1.  The following are examples where companies or a government on their behalf have sought to change domestic legislation aimed to protect consumers. With the added threat of investor-state disputes not limited by political constraints of governments, this pressure will clearly increase. For further information on multinational practice and how it affects consumers see Consumers International's Briefing Papers "Promoting Best Practice" and "Competition in the Global Market". We would add that Austria sought an exemption for all consumer protection laws when negotiating the MAI.

  2.  For four years between 1990 and 1995, US based-Gerber Products Company launched a campaign to force Guatemala to eliminate an infant health law that banned the use of pictures on labels for baby food for children under two years of age. The Guatemalan law implemented the WHO-UNICEF Infant Formula Marketing Code, which was developed to help protect the lives of infants by promoting breast feeding over artificial breast milk substitutes, including through elimination of packaging that would induce illiterate parents to associate formula with healthy, fat babies.

  All of Guatemala's domestic and foreign suppliers of infant forumula and other breast milk substitutes made the necessary changes to their packaging to comply with the Guatemalan law, except Gerber. Guatemalan infant mortality rates dropped significantly after the law passed, with UNICEF holding up Guatemala as a model of the Codes' success in its literature.

  Upon passing the law, the Guatemala Ministry of Health negotiated with Gerber to seek compliance. After several years of watching Gerber refuse to abide by its regulations, the government of Guatemala considered a ban on the company's products altogether. It was at this point that Gerber threatened the Guatemalan government with a challenge under the GATT/WTO. Although Gerber cannot personally launch a GATT challenge to the Guatemalan law, it raised the spectre of a GATT challenge to intimidate the Guatemalan government and obtained US government support for its threat.

  According to Gerber's letter to the President of Guatemala, the intellectual property provisions of the GATT Uruguay Round would not provide for an exception from trademark protection for the enforcement of a conflicting domestic health law that limits use of a trademark. By 1995, Gerber's threats of trade sanctions succeeded when the Guatemalan Supreme Court ruled that imported baby food products are exempt from Guatemala's infant health laws.

  3.  The head of the South African Pharmaceutical Manufacturers' Association (PMA) has threatened the South African government with a WTO challenge over proposed national health laws. This industry group is comprised of subsidiaries of large foreign pharmaceutical companies and is closely linked with PHARMA the US pharmaceutical industry manufacturers association. The law when implemented will encourage the use of generic drugs, ban the practice of manufacturers offering economic incentives to doctors who prescribe their products and institute "parallel importing".

  The US Ambassador to South Africa James Joseph sent a letter to a South African parliamentary committee, urging the government to eliminate the parallel import provisions of the proposed health bill. "The US government," the letter said, "is gravely concerned over the public policy implications of a law which could infringe on intellectual property rights . . ." Joseph claimed that Switzerland, France and the European Union had made similar requests. The Clinton Administration even raised the industry complaint during the President's visit to South Africa in March.

  Many nations not only allow parallel imports but some national antitrust authorities, including the European Community and in Japan, actively take steps to prevent manufacturers from discouraging or impeding parallel imports. There is no restriction in WTO rules against the parallel import provisions in the healthcare proposal. Under such pressures though it is often easier to comply with the private sector's wishes rather than worry about the health of a nation.

  4.  Thailand had banned the import of foreign cigarettes. This was challenged by the US under GATT rules. Since the health consequences of the opening of cigarette markets constituted one of the major justifications for Thailand's cigarette import regime, Thailand deemed it necessary that the panel consult with experts from the World Health Organisation (WHO) on recent experience in countries which had been made to open their markets for cigarettes. This showed that once a market was opened, the United States cigarette industry would exert great efforts to force governments to accept terms and conditions which undermined public health and governments were left with no effective tool to carry out public health policies. Advertising bans were circumvented and modern marketing techniques were used to boost sales. Hence, Thailand was of the view that an import ban was the only measure which could protect public health. Any other measure which allowed imports in any amounts would not be effective.

  The US government on behalf of its tobacco companies further pressured the Thai government for the right of manufacturers of foreign cigarettes to advertise and conduct point-of-sale promotion even though such right was denied to manufacturers of domestically-produced cigarettes. Whilst the GATT panel ruled against the Thai efforts to ban import of cigarettes, it did indicate that a ban on the advertising of cigarettes, while potentially harmful to the interests of importers who were not well known, was justified for public health reasons.

  5.  In India, 13 multinational companies used the High Court to contest Government controls on drug prices which aimed to ensure that medicines were available for all consumers. The Government of India appealed and the supreme court upheld its case. This Court observed that one particular foreign company (Hoechst) charged prices so "unconsciously high, even compared with the prices complained by Hoechst itself, that it appears to justify the charge that some manufacturers to indulge in `profiteering'".

  6.  During a period of official price controls in Kenya (1985-7), the Kenyan Government attempted to persuade a local subsidiary of Unilever which was producing basic goods, to reverse a series of price increases. Unilever resisted and basic items essential to all consumers like cooking fat, oils, soaps, detergents etc, rose by over 250 per cent with a 100 per cent price increase in the period November 1992 to March 1993. The high costs of basic goods creates a burden which falls disproportionately on the poor.

  7.  Consumers International's members have identified instances in which companies produce and distribute products abroad which are banned in their country of origin. Companies sometimes also lobby against the introduction of standards abroad that are already in place in their home country. Examples have included:

—  Pressure from foreign oil companies against the introduction of unleaded petrol in Kenya.

—  The production of pesticides, herbicides and fungicides by Shell in Kenya that are banned in other countries.

—  The promotion of tobacco products in developing countries using advertising techniques disallowed in their home countries.

—  The manufacture abroad by a subsidiary of a Japanese multinational of a painkiller (Bonpiline) whose production and manufacturing were stopped 10 years earlier in Japan due to its strong side effects.

  8.  Consumers International case studies have unearthed a number of case studies of different standards in information disclosure and unethical marketing practices by multinational companies including:

—  In pharmaceuticals, misleading claims about drugs and failure to mention contra indications. Reports from Consumers International members continue to uncover the unethical promotion of drugs by large companies including incentives to doctors to prescribe certain, often inappropriate, drugs. This is a particularly acute problem in developing countries.

—  In the promotion of breast-milk substitutes: continuing breaches of WHO standards in the promotion of baby milk; products carrying no information about the sterilisation of bottles before use; products with labels not written in local languages; labels that fail to mention the dangers of bottle feeding; labels that make misleading comparisons with the content of breast milk. Powdered milk is still promoted as a breast milk substitute by the giving of free samples to hospital maternity wards or gifts to staff and health officials and through other promotional techniques that do not correspond to agreed international guidelines. This includes the continued use of pictures of babies on the packaging of powdered milk. IBFAN's "Breaking the Rules" reports and the report of the Interagency Group on Breastfeeding Monitoring of the UK, all show that in nearly every participating country the major manufacturers of breastmilk substitutes do not comply with the requirements as set out by the World Health Assembly. The reports give evidence of deliberate, extensive and systematic violations of the International Code and resolutions which continue to put infant and young child health at risk.

  9.  Local communities are also threatened by manufacturing processes with low standards of environmental control. Examples of this would have emerged at the Environmental Audit Committee.

  10.  The need for international regulation of anti-competitive practices is highlighted by the following examples:

—  In Pakistan which imports tea, the leading tea suppliers accounted for over half of the market. When the supplier's parent companies merged, Pakistan found that the price of tea rose as the suppliers were buying from Kenya at a price higher than the world prices. Under investigation it was found that the average price of tea imported from sister companies in Kenya was higher than the prices paid by them to other sellers in the international markets.

—  In Chile, Pfizer started a law suit against a rival Chilean company that was importing veterinary antiseptic, claiming breach of patent. The cost of the imported product was about one third of Pfizer's local product. This court action blocked distribution of the drug and some associated products for four years. During the case, Pfizer withheld information about a similar court case contested in Spain which had determined that there were flaws in Pfizer's technical argument. After four years, Pfizer withdrew; in the meantime it had been able to maintain the price of its product and damage a competitor.

  11.  Globalisation and the removal of exchange controls and other barriers to the free movement of capital have promoted economic development. But they have also increased the scope of tax avoidance and evasion and the loss of tax revenues is significant in both developing and developed countries alike.

  Tax avoidance and evasion cause many problems. Governments lose revenues and so taxes on those who do not escape the tax net must rise to plug the gap. Countries where tax compliance is highest lose out, as trade and investment flows are diverted elsewhere. The OECD's Committee on Fiscal Affairs has taken a number of steps to combat international tax avoidance and evasion. For examples, we would recommend you contact them. The problem is exemplified by the fact that California sought to implement a law which taxed international companies according to the share of their operation in California rather than their declared profits as it felt this information was not reliable and they would not be able to obtain the full information elsewhere.

  12.  On bribery and corruption, we would refer the Committee to the OECD's Technical Paper No. 122 entitled "Corruption: The Issues" which highlights the number of empirical studies on bribery and corruption. Again the need for multinational rules in this area has been recognised by the OECD's Convention on Combating Bribes of Officials in International Business Transactions.

  13.  We would also add that it has been shown by a number of studies including by UNCTAD and the DTI, that investment agreements do not in themselves increase investment flows. Thus in answer to a question posed during the oral evidence, it is not a matter of having to choose between higher standards or increased levels of investment.

26 November 1998