Power of multinationals in Third World under U.N. fire

Press, 22 May 1978, Page 22

Power of multinationals in Third World under U.N. fire

By PETER HULM, NZPAReuter correspondent Geneva a Multinational corporar tions. already under attack d for their production and ei investment policies, have e drawn new fire from the c United Nations for their s' role in marketing and dis--1 tributing the Third vl World’s exports and imi' ports. i| The charges range from ;, I price-fixing to total cont [ tro) of trade channels, i they include tax avoisdance, ‘‘multi--I nationalisation" of nat- -; ional firms, cartels, and e devices to spirit excess y profits out of the country, s Multinationals’ control - over world marketing and n distribution has an even -i greater impact on devel- ; oping countries than for-_

eign investment and manufacturing policies, according to a study by the secretariat of the Gen-eva-based United Nations Conference on Trade and Development. The report is to be considered in November at the next meeting of the manufacturers committee of U.N.C.T.A.D. the main United Nations body concerned with promoting Third World trade. Multinational companies, also known as Transnational corporations. handle most developing countries’ imports and a large proportion of the exports pass through them, according to the U.N.C.T.A.D. report. In countries where they dominate trade channels, even as buyers, multi-

nationals can fix the design and styles of manufacture required, set prices and delivery dates, control production and quality, and organise shipping and marketing, the report says. Multinationals’ position in developing countries enables them to manipulate prices to force local competing firms out of business, and charge whatever the local market can bear for their products, the report says. Transnational companies can also use their position “to transfer monopoly or excess profits abroad, to circumvent taxation, or to control the flow of exports and imports,” the U.N.C.T.A.D. secretariat says. Multinationals are also gradually taking over domestic firms until they have complete foreign control of an industry. “The electrical industries in Brazil and Mexico provide an outstanding example of the denationalisation process of well-established national industries in developing countries through acquisition of local firms by transnationals,” the U.N.C.T.A.D. report says. The U.N.C.T.A.D. ' experts call for industrialised and developing countries to take action to limit restrictive business practices by multinational companies to control marketing and distribution. Developing countries could set up import and export trading houses together, and establish direct marketing outlets in principal foreign markets to increase their bargaining power and role in supplying goods to consumers, the experts suggest. They say that more than 30 per cent of world trade is business between branches of the same firm, and estimate that as much as half of the Third World’s international transactions were trade within firms. “In many cases, transnationals control the whole chain of operations, from the extraction of the raw materials to the sale of the final manufactured goods.” the report says. The United Nation experts say that public information about cartels was scarce, but comments “Their existence, however, is well acknowledged.” A West German study has concluded that multinationals take part in some 70 per cent of all the export cartels in the

country. In Britain, transnationals are members of 29 of some 41 international export cartels. “Collective action by transnationals seems to be especially marked in such key sectors as electrical engineering chemicals (including man-made fibres), and certain raw materials and their processed products, which are of great trade interst to developing countries. “Spheres of influence are manifest in the exports of transnationals to small developing countries, which as a result have to pay higher prices for imports of machinery, chemicals, iron and steel than are paid for comparable imports by larger developing countries.” Brand-names are also concentrated in the hands of multinationals, the report says: “Unilever, for instance, has over 100,000 registered trademarks throughout the world.” In 1974, 88.4 per cent of the new trademarks registered in Africa were for-eign-owned. and 65.2 pet cent in Asia. > A recent development is franchising of trade marks, giving another person or firm the right to use the brand name, and this is likely to become important in the marketing and distribution activities of multinationals in some sectors, the United Nations experts predict. “Currently, franchising is the preferred practice in the marketing of soft drinks, automobile distribution, car rentals, and the hotel industry.

“Action needs to be taken to limit the ways in which patents and trade marks may be used foregulating imports and exports and also isolating markets and maintaining high prices.” The report blames both industrialised and developing countries for helping multinationals to gain control over marketing and distribution channels.

Most rich States give tariff concessions for products processed or assembled abroad if the original materials or components come from these States. Government supervision of transactions within firms has been minimal, the report says. Developing countries have given transnational corporations a . virtual monopoly over manufacture of' products, which have strengthened the firms’ control over marketing and distribution.