Globalization and the Private-Public Global Governance

Natalia Semeria Ruschel

“The main losers in today’s very unequal world are not those who are too much exposed to globalization. They are those who have been left out.” [1]

The gap between the forces of globalisation and the rules, arrangements and institutions that manage them represents the result of a complex system of many actors playing for and against each other according to their interests and power. This dynamic and uncertain ‘game’ represents a risk to the multinational corporations to the extent that they have no predictability and it inhibits new long term investments and trade relations. In order to reduce this risk one of the solutions is the joint private-public governance to coordinate the actors and give them some minimum guidance to evolve trade relations with more transparency and security.

The globalisation is a reality without clear definition. It can be described as the integration process of economic, financial, trade and communication in a global scale, which ‘facilitates’[2] the open market and ignore the traditional frontiers, demanding a wider perspective of the national and international relations within its dynamic forces and many actors. Additionally, the development of information technology enables people to communicate and organise themselves, having access and distributing ideas and information without any limits, in a manner that contributes for the formation of new groups of actors with voice and relative power in the international society.

In this context brimful of variables and paradoxical forces of convergence and divergence, actors try to defend their interests and establish relations with one another to strengthen their voice and power in order to influence the forces of globalisation in behalf of their interests. Due to all these factors, the international system has uncertain direction and the global governance[3] plays an essential role in this system for the purpose of giving some guidance and limits to the ‘game’, meaning to settle rules, arrangements and institutions to organise and regulate the international relations.

The struggle of power to dictate the rules - which used to be between the government and the private sector - is now among these various international actors (individuals or groups) divided or united by their interests in different levels and sectors: multinational corporations (MNC’s), multinational institutions, international organisations, regional organisations, non-governmental-organisations (NGO’s), unions, private commercial associations, collective groups, cooperatives of workers or small enterprises, ideological groups and any other groups or individuals who have capacity to influence in the international system being through actions of global governance.

Bearing this in mind together with the international predominant idea of free trade and liberalisation, the multinational corporations are stimulated to look for their space in this global stage in order to take advantage of the new opportunities and access markets in a game of endless competition and run for power[4]. Therefore, it is important to observe the role of the MNC’s in this game and their interaction with the other groups, individuals and governmental institutions.[5]

At the complex international system, according to Richard Haass, “(...) there is a gap between the forces of globalisation (...) and the rules, arrangements, and institutions that manage them”.[6] The mentioned gap would be exactly the space of those indeterminate paradoxical forces which result in uncertainty, insecurity and unpredictability to the system. Thus, the outcome of these forces in relation to the trade negotiations, as well as the broader social (including environmental), economic and political issues cannot be foreseen.

In the particular case of the multinational corporations, this unpredictability and insecurity compromise their business strategies and long-term plans of international investments and operations. The more factors (and actors) intervening in the system and the more dynamic it is, the less predictability; consequently, the MNC’s have difficulties settle their risk assessments, to anticipate and tackle adverse externalities or to prepare themselves to take advantage of some new opportunity.

Moreover, this ‘gap’ between the forces of globalisation and the rules, arrangements and institutions enhance the importance of the national and international political relations for the reason that the analysis of this relations can be a fundamental tool to be considered as an indicator of the future market tendencies – assuming the interaction of both.

Provided the constant change of circumstances with the rise of new groups of interests (actors), the governmental institutions are not able to respond effectively to the business[7] necessities in the domestic and the international spheres. The arduous work of representing such a net of diverse interests before the international players (States or multilateral organisations) of different sectors and levels accounts for a lack of governmental actions and representativeness in the negotiations and agreements.

Hence, the mentioned lack results in the action of the private global governance as one of the answers from the private actors trying to fill up this lack. [8] The functions of private global governance, according to Prof. Patrick Leblond[9] are: development and implementation of regulations; forum for deliberation and conflict resolution; producing and disseminating valuable knowledge and information; providing opportunities for organizational learning; and securing independent verification of norm compliance.

Considering this functions, the private sector[10] increases its efforts to contribute to the ‘rules of the game’ setting up standards[11] in a way to regulate the trade relations and monitor it, so that the competition is not guided totally by the free market tendencies.

For the success of the standards and their harmonisation, the cooperation and coordination among the groups of private the actors are of fundamental relevance. Although the standards are one of the ways multinational corporations can facilitate the trade flow and have some influence in the regulation, it is also a challenge.

The existence of various standards formalised by different groups in the same sector can have negative effects for the competitiveness and for the international trade flow. It is difficult to set the criteria for the multinational corporations and to the consumers to identify which would be the best standard to implement. Additionally, the firms that want to enter in the market might have more obstacles when pressured to adequate to the standards. For this reason, it is a challenge to harmonise the standards. But the question is: who is going to say which standards are adequate? The answer is not easy and is still in discussion; however, one have to bear in mind that the harmonisation of standards involves delicate issues of trade, development, cultures, social necessities, health and politics.

Given the challenge, with respect to the cooperation and coordination to the success of the global governance, the active interaction between MNC’s and the governmental entities is essential. It ought to be a complementary work in joint private-public governance[12] which aims efficiency, juridical security, a minimum of predictability and other essential features to acquire competitiveness in the global market. The government can help MNC’s providing and disseminating ideas and information, as well as being a facilitator for the actors to connect and negotiate. In addition, the government can help with its expertise in diplomatic and policies, features that must be integrated in the analysis and strategies of the MNC’s. One important observation to this coordinated work is that the government is sovereign and has the authority, the power and a public duty to make law in behalf of the people, the environment and the sustainable economic development. So the public goods and values are at first place and must not be forgotten.

Concluding, the complex global system has many actors and it is influenced by indeterminate forces which represent a risk to the MNC’s. In order to have a minimum of predictability and security one of the solutions is the joint private-public governance to coordinate and capacitate the actors giving some guidance to the trade relations. This public guidance is important to promote the common interests of the MNC’s, but it is even more important to guarantee that those who were left out of the globalised system have the opportunity to get into it and to have the instruments to compete and interact with the other actors.

List of References

Cutler, A.C. et al., Private Authority and International Affairs, New York, NY: Suny Press, 1999, Chapter 1.

Finkelstein, Lawrence S., ‘What is Global Governance?’, 1995 (accessed 6 November 2009), http://www.agropolis.fr/formation/dd/nov04/what_is_global_governance.pdf.

• Mattli, W. “Public and Private Governance in Setting international Standards”, Kahler, M. And lake, D.E. (eds), Governance in a Global Economy: Political Authority in Transition, Princeton, NJ: Princeton University Press, 2003, pp. 199-225 (Chapter 8).

Nadvi, K. “Global Standards, global governance and the organization of global values chains”, Journal of Economic Geography, Vol. 8, No 3, 2008, pp. 325.

Leblond, Patrick. Lecture of “Business and the Governance of International Trade and Investment”, at the World Trade Institute, October 21, 2009.

Haass, Richard. Interview published in the February 2008 issue of the McKinsey Quarterly.

Woll, C. Firms Interests: How Governments Shape Business Lobbying on Global trade, Ithaca, New York: Cornell University Press, 2008.