TUESDAY 17 NOVEMBER 1998

MR RICHARD BATE

  60. Mr Bate, really what you are saying, which seems eminently reasonable to me, is that a business is there to invest and to seek to make a profit, but it does not have a responsibility to be a social, cultural or environmental policy-maker for the world.
  (Mr Bate) That is right. It is not the investors' responsibility to do that, but investors will abide by the local legislation, yes.

  61. But is it not also true, especially with the big investor taking a big investment in a small country, that that investor can put a lot of pressure on the government of that country by the effect and the character of the investment, to put pressure on them not in fact to bring up the standards of labour legislation, et cetera, on the grounds that if the labour legislation is changed, they will just take their investment somewhere else?
  (Mr Bate) I think it is fair game, if you like, for an investor to establish whether governments want to raise standards. As I said a moment ago, investors are not there to set the laws, to write the laws, but investors are there to play the game under the rules that are there at the time and if countries want to raise standards, which is perfectly normal and perfectly acceptable, the only question that investors would have is, "Please don't discriminate against us. Make sure that we have the same rules as existing companies in the country concerned".

  62. But it is not really a game, is it? These investors are coming from countries that have much, much higher standards than the countries they are seeking to invest in and do these investors not have some moral responsibility to try and improve standards?
  (Mr Bate) I do not think it is a question of moral responsibility on the investors. It is not for investors to try to run countries. Investors are businesses. The people to run countries are the local governments, I think.

  63. Would you, therefore, think that it would be unethical for large companies to put pressure on governments to influence policy and to change policy? That would be something or that would not be something that you would be expecting to happen?
  (Mr Bate) I think it is perfectly in order for companies to find out from governments what their policies are in legislation in various areas, to clarify and find out and say, "Are you proposing to do this or that?" or "We don't think that is a good idea because . . ."

  64. To seek to amend?
  (Mr Bate) Well, I think it is in discussions that businesses have with governments all around the world, just as in business in this country we come along to the DTI and discuss with the DTI, and at the end of the day the House of Commons makes a ruling and business will comply with it and that should apply all around the world.

  65. It seems to me that when you look at big businesses, they actually trawl themselves around the world to look for the country with the weakest laws, lack of representation on labour laws, lower environmental standards, and at the end of the day unfortunately investors do actually try to take part in government and in some cases have propped governments up. I do not think you can actually disagree with that. Do you not think there ought to be some ethical and moral responsibility by investors at times?
  (Mr Bate) Most big companies that I am aware of, certainly most of the big UK companies, have their own codes of conduct, their own codes of practice which encompass the sort of points you have just been making. It is not in the best interests of companies at the end of the day to carry out their business in an unethical or immoral way because at the end of the day they will be found out and people will stop buying their products. I am not saying it has never happened, but companies are getting much, much more aware of their social responsibilities and in fact the DTI and the Department for International Development have got many, many company codes of conduct which we have been gathering for them because companies are realising that they have got to take an ethical, responsible approach to their businesses and their investments.

  66. Do you agree that some companies in the past have propped up regimes and kept dictators in place?
  (Mr Bate) I am not aware of that. I would not say yes or no to that.

  67. Yes, but there are some parts of the world, for example, India, with absolutely minimal environmental standards, ship-breaking activities which are taking place with all the environmental problems and the hazardous working conditions. Are you saying or is it tantamount to what you are saying that that is somewhere where perhaps UK companies should be directing their activity, perhaps away from the UK? We have got the controversy that has been around for a period of time and flared up over the Brent Spar. Would you, for example, be advocating that maybe companies should be directed to the Indian Sub-Continent where, let us be frank about it, environmental standards are particularly lax?
  (Mr Bate) No, I would not say that. Companies and the big multinational companies in this country—I am just thinking of the codes of conduct that they have—they lay down that they will behave in a certain way wherever they are operating. Companies do not go around the world looking for a cheap place to do something. That is not their motivation. Their motivation for investing in a country is: is there a need for our product or service in that country? They do not say, "Where is the cheapest place to go? Where are the lowest labour standards? Where are the lowest environmental standards?" or, "Where can we break up ships?" if they are not a ship-breaking company. They are looking for a marketplace for their product or service in the first instance. At the end of the day they have got to survive by producing a product or service which, if it is not relevant, there is no point in producing it.

  68. But would you agree with me that there are activities that some well-known, for example, UK companies are undertaking, some of the very close associations that they have with some of the perhaps notoriously bad military regimes in places like South America, which again is very recent in the news? They are large or reputed to be large companies, maybe in joint ownerships. They may have the ethical practices and codes here and all very laudable, but in practice in the farther-flung corners of the world, they tend to get away with what they can get away with.
  (Mr Bate) I do not think that is something which the major UK multinational companies do which I am aware of. They have their codes of practice, and they are doing their best to stand by their codes of practice, I do not think that is what the major UK companies are doing.

  69. If that is the case, who is it that is going to be afraid of the kind of things some people want to write into the MAI, these minimum standards for environmental and consumer protection?
  (Mr Bate) The business community was a little bit disturbed when environmental standards and labour issues were brought right at the last minute into the MAI because we said that, first of all, it is a very complicated agreement and right at the last minute bringing these extra clauses is going to complicate it and may stop the agreement being signed, and in any event we believe that the ILO is the right body to look after labour standards. They are the experts in this, so let them do it. There is a Commission on Sustainable Development which meets in New York every year looking after the environment. There is a WTO committee on trade and the environment. We were saying, "Try not to bring them in just to complicate the agreement". The MAI at the moment is not asking for environmental standards to be lowered anywhere and all business is saying is, "We will abide by the environmental regulations of the country where we are investing and the labour regulations and whatever".

  70. Therefore, if we take the argument that it complicates the MAI, would you support negotiations on a separate multilateral agreement specifically, say, on labour policy or on environmental policy or consumer protection or on all the other things?
  (Mr Bate) I think the intention under the MAI was that environmental issues and labour standards would be as an annex to the MAI. Business would be quite happy with that.

  71. What would the difference of an annex make?
  (Mr Bate) I think it was really just that to enshrine the clauses in the original MAI was just going to complicate it. Business is not frightened of environmental standards or labour standards. It was just that the reason why this time last year we were sort of backing off, saying, "Oh dear, let us not have the agreement complicated" was just that. We wanted to see an agreement and we felt that if you brought environmental standards and labour issues into the agreement, it would just complicate it, so we would never get an agreement. We were saying, "Look, the ILO are the experts in labour standards. Let them handle it".

  72. But do you not think, Mr Bate, that one of the problems seems to be from the previous witnesses we have had this morning that around the MAI there was a kind of veil of secrecy, that NGOs were not consulted at early stages and it was only when they began to appreciate the immensity of what was perhaps going to be signed that they began to put pressure on and that perhaps had there been a more transparent approach earlier on, then we might not have had this late avalanche of amendments and addenda relating to the environment, labour standards and the like and that perhaps the sponsors of the MAI were the victims of their own secretive approach?
  (Mr Bate) I do not believe that the MAI process was ever secretive. There have been public meetings in Paris at which government organisations, local government organisations, consumer groups, business, unions have all taken part. We have never had any difficulty in coming along to the DTI, for example, and saying, "We would like to give you our views". Our views have been welcomed. We do not believe that it has not been transparent.

  73. You said earlier on that you recognise the great limitations of it being an OECD-based negotiation. The rich countries got together and decided to discuss arrangements for international investment and you used the term "outreach programme" for developing countries. Now, is this not precisely the problem, that the non-OECD countries, most were not actually even outreached, but they certainly were not equal participants in this discussion and, therefore, I think the Chairman's point about the somewhat exclusive way in which the attempts originally to broker an agreement were being made clearly has caused great anger, to put it mildly, in some quarters and hence it is hardly surprising that a whole range of other issues then subsequently get involved.
  (Mr Bate) I think that is fair comment. The OECD would not have been the organisation of choice, if you like, to set up these discussions in the first place, but there was nowhere else at that time because the WTO had really not taken off. One advantage of the OECD was that they actually do have experience and expertise in these sort of international agreements and we were looking for what we have called a "high-quality agreement" which would hold together through thick and thin. The discussions have broken down and one of the reasons is that perhaps the OECD was not the right forum. Fair enough. So what we are saying is that maybe it would be sensible to go to the WTO, but what I hear from comments that NGOs make to me is that maybe the WTO would not be a very popular place for some of them to go to. What I am saying is that there has been built up over the last two or three years a great deal of experience and expertise within the OECD to take these negotiations forward and it would be an awful shame to lose that, and obviously we have got to get this MAI moving again somehow, so let us try to find a way of overcoming the disadvantages of holding it within the OECD, which is why I made the comment about a sort of outreach programme because yes, other bodies must be brought in.

  74. I would like to get some clarification really about something you were saying earlier about companies not looking around places to transfer investment based on issues like environmental legislation or whatever. I find that very confusing because are you saying that there are not examples of people transferring manufacturing and production into different countries or choosing to invest their development plans in different countries because of their environmental and labour legislation?
  (Mr Bate) No, I think companies do not make investments just based on one reason. There is a whole raft of reasons and there has to be a marketplace for whatever they are making, their goods or services or whatever, maybe it is countries where they find their raw materials, or maybe there are certain skills available in certain countries around the world. There is a whole host of different reasons why companies make their investments, not just one. I do not believe that a company would say, "Where are the lowest environmental standards in the world? Right, we will go and build our factory there". That could be a reason, but it would not be the prime reason.

  75. So do you think in terms of good company development and good international development that companies should not invest in countries which do not meet ILO standards?
  (Mr Bate) No, I do not say that. I think that companies must be free to invest wherever they wish to invest. Companies must then obey the local laws, but one of the advantages of big companies investing around the world is that they tend to take their best practices with them and they tend to take their best practices and educate the local workforce or whatever and train them so that at the end of the day it is very often that labour standards are improved as a result of companies investing in countries.

  76. So would it be fair to say that you believe that companies should only invest in countries that do not meet ILO standards if their operation meets or exceeds ILO standards and improves local practices?
  (Mr Bate) Companies must always obey local national laws. Companies do not go around and say, "Where is there a country in the world where ILO standards are very low? We will go and invest there".

  77. That was not the question I was asking. The question I was asking was do you believe that companies should only invest in countries which do not meet ILO standards if their own practice either meets or exceeds them, so in fact they are improving on the standards, that they should not take advantage of poor practice or dangerous practice, but that they should actually accept that there is an international standard that the ILO are recognised as being experts in and they themselves should actually choose to promote that practice?
  (Mr Bate) I think you will find that most companies with their own internal codes of conduct and rules of doing business would respect international standards. I am sure they do.

  78. And do you think that is something which should happen?
  (Mr Bate) I think that is something that would happen. Companies are doing that.

  79. Mr Bate, let us face it, at the moment we have OECD guidelines for multinational enterprises and it could be said that the MAI was merely going to incorporate that into a more general framework, but do you think there would be any greater adherence to these guidelines if they were in the MAI than there is at the present moment because it seems that people just choose to ignore the guidelines when it suits their purposes?
  (Mr Bate) One of the benefits of an MAI would be that the OECD guidelines would be built into the MAI, as was an undertaking not to lower environmental standards or to lower labour standards, so one of the benefits of an MAI would be that the OECD guidelines, on which there is a meeting in Budapest this morning, I think, would be built into the MAI, so that would be a benefit.