GB.274/MNE/2 - Governing Body

ILO is a specialized agency of the United Nations

GB.274/MNE/2 274th Session Geneva, March 1999

Subcommittee on Multinational Enterprises	MNE

SECOND ITEM ON THE AGENDA

Developments in other organizations

1. This paper is submitted in accordance with an earlier request made by the Committee on Multinational Enterprises. It briefly summarizes developments in, and the activities of, various international and regional intergovernmental organizations which have codes, guidelines or some form of instrument relating directly or indirectly to multinational enterprises and their activities, and updates the information submitted to the Subcommittee at the Governing Body's 268th Session (March 1997).⁽¹⁾ The Office gratefully acknowledges the cooperation of those organizations that responded to its request for information.

Council of Europe

2. The Council of Europe informed the Office that neither the Social, Health and Family Affairs Committee nor the Committee on Economic Affairs and Development of the Parliamentary Assembly had anything new to add to earlier information.

UN ESCAP and UN ECA

3. The UN Economic and Social Commission for Asia and the Pacific (ESCAP) and the United Nations Economic Commission for Africa (ECA) had no input to offer at this time.

European Commission

4. A Symposium on Codes of Conduct and International Labour Standards was organized jointly by the European Commission and the United States Department of Labor. It brought together representatives from a wide range of organizations with a shared interest in the development and implementation of codes of conduct on labour standards. These organizations included businesses, labour unions and non-governmental organizations.

5. The transatlantic dialogue was a first attempt to share experiences from both sides of the Atlantic, and was continued at a follow-up event held in December 1998 in Washington, DC, at which some of the issues raised in Brussels were discussed in more depth.

6. At the Symposium there was widespread agreement that more needs to be done to eradicate violations of labour standards at the workplace. No one, whether they are consumers, businesses, or governments, wants to be associated with exploitative employment practices which, nonetheless, are endemic, particularly in the developing world.

7. In the words of one non-governmental organization (NGO), the recent proliferation of codes of conduct reflects the failure of governments and international organizations to enforce minimum labour standards. Corporate codes of conduct are no substitute for national and international labour regulations enacted and implemented everywhere. Public and private initiatives in the area of labour standards should be seen as complementary and mutually reinforcing. As for corporate codes of conduct, in the worst case they are established purely as a public relations exercise to reassure consumers that they do not have to worry about the social conditions under which certain products are manufactured. In the best case, codes of conduct could provide a means of enforcement through contracting in the absence of viable alternative enforcement mechanisms.

8. Ideally, codes of conduct would become the basis for joint efforts to seek lasting improvements of working conditions. This ambition seems to be behind many partnership initiatives involving business organizations, labour unions and NGOs.

9. Another view was that, aside from pure public relations, there are valid business reasons for companies to improve conditions of work through codes of conduct. For one thing, business partners that follow codes of conduct are also the ones that are likely to deliver a good product on time and at a fair price. Second, where workers are treated fairly there is likely to be higher productivity, lower turnover, and fewer workplace disruptions. A representative from the business sector added that, in addition to heightened consumer concern over exploitative labour conditions, businesses support codes of conduct because they want to ensure that no competitor is able to gain an advantage through such exploitation. Indeed, codes of conduct can be used in a defensive way by trying to discourage the purchase of goods that are produced under socially undesirable conditions. This may generate fears that such codes of conduct might become a new form of protectionism that prevents producers in poor countries from gaining access to markets in the developed world.

10. The kinds of labour standards covered by the various codes of conduct differ widely and the common ground does not seem to stretch far beyond the rejection of child labour. Codes of conduct often use ILO Conventions for the definition of core labour standards (prohibition of child labour, forced labour, discrimination on grounds of sex, race, religion, etc., and the guarantee of freedom of association and collective bargaining). Other initiatives use the Universal Declaration of Human Rights and the United Nations Convention on the Rights of the Child.

11. Trade union participants at the Symposium expressed the fear that respect for other labour standards might be regarded as a substitute for freedom of association and collective bargaining and bargaining rights. They also stressed the importance of free trade unions for the effective monitoring of codes of conduct. The trade unionists' arguments focused on the need to avoid a "pick-and-choose" attitude whereby companies select the most convenient code of conduct for them. They also stressed that the coordination of codes of conduct would help suppliers or subcontractors who might otherwise have to comply with a different code for each of their major customers.

12. One company representative explained that there are similar discussions in progress on various continents and that some form of cooperation and coordination needs to be established between these processes involving companies, human rights organizations and trade unions. Another company representative even went a step further and called for the development of a single code of conduct, since a multitude of codes leads to confusion (this speaker argued) and is likely to slow down their adoption by many organizations.

13. The Symposium participants also discussed how far down the supply chain a code of conduct should reach. There are clear-cut cases: one extreme would be a fully controlled foreign subsidiary; at the other end of the spectrum would be producers of a minor input bought through the open market (e.g., dyes for textiles). In the former case, codes of conduct must be observed; in the latter, a code might be impossible to implement. In between there is a vast grey zone. Small and medium-sized companies (SMEs) were mentioned by several participants as a special case. Even a relatively small importer in an industrialized country can have considerable buying power. What it might lack, though, is the ability to carry out monitoring, including on-the-spot checks. What seems to matter is the degree of control a company has over the employment conditions of all workers employed by subcontractors. Such control is not only exercised through direct ownership or large orders, but also through the award of licences for the use of intellectual property rights (a large publisher or media corporation could have thousands of licensees using copyright material). One speaker suggested that companies shorten their supply chains as a means of ensuring that labour standards are respected.

14. It was well understood by the participants that once a code has been developed it needs to be brought to the attention of a wide range of people: workers, suppliers, other interested stakeholders, and the general public. Employees who are protected by a code must be informed that it exists. Business partners need to be told about the code and the way in which it affects contractual obligations. To enhance the effectiveness of a code it is also useful to advise trade unions and NGOs of its existence, and in particular of its content, scope and monitoring. Finally, businesses may want to inform the general public and particularly consumers of their adherence to a code of conduct. Large companies selling well-known consumer products may use a code of conduct to establish or enhance an ethical brand image. It may also be helpful to convey a message about a company's code of conduct through product labels.

15. The pros and cons of instituting a labelling programme, a related issue, received a good deal of comment, especially from the European participants. The discussion centred not on whether labelling is a good thing in itself, but rather whether such a regime could be made credible to consumers, given the multitude of entities along supply chains.

16. A key question regarding the implementation of codes of conduct is whether they are used as an internal management tool or as a public commitment to the outside world. Some companies prefer to remain discreet about their internal code, which is designed to help them establish solid and durable business relations with their suppliers. However, there are strong motivations for companies to make their commitment public and to show consumers that they sell products that are manufactured under adequate employment conditions. A company code of conduct can help to establish an ethical brand image that can become a source of competitive advantage. The overwhelming consensus at the Symposium was that in order to establish such an advantage a company must submit to external and independent monitoring, although this does not necessarily imply that internal monitoring does not also have a useful role to play.

17. Several speakers emphasized that monitoring -- be it internal or external -- must be carried out professionally. It should not be primarily the responsibility of either trade unions or NGOs. The preconditions for professional monitoring are that the standards are clearly defined and that staff has been trained to carry out factory inspections.

18. Several speakers stressed the need for the accreditation of monitors. In addition to ensuring professionalism, this would also constitute a guarantee that monitoring is truly independent. The accreditation process could be overseen by a foundation in which representatives from businesses, organized labour and human rights organizations would cooperate. Another role of such a foundation could be to determine what remedial action would be acceptable once a breach of a code of conduct has been found. Despite calls for the professionalization of monitoring, trade union representatives in particular stressed that their organizations had a very important role to play in the implementation of codes of conduct. Some speakers even suggested that the existence of trade unions on the shop floor might make external monitoring unnecessary. In the words of one labour participant, "the best monitoring is having a trade union, freely selected by the workers, in the plant representing the workers". It was also stressed that trade unions can rely on their informal networks and direct contacts with workers to gather information on employment conditions. In the absence of local trade unions, NGOs could have a more important role to play with regard to monitoring. One trade union speaker qualified them as "ad hoc watchdogs", adding, however, that they would not normally have the expertise to examine complex workplace practices.

19. Participants also discussed the issue of certification of suppliers. In a certification regime, contractual relations with other companies would only be entered into if these other companies produce evidence that they comply with the standards laid down in a code of conduct. The certificate proving this compliance would have to be renewed at regular intervals following a social audit of the company. A certificate could be revoked if there are substantiated complaints about violations of the standards required by the code of conduct. As soon as codes of conduct are more standardized and a generally accepted monitoring procedure has been established, there could be systematic certification of suppliers.

20. Other issues discussed included SMEs and certification, how to deal with breaches of codes of conduct, the role of the authorities in the implementation of codes, etc.

Food and Agriculture Organization
of the United Nations (FAO)

21. Food security is of the utmost concern to FAO. It helps countries protect their crop production throughout growth, harvest and storage cycles and in commercial trade. FAO has several activities that are multilaterally mandated and recognized as leading means for protecting the world's plant resources and managing pests in effective, sustainable and environmentally sound ways.

22. Agenda 21, the global action plan for sustainable development approved by the 1992 United Nations Conference on Environment and Development (UNCED), highlights the need for environmentally safe management of toxic chemicals, including pesticides, and identifies several areas where FAO serves as the technical agency assisting countries in achieving this objective and in the development and use of sustainable and sound agricultural practices.

23. The World Trade Organization (WTO) recognizes the International Plant Protection Convention, administered by FAO, as the multilateral agreement by which countries set international standards for phytosanitary measures.

24. The FAO Plant Protection Service and its various component bodies address international aspects of plant protection, promoting effective strategies that are safe for human health and the environment, in collaboration with national and regional plant protection organizations. A new development is the Global Plant and Pest Information System which emphasizes information-sharing through a participatory approach, using an interactive database on the Internet.

International Plant Protection Convention

25. FAO has been the lead international organization for plant quarantine since the International Plant Protection Convention (IPPC) was adopted by the FAO Conference in 1951. The IPPC is deposited with the Director-General of FAO. As of July 1998, 107 countries have adhered to the Convention. The purpose of the IPPC is to secure common action to prevent the spread and introduction of pests of plants and plant products, and to promote appropriate measures for their control.

26. A major achievement was the approval of a new revised text of the Convention by the FAO Conference in November 1997. This constitutes a modernization of the IPPC to reflect consensus on the application of concepts emerging from the GATT Uruguay Round Agreements, and the formalization of a global programme for harmonizing phytosanitary measures and facilitating implementation of the IPPC. A resolution passed by the conference urges non-member countries to adhere to the IPPC, and contracting parties to accept the amendments as quickly as possible.

27. International trade obligations of countries under the Uruguay Round Agreements require that phytosanitary measures be transparent; nor should measures be arbitrary or unjustified restrictions on trade. This is clearly recognized in the new revised text. The responsibility of the IPPC as the international standard-setting body for phytosanitary measures is specifically recognized in the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement).

28. As part of its programme of work on the elaboration of international standards and implementation of the Convention, one standard -- the Code of Conduct on the Import and Release of Exotic Biological Control Agents -- has been developed as a guideline to the responsibilities of governments and industry.

International Code of Conduct on the Distribution
and Use of Pesticides

29. The International Code of Conduct on the Distribution and Use of Pesticides is one of the cornerstones of the Service's work programme. Approved in 1985 by the FAO Conference, it outlines government responsibilities and sets standards for public and private entities. The Service helps Members to implement the Code by strengthening their capabilities for monitoring and controlling pesticide usage through the development of national pesticide regulations and the improvement of training, laboratory facilities and pesticide handling. The programme encourages the harmonization of pesticide registration requirements in regions through the adoption of common criteria and the development of relevant test protocols under local conditions.

Prior Informed Consent (PIC)

30. The Code was amended in 1989 to include the principle of Prior Informed Consent (PIC), a voluntary procedure coordinated by FAO and the United Nations Environment Programme (UNEP). The PIC procedure allows countries to make decisions on imports of chemicals (including pesticides) that are banned or severely restricted in other countries, and on pesticides that cannot be handled safely in developing countries. The responsibilities are divided, with FAO handling issues related to pesticides and UNEP handling other chemicals. The decisions are communicated to the FAO/UNEP PIC secretariat, which informs exporting countries. An FAO/UNEP database maintains information on the global operation of PIC, including export notifications and import restrictions from participating countries. Exporting countries are expected to take measures to stop exports to countries that have indicated their unwillingness to receive such chemicals in future. As of July 1998, 157 countries have nominated designated national authorities who serve as the PIC contact points; 22 pesticides and five industrial chemicals are included in the procedure.

31. As requested in Chapter 19 of Agenda 21, countries started negotiations to make the procedure legally binding in 1996. FAO and UNEP served as the secretariat to the Intergovernmental Negotiating Committee (INC) for the development of an international and legally binding instrument for the application of the PIC procedure to certain hazardous chemicals and pesticides in international trade. The negotiations were concluded in 1998 and a diplomatic conference for the signing and adoption of the Convention will be held in September 1998 in Rotterdam, Netherlands.

Organisation for Economic Co-operation and Development
(OECD)

Multilateral Agreement on Investment (MAI)

32. The launching of negotiations in the OECD on a Multilateral Agreement on Investment (MAI) stood out as a landmark in 1995. Negotiated in a specially established negotiating group, MAI was to be a legally binding treaty providing for high standards for the liberalization of investment regimes and investment protection, and with effective dispute settlement procedures. It would have been a free-standing international treaty open to all OECD members and to any non-member country that was willing and able to undertake its obligations.

33. In a progress report, the negotiating group informed the Council at its ministerial level meeting on 27-28 April 1998 that most substantive issues had been examined. Taking into account the positive results produced by the negotiating group, and cognizant of the importance of the public debate on the implications of globalization, as well as the remaining difficulties and the concerns that had been expressed, the ministers decided on a period of assessment and further consultation between the negotiating parties and with interested sectors of their societies, and invited the Secretary-General to assist this process.

Combating bribery in international business transactions

34. In December 1997 OECD countries, joined by five non-members -- Argentina, Brazil, Bulgaria, Chile and the Slovak Republic -- signed the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Participants set the goal of bringing the Convention into force by the end of 1998.

35. Non-member countries have been invited to adhere to the OECD anti-corruption Recommendations, to accede to the Convention and to participate in all the activities of the Working Group on Bribery on an equal footing with OECD members. Workshops are being organized to discuss anti-corruption initiatives with non-participating countries from Latin America, Asia, Eastern Europe and newly independent States.

36. Other matters being addressed include the issue of criminalization, such as payments to political parties or candidates for office and the role of company subsidiaries and offshore centres. The difficult problem of solicitation of bribes will also be examined.

The OECD Guidelines for Multinational Enterprises

37. The OECD Guidelines for Multinational Enterprises (MNEs) are a part of the Declaration on International Investment and Multinational Enterprises and constitute a code of conduct for MNEs to ensure that they operate in harmony with the policies of the host countries. The Guidelines are supported by follow-up procedures in all 29 OECD member countries, and in three non-member countries (Argentina, Brazil and Chile).

38. In June 1998 the Committee on International Investment and Multinational Enterprises decided to launch a review of the Guidelines which may result in strengthening several provisions, notably those on labour standards and the environment, as well as the implementation procedures. These issues were discussed at a conference on the Guidelines that was held in Budapest on 16-18 November 1998. The meeting's achievements were summarized as follows:

The meeting has accomplished its objective of a brainstorming session which has served to collect ideas for the review process. It was not its intention to reach decisions or establish consensus among participants. Nevertheless, on the following key aspects a communality of views emerged.
The review should be serious and meaningful. It needs to address the reasons why the Guidelines have not been as effective as they could have been. It should also deal with areas where the Guidelines may no longer represent the state of the art as reflected by developments in legislation and other international instruments.
Areas for future attention include: raising awareness of the Guidelines and promote their use and understanding, improvements in follow-up procedures and updating their text where this proves necessary on the basis of further analysis. Among the chapters which may need revision, labour and industrial relations, as well as the environment, were most frequently mentioned, but other chapters also need examination. New issues like human rights and sustainable development also need to be addressed.
The review process is still at an early stage and further analysis is required. The work of the CIME on the review will proceed in close co-operation with other key players, including other OECD committees, business, labour, NGOs and other international organisations.
The ultimate objective of the review is to establish a common vision of the Guidelines as part of a framework for the proper functioning of markets and managing globalisation.
The momentum created in Budapest should be maintained and the consultation process with the organisations represented at this conference will continue.

Capital controls

39. In 1997 the OECD concluded its examination of member countries' remaining restrictions on the admission of foreign securities to national capital markets in OECD countries and corresponding reservations under the Capital Movements Code. This examination led to recommendations by the Council and actions by certain member countries to narrow the scope of their reservations in this field.

Professional services

40. Services provided by accountants, lawyers, engineers and architects is one of the fastest-growing sectors in OECD economies, but international trade and investment in these professional services remain hindered by complex domestic regulations.

41. A third OECD workshop on trade in professional services, held in February 1997, considered concrete policy for advancing liberalization through regulatory reform while maintaining high standards for consumer protection. A clear set of general principles was identified and specific policy recommendations to promote liberalization of international trade and investment in professional services were outlined. The workshop papers and a record of its discussions and conclusions were published in the OECD document series under the title: International trade in professional services. Advancing liberalisation through regulatory reform (June 1997).

42. A fourth OECD workshop, to be held in late 1999, will focus on the following issues:

reform of domestic regulations in the light of competition policy principles;
the scope for facilitating access to local practice for foreign professionals, including recognition;
the needs and perspectives of consumers, including corporate consumers.

Country examinations

43. The OECD has conducted three examinations of non-member countries in the past two years (Argentina, Brazil, Chile) as part of their adherence to the 1976 OECD Declaration on International Investment and Multinational Enterprises and its Related Decisions and Recommendations.

New members

44. One of the essential conditions for accession to OECD membership is the acceptance by the candidate country of its obligations under the OECD Liberalisation Code and of its commitments under the Declaration and Decisions on International Investment and Multinational Enterprises.

45. As part of the accession process, new members are also required to adhere to the 1976 Declaration and Decision on International Investment and Multinational Enterprises -- which encompass the OECD Guidelines on Multinational Enterprises -- and to participate fully in its implementation (including the establishment of a national contact point for the Guidelines).

46. The examination of the Slovak Republic is in process, but has not been concluded.

Relations with non-members

47. For activities with non-OECD members in the field of foreign direct investment (FDI), the OECD has established the Investment Policy Forum (IPF), a programme of activities rather than a fixed body such as the Advisory Group on Investment (which has been terminated). The IPF serves OECD members and non-members as a means of exchanging experience on legal and institutional reforms aimed at promoting foreign investment.

48. The activities of the IPF encompass conferences or workshops on selected issues, such as the relationship between FDI and economic development, the environment and labour standards. It also includes country and regional programmes, notably with Russia, China and the Baltic republics.

United Nations Conference on Trade and Development
(UNCTAD)

49. Pursuant to the mandate given it at UNCTAD IX, UNCTAD has developed a work programme whose main purpose is to help developing countries to participate as effectively as possible in international discussions and negotiations on investment rules, by deepening their understanding of all the issues involved and, in particular, ensuring that the development dimension is understood and fully addressed.

50. UNCTAD's work in this area involves providing substantive support to the intergovernmental debate in various intergovernmental bodies, especially the Commission on Investment Technology and Related Financial Issues and its expert meetings on issues related to investment and a possible multilateral investment framework. The first expert meeting held on 28-30 May 1997 dealt with bilateral investment treaties and examined the nature and implications of these agreements, the range of issues addressed by them, the extent to which the development dimension is taken into account and the extent to which issues arising in the context of these agreements are relevant, from a development perspective, to a possible multilateral framework on investment. The second expert meeting (1-3 April 1998) looked at regional and multilateral investment agreements, focusing on their objectives, notably the development objectives, and on the definition of investment. The third expert meeting has been scheduled for 24-26 March 1999 and will deal with "concepts -- such as exceptions and other mechanisms -- allowing for a certain flexibility, including in the field of technological capacity-building, in the interest of promoting growth and development -- to allow countries in different stages of development to benefit from international investment agreements".

Cooperation with WTO

51. Following the WTO Ministerial Conference in Singapore, UNCTAD was given special observer status in the WTO Working Group on the Relationship between Trade and Investment, to which it has contributed various statements and papers on issues under discussion, paying special attention to the development dimension.

Preparation and dissemination of
a series of technical papers

52. The main purpose of the series of technical papers is to address key concepts and issues relevant to international investment agreements, with particular attention to the way in which these key issues have been dealt with so far in international investment agreements, their economic effects -- especially under conditions of liberalization -- and the needs and concerns of developing countries.

Regional symposia

53. Four regional symposia have been organized so far, focusing on recent trends and initiatives in international investment rule-making and on the key concepts and issues relevant to these discussions and negotiations.

54. The first regional pilot symposium was held for African countries in June 1997, in Fez, Morocco. The regional symposium for Asia took place in New Delhi, India, on 15-16 July 1998. English-speaking Caribbean countries met in Kingston, Jamaica, on 27-28 September 1998, and the regional symposium for the ANDEAN Group was held on 4-5 November 1998 in Lima, Peru.

Geneva seminars

55. A series of Geneva seminars has been launched in cooperation with the WTO, with each seminar commencing with an in-depth examination of the economics of FDI and its implications for development, and concluding with an examination of key concepts and issues of relevance to international investment agreements. The first and second joint seminars were held in Glion-sur-Montreux on 26-27 February and 8-9 June 1998; the third has been scheduled for March 1999.

Training courses

56. Training courses on FDI are being developed for diplomats and government officials from capitals. The courses are designed to provide participants with better knowledge of FDI and related issues, and to enable them to understand properly the issues involved. A pilot training course took place in Turin in December 1997. In addition, an intensive training course is being developed for a core group of developing country negotiators involved in discussions relating to international investment agreements.

Related activities

57. Round tables with interested groups from civil society provide a forum for public/private sector dialogue on issues related to international investment agreements. The first such dialogue, organized in the context of the annual UNCTAD-NGO consultations, was held in Geneva in cooperation with the European Roundtable of Industrialists in November 1997. The dialogue was followed on 18 June 1998 by a round table between ambassadors and NGOs. A similar dialogue was held with the International Confederation of Free Trade Unions on 9 December 1998.

58. In response to a request from the Group of Fifteen (G-15), UNCTAD is also currently organizing a forum, scheduled for 8-14 January 1999, to assist the chief negotiators of G-15 countries in the negotiation and conclusion of bilateral investment treaties (BITs). Coinciding with this event, UNCTAD is releasing a new study on Bilateral investment treaties in the mid-1990s. The study highlights a number of significant developments that have taken place during the 1990s, including the rise in the number of treaties to a total of 1,513 in December 1997 and the increase in the number of treaties signed between developing countries. It also analyses the policy implications of these developments for the role BITs play as instruments of international investment policy, paying special attention to how recent BITs address development concerns and whether they have had an impact on investment flows.

World Bank

59. The World Bank Group contributes in many ways to fostering increased flows of private foreign investments in developing countries. The International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) have financed projects with components supporting government measures to liberalize foreign investment regimes. The International Finance Corporation (IFC) finances projects without a government guarantee; the Multilateral Investment Guarantee Agency (MIGA) provides foreign investors with guarantees against non-commercial risks; and the International Centre for Settlement of Investment Disputes (ICSID) provides facilities for the conciliation and arbitration of investment disputes.

60. The Foreign Investment Advisory Service (FIAS), a joint service of the IBRD and IFC, helps developing country governments design initiatives to attract foreign direct investment; by advising on laws, policies, incentives, institutions and strategies, FIAS assists countries in increasing the amount of investment they receive, and the benefits these investments can produce for the host countries.

World Health Organization (WHO)

International Code of Marketing of Breast-milk Substitutes

61. The Director-General of WHO presented the tenth in a series of biennial reports on infant and young child nutrition (document A51/6, part IX) to the 101st Session of the WHO Executive Board and to the Fifty-first World Health Assembly, in January and May 1998 respectively. Since 1994, 63 member States have taken new, predominantly legislative, action concerning the Code. Since its adoption in 1981, 158 member States (83 per cent) have reported on steps they have taken to give effect to the Code.

62. The aim of the International Code is to contribute to the provision of safe and adequate nutrition for infants, by protecting and promoting breastfeeding, and by ensuring the proper use of breast-milk substitutes, when these are necessary, on the basis of adequate information and through appropriate marketing and distribution. The Code (article 11.7) provides for reporting in even years on the status of its implementation.

63. In 1996 the Executive Board decided that biennial reporting should continue, but that starting in 1998 every second report should be comprehensive. Thus, both the Board and the Health Assembly had before it a supplementary report (document A51/INF.DOC./3) covering the broad area of infant and young child nutrition, including additional information related to the International Code. A further document devoted solely to the Code (WHO/NUT/9811) provided a detailed summary of relevant action taken by the 63 WHO member States and by international non-governmental organizations during the period 1994 and 1998.

64. The next report by the Director-General on the status of the implementation of the International Code will be presented in 2000 to the 105th session of the Executive Board and to the Fifty-third World Health Assembly.

Multinational enterprises and tobacco

Public health and economic impact

65. The extremely negative impact of tobacco on health now and in the future is the primary reason for giving explicit and strong support to tobacco control on a worldwide basis. The increased impact of tobacco looms as one of the greatest public health threats in the twenty-first century. WHO estimates that there are currently 3.5 million deaths a year from tobacco, a figure that is expected to rise to about 10 million by 2030. By that date 70 per cent of tobacco-related deaths will occur in developing countries. Mortality data do not reflect the enormous additional toll in terms of morbidity, disability and suffering among children and adults.

66. The economic impact of tobacco has been analysed in many countries in recent years. Studies in countries as diverse as Brazil, China, South Africa, Switzerland and Thailand are now available to complement some of the previous studies done in Canada, the United Kingdom and the United States. Together, these studies show that the alleged economic benefits of tobacco are illusory. There are, however, large direct, indirect and intangible costs associated with tobacco that hamper economic development rather than promote it.

Trade, foreign direct investment and tobacco consumption

67. The expansion of the global tobacco trade and market penetration in developing countries and transitional economies contributes significantly to the increased risk of tobacco disability and disease. In response to dwindling sales in Western industrialized countries, major transnational companies have targeted growing markets in Latin America in the 1960s, the newly industrialized economies of Asia (Japan, Republic of Korea, Taiwan and Thailand) in the 1980s, and in the 1990s are moving into Eastern Europe, China and Africa, where they are increasingly targeting young persons and women. Empirical evidence that demonstrates a clear link between increased tobacco-related trade and investment and higher tobacco consumption is beginning to accumulate. Domestic demand cannot remain insensitive to massive marketing campaigns financed by multinational companies, especially in markets where tobacco advertising regulations are non-existent or poorly enforced. Moreover, the lower tobacco prices that come with increased competition and more efficient production contribute significantly to tobacco consumption. There has been a huge growth in the tobacco-related trade.

Framework Convention on Tobacco Control

68. Transnational public health challenges, such as the growing tobacco trade, foreign direct investment and consumption, underscore the fact that tobacco control cannot succeed solely through the efforts of individual governments, national NGOs and media advocates. What is also needed is an international response to an international problem. The development of a WHO Framework Convention on Tobacco Control (FCTC), which will cover key areas of tobacco control that transcend state borders, constitutes just such an international response. The FCTC will seek to address key issues of tobacco control, such as the harmonization of taxes on tobacco products, smuggling, tax-free tobacco products, advertising and sponsorship, international trade, package design and labelling, and agricultural diversification. The development of an international legal regime on tobacco control will do much to motivate national leaders to rethink priorities and, possibly, to direct more attention and resources to global tobacco control.

* * *

69. At the time of preparation of this report, no information had yet been received from: the Acuerdo de Cartagena; MERCOSUR; the United Nations Economic Commission for Latin America and the Caribbean; the United Nations Centre for Regional Development (Nagoya, Japan); and UNIDO.

Geneva, 23 February 1999.

1. GB.268/MNE/2. Earlier papers were submitted in November 1982, 1983, 1984, 1985, 1986, 1987, 1989, 1990, 1991, 1992, 1993 and 1994 (GB.221/MNE/3/3, GB.224/MNE/3/3, GB.228/MNE/3/1, GB.231/MNE/3/3, GB.234/MNE/3/6, GB.238/MNE/5/5, GB.244/MNE/3/5, GB.248/MNE/3/4, GB.251/MNE/3/2, GB.254/MNE/3/5, GB.258/MNE/3/4 and GB.261/MNE/3/5). Attention is also drawn to the information contained in the paper entitled "ILO activities on multinational enterprises: Coordination with other organizations" (GB.234/MNE/4/3), submitted to the Committee in November 1986.

Updated by VC. Approved by RH. Last update: 26 January 2000.