paying for services and products (evades corporate taxes)  Shift profits to tax havens offshore (evades corporate taxes)  Simply under-declare profits in the books (evades corporate taxes)

Timber Firms & Tax Evasion  Under-declare export volumes (evade export taxes on volumes)  Mis-declare species and grades (evades higher taxes on valuable & high-grade species)  Smuggle logs out (evades both export taxes & corporate taxes)

Why are Timber Firms Able? 1. Firms are pursuing quick, large profits, partly responding to high levels of uncertainty 2. Business executives have more skills than landowners 3. Governments lack the political will to enforce rules 4. Governments lack the technical capacity to enforce rules

Conclusion  Need to stress complexity of MNC effects on Third World  Evidence MNCs sometimes raise standards (US chemical MNCs, see Garcia-Johnson)  Evidence MNCs sometimes slash and run (e.g. tropical forests, minerals, fishing)