FURTHER SUPPLEMENTARY QUESTIONS

1.   It would be helpful to have some examples of the barriers faced by firms intending to invest abroad which have recently been brought to your attention (Q126)

  The exceptions listed by countries negotiating the MAI gave a flavour of the type of barriers to foreign investment. These range from outright or partial prohibitions in certain sectors, for example, ceilings on the percentage of shares held by foreign investors, to restrictions which deny foreign companies the same treatment as domestic companies in terms of, say, access to grants and subsidies, the granting of licenses or the ability to operate through branches. They also include screening of foreign investment, now only deployed by a few OECD countries, and real estate ownership restrictions. Some of these are justified because of prudential concerns or requirements stemming from other international agreements or because of the need to show an economic link with a local community but for others the case is more tenuous.

  There are other forms of barriers which companies face, mainly outside the OECD countries. Often these are less transparent than most of the examples given above. They relate to issues such as corruption or the absence or arbitrary nature of the domestic regulatory system, for example, poorly enforced intellectual property rights or other forms of tenure, questionable impartiality of the domestic legal system and prejudiced actions by the authorities which seriously interfere with the lawful conduct of business.

2.   Can you tell us the latest position with regard to the challenge made by EU members to the secondary boycott legislation enacted by the US?

  The case brought in the WTO by the EU against US sanctions legislation on Cuba was suspended while the negotiations leading to the 18 May Understanding were in progress. That Understanding has, we believe, resolved the situation. The EU does however retain the right to respond should the US take action against EU companies under either the Helms/Burton legislation on Cuba or the Iran and Libya Sanctions Act in breach of the Understanding.

3.   With regard to the OECD Guidelines for Multinational Enterprises and your answers to our previous questions, it would be helpful to have further detail about:

(a)  The issues stemming from the two enquiries made from non-governmental bodies to the UK's National Contact Point with the OECD in 1998.

  The issues raised in the two enquiries to the UK National Contact Point related principally to allegations of non-compliance with the Guidelines recommendations on environmental protection. Following our examination of the allegations, we were not able to conclude that there was a breach of the Guidelines in either case.

—  One case related to a UK-based company that was studying the possibility of engaging in an infrastructure project in a non-OECD country. It was suggested, among other things, that the company was involving itself in local politics contrary to the spirit of the Guidelines, and that it was seeking to establish a monopoly position for itself (the company has since decided not to proceed with the development).

—  Another case related to a UK-based company planning to build a manufacturing facility in a non-OECD country. It was suggested that the company had not taken proper account of the environmental issues involved. The Government of the country in question was consulted; they expressed their opinion that the company had carried out a full and detailed environmental impact assessment, which had enabled the Government to make an informed decision on allowing the plant to proceed and on what terms.

  The Government is sensitive to the question of the application of the Guidelines to activities of multinational enterprises in countries outside the OECD area. This is one aspect of the current review of the Guidelines where we will hope to see a useful clarification.

(b)  The promotional activities undertaken by DTI to inform businesses of the Guidelines, including any estimate made of the penetration of such promotional activities amongst UK firms.

  We have ensured that the details of the UK National Contact Point are available on the OECD website. The National Contact Point has made copies of the Guidelines available directly to enquirers—although there has been only a small number of these. The UK has involved business, trade unions and civil society in its consultations on the periodic reviews of the Guidelines.

(c)  The extent to which DTI has surveyed UK based multinational enterprises to assess their compliance with the Guidelines; and the results of such surveys.

  In common with other OECD countries, we have not carried out any formal monitoring of compliance with the Guidelines. Informal discussions with industry representative bodies suggests that awareness of the Guidelines is low.

(d)  The objectives of the current review of the Guidelines and the timescale for that review.

  The overriding objective of the UK in the current review is to ensure that the Guidelines are strengthened in those areas where they are perceived to be weak and that at the end of the review they emerge as an up-to-date set of recommendations on the behaviour of enterprises. While the review is still at an early stage, we have already proposed specific changes to the labour relations and environmental chapters. This entails incorporation of the ILO Declaration on Fundamental Principles and providing a clear focus on sustainable development. We will also wish to see a strengthening of the procedures for dealing with the question of non-compliance and a clarification of the application of the Guidelines to non-member countries. Additionally, we will look for the review to commit all parties—Goverments, Business and Trade Unions—to greater promotion of the Guidelines. While pressing for relevant changes to the Guidelines, we shall also work hard to ensure that they retain their wide, tripartite acceptance.

  Most member countries want the review to proceed at a steady pace so that all the issues are fully identified and analysed. The review commenced formally in June 1998 and is likely to be completed within a period of 18 months-two years.

4.   What assessment has DTI made of the extent to which UK national or local government bodies utilise any pensions or investment schemes which discriminate on the grounds of either nationality or companies' ethical standards?

  Those responsible for funded pension schemes must always act in the best interests of the beneficiaries of the fund. They must therefore demonstrate that their overriding concern is to seek the best return for the scheme members.

December 1998