Another problem which is evident with TNCs is that they may partake in intra-firm trade. Intra-firm trade is when the TNC trades within the same company, from one branch to another. It is estimated that one-third of all world trade in goods is intra-firm (Willetts, 2001). However the sheer logic of intra-firm trade means that national governments cannot gain clear expectations as to the effects their financial and fiscal policies will have on the companies. The TNCs can avoid high national taxation through intra-firm trade. Transfer prices are the prices set by the TNC for intra-firm trade. Through the setting of transfer prices, firms can control the levels of tax they pay by adjusting their transfer prices, they can pay a higher proportion of their tax in countries with lower levels of taxation than others and as a result experience higher profits.
TNCs also prove to be difficult to regulate when it comes to standards. Due to heir transnational nature, if a company is not happy with the government’s policies in one country, it can simply limit its production or transfer it to another country. Therefore, the countries with the least stringent health, safety, welfare and environmental standards will offer competitive advantages to more socially irresponsible companies. What this effectively means is that it becomes increasingly more difficult for governments to impose high standards. Banking is an area of great global concern with regard to this, where the risks of a bank collapsing due to thoughtless or criminal activity are so great that the major governments of the world have set common capital standards. The Basle Committee rules that all commercial banks must protect their viability by having capital to the value of 8 percent of their outstanding loans (Willets, 2001).
In addition to the problems faced by national governments in regulating TNCs, they also generate conflicts between states through clashes of sovereignty. The problem of extraterritoriality is inherent in all TNCs. For example who has sovereignty over a subsidiary of an American TNCs operating in Britain? The British government would have the right to the subsidiary as part of its internal affairs. Same as the American government would have the right to the parent company. Also both governments would agree that the TNC could control its own policies. The problems arise when for example, the US government impose orders on the parent company to cover all its global operations, this would mean that the subsidiary would have to choose between obeying the British government, or the US government.
Non-governmental organisations too can affect global politics. Just as in domestic politics, in order to gain a full understanding of global politics, the groups which lobby the organisations must be identified.
Article 71 of the United Nations Charter has been amended in order to insert an article granting NGOs consultative status on the Economic and Social Council (ECOSOC). Nowadays, following efforts made by in particular the World Federation of Trade Unions; the Council have formally codified the practice, in a resolution which was in effect a statute for NGOs.
As a result of globalisation, the ability of criminals and guerrillas to influence global politics both directly and indirectly has increased. Indirectly, regulation of criminal activity poses the same problems to sovereignty that TNCs create; the financial flows of criminals can be large and unpredictable. An added problem arises in the fact that money laundering threatens the integrity of banks; Criminal trade, like that of TNCs is extensively triangulated. There is not a government in the world that can confidently claim that its country is not a transit route.
However the problem of extraterritoriality has been addressed in that it is now accepted with regards to criminal jurisdiction and sovereignty is surrendered in order to tackle the most threatening criminals.
However directly, the only limited success that non-legitimate groups can have is that in exceptional circumstances they may be recognised as National Liberation Movements and take part in diplomacy. An example of a NLM is the African National Congress (ANC) and the South West African People’s Organisation (SWAPO) received widespread external support for their fight against the South African apartheid regime. They gained diplomatic status, money and weapons supplies.
The recent revolution in communication technology has also had an effect on global politics. As a result, networks of non-state actors proliferate, altering the functions of international organisations and creating new pressures on states. In particular the internet has greatly improved the capacity of networks to coordinate action, circulate information, and recruit new members. In an age of internet and satellite communications, these networks have the ability to transcend distance completely. As a result of this, it can be said that the political action and the authority based in the network form is deterritorialised; in that distance becomes unrelated to territorial space.
Transnational social movements are efforts by clusters of relatively marginalized actors to promote some sort of social or political change. However, movements promoting different goals not only vary in the actors they mobilise and in their degree of formal cooperation, but they also face different political opportunities in national, intergovernmental and trans-governmental decision making arenas. The intervention of these transnational social movements in national, intergovernmental and transnational political processes alters the decision makers’ perceptions of problems and of the costs and benefits associated with different policy choices. Although many social movements do not often realise their specific goals, they do clearly have an impact on global policy. Transnational social movements can mobilise transnational resources in national conflicts, generate constituencies for multilateral policy, as well as targeting international institutions to affect interstate relations. In the past decade, political scholars have sought a better understanding of these transnational social actors. Peter Haas (1990, 1992) identified the activities of ‘epistemic communities’ in various issue areas, in particular, the environment, global finance and arms control. These epistemic communities are knowledge-based transnational communities of experts with shared understandings of an issue or problem or preferred policy responses. According to Haas, these epistemic communities function essentially as transnational interest groups or bureaucrats.
Altwood’s discussion of the United Nations Special Sessions on Disarmament shows us the now widespread efforts by Transnational Social Movements to play a part in intergovernmental organisations. They do this through regular meetings of councils and assemblies throughout the United Nations and in other intergovernmental organisations. Transnational social actors not only respond to issues placed on the agendas of intergovernmental organisations such as the United Nations, but they also raise their own issues. It is also true to say that they support the development of multilateral institutions such as Earth Action.
Transnational social movements have now been given opportunities by the UN Special Sessions on Disarmament to formally address the Ad-Hoc committee, and also to submit documents for listing and display. This example also does well to illustrate the importance of growing transnational social movement participation in intergovernmental political processes with respect to improving conference diplomacy skills and increasing their expertise on issues.
Anti-Globalists are another group which have been able to play an increasing part in global politics. These groups, known as protectionists feel that they must protect themselves and others from the negative consequences of globalisation. Anti-Globalists can be split up into two distinct sub-groups, Particularist Protectionists and Universalist Protectionists. Particularist Protectionists include groups who blame globalisation for the majority of the political, economic and cultural problems affecting their home countries. They oppose free trade, the neo-liberal agenda of TNCs, the power of global investors and Americanisation. It is also true to say that Particularist Protectionists care more about the well-being of their own citizens than the amelioration of an equitable international order based on global solidarity.
Universal Protectionists on the other hand can be found in various progressive political parties dedicated to establishing a more even relationship between the north and south. They include a growing number of NGOs and transnational networks concerned with the protection of the environment, fair trade and human rights. These groups point to the possibility of constructing a new international order based on a global redistribution of power. Unlike Particularists, Universalists claim to be guided by ideals of equality and social justice for all the people in the world, not just those in their own countries.
In Seattle, USA in 1999, 50,000 people took part in protests against the World Trade Organisation, criticising the WTO’s neo-liberal position on agriculture, multilateral property investments and intellectual property rights, the crowd represented over 700 different organisations and groups from all over the world. The vast majority of the demonstrators advanced Universalist criticisms of free market capitalism and corporate globalisation. Their main message was that the WTO had gone too far in setting global rules that supported corporate interests at the expense of developing countries, the poor, the environment, workers and consumers.
The meeting did not run smoothly, following a delayed start due to the demonstrations, the WTO delegates struggled to reach decisions on key issues such as international labour and environmental standards. Following the meeting and the demonstrations, President Clinton admitted that the WTO needed “some internal reforms”.
With regards to the Nation-State, globalisation has led to the growth of alternative frameworks of community, and as a result it has been weakened. In addition the rise of supraterritoriality has compromised the states previous capacity to monopolise the construction of nations. For example, under prevailing neo-liberal policies, the globalisation of capital has made it next to impossible for states to expropriate enterprises in the alleged ‘national interest’. Through privatisation and globalisation, the state now owns and operates fewer of the communication networks that are critical in the formation of common cultures. Also, it can be said that with the growth of transworld relations, money has come to involve much more than being a state-sponsored national currency. What this all entails, is that the state is no longer able to control many of the circumstances that can spawn collective solidarities. Some of the alternative communities that have developed in this situation can also be classed as nations; however, these national associations do not correspond with an existing state. Between the mid 19th century and the 20th century the state; as the structure of governance, and the nation; as the structure of community were so tightly connected that people could assume that the two where inherently paired together. However the distinguishing features of a nation, which are; a large population; an attachment to a territorial homeland; an emphasis on cultural distinctiveness; and international reciprocal identification, today apply to many communities that are not connected to a state, nowadays, a nation and a state can be said to be completely separate.
As there is now a clear-cut difference between the nation and the state, and as the spread of transworld relations has not meant the end of territorial spaces, we can expect that territorially based governance agencies such as the state to survive quite well in a globalising world. Although it can be said that various non-state actors are continually playing an ever-increasing role in global politics, the states remain the prominent players in the contemporary governance of global flows and they are showing every sign of retaining that significance in the 21st century.
Scholte observes five changes to the state as a result of globalisation. The first being effectively being the end of sovereignty; the reorientation to serve supraterritorial interests; a redefinition of the use of welfare; downward pressures on public sector welfare; and an increased reliance on multi-lateral regulatory relations.
However whatever new world order might be emerging in the course of globalisation, it is true to say that the state has continued to play a major part in it. Even in those countries where ultra-neoliberal governments have been committed to shrinking the public sector, states have often increased their level of regulation (Scholte, 2003). The Bretton Woods institutions too, have recognised the importance of the state for an effectively functioning global market. It is true to say that many states have contracted in relation to privatisations, which have had a total value of hundreds of billions of dollars since the mid 1980’s. Nevertheless state expansion in other areas has generally more than compensated for such a shrinkage. Some of this expansion is related to the spread of supraterritoriality. For example, increased technologies as a result of globalisation have given states surveillance tools and military equipment of unprecedented sophistication and destructive potential. In addition, the growth of global flows has encouraged some states to pursue greater environmental and consumer protection. Therefore in sum of this section, rather than contracting or eliminating the state, the spread of supranationality has tended to create a different kind of state. As many a political theorist has stressed, the state has never in its history been fixed, it is perpetually “in motion, adapting, incorporating… always in some condition of transition” (Jarvis and Paolini, 1995; 5-6).
In concluding this argument it can be said that those actors with the greatest capacity to transcend national boundaries do play a part in distorting global politics. The activities that transnational companies do play a part in global politics by undermining the state. Non-governmental organisations too, can distort global politics, with their increased cooperation with various international organisations. Non-legitimate groups such as guerrillas or national liberation movements can too play a limited part in global politics. Transnational social actors such as epistemic communities play an ever increasing part in global politics, however their influence is still only through recommendations. With regard to the state, there are many ways in which the state has been weakened by the increase in non-state transnational actors, nevertheless the state shows no sign of being abolished, or even changed severely.
Bibliography
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