Globalization and State Sovereigntyyjsb.cfau.edu.cn/attach/-1/1307041612224522706.doc · Web viewIn a word, the United Nations occupies an irreplaceable place in the international

MA ThesisChina Foreign Affairs University

外交学院 2003级硕士研究生毕业论文

Despite Global Changes, Sovereignty Still Reigns

—Globalization and its Impact on State Sovereignty

论全球化对国家主权的影响

MA ThesisSubmitted to the Department of English and International Studies

in partial fulfillment of the requirementsfor the degree of master of arts in American studies

Major: English Language and Literature

专业：英语语言文学Focus: American Studies

方向：美国研究Supervisor: Prof. XXX

导师：XXX 教授Writer: XXX

研究生：XXX

May 2006

Acknowledgements I would like to express my greatest appreciation to my supervisor Professor XXX

for providing me with constant support and valuable comments on my work. Without

her guidance and assistance this paper would not have been possible.

I am also deeply indebted to all the teachers who have taught me for the last

three years, for their generosity of sharing with me their vast knowledge on English

language and international relations.

I would also like to thank all the staff of the Postgraduate Department who have

worked so hard to create a favorable environment for our study. I am grateful to all the

classmates and friends with whom I have spent the most beautiful days of my life.

Thanks are also owed to all the scholars and intellectuals whose researches and

opinions are drawn on and adopted in this paper.

AbstractWith the intensification of globalization, there arises an argument that state

sovereignty is weakened and nation-states are eclipsed by forces unleashed by this

wave of international integration. On the basis of the analysis of the actual influence

felt by nation-states, this paper sets to show that the opposite holds true.

The impact on state sovereignty brought by globalization is interpreted from two

aspects: political and economic.

The main contributors of the political impact are identified as international

governmental organizations and non-governmental organizations. The natures and

limitations of these two groups of organizations and their dependency on nation-states

predetermine the restricted role they are playing in managing national and

international affairs.

The economic impact on state sovereignty is delivered by multinational enterprises

and the scourge of marginalization. Multinational enterprises subordinate to and

depend on nation-state governments under a lot of circumstances. And the power

exhibited by nation-state governments in dealing with multinational enterprises

shatters the illusion that multinational enterprises are surpassing nation-states in

strength. Marginalization poses challenges to nation-states, but more importantly it

urges nation-states to strengthen sovereignty and improve governance to ensure that

the benefits of globalization are distributed equally.

Despite the obvious influence of globalization channeled through these non-state

actors, the power stays with nation-states and state sovereignty remains untouched.

The principle of sovereignty continues to govern the international relations.

Keywords: Globalization, Sovereignty, Non-State Actors

摘要随着世界进入全球化时代，民族国家及其主权受到了影响。这其中的影响从

政治和经济两个方面得到体现。政治方面主要表现为国际组织和非政府组织的日

益增多。经济方面则表现为跨国公司的作用的日益增强及边缘化化对民族国家的

挑战。

面对国家主权过时论，事实却是国家主权的性质没有改变，相反国家主权

的功能在全球化时代得到了增强。

国际组织和非政府组织建立在尊重国家主权的基础之上，其对民族国家和

政府的依赖以及本身的局限性限决定了二者在国际事务中的有限作用。跨国公司

从属于国家。国家政府提供的基本保障是跨国公司生存和发展的基础。而在利益

发生冲突时，国家政府则显示了绝对的优势和实力。边缘化向国家政府行使职能

的能力提出了更高要求，促使边缘化国家加强主权应对挑战。

可见，民族国家及其主权确实受到了全球化的影响，但全球化没有削弱民

族国家的地位，民族国家及国家主权在国内和国际政治生活中仍处于核心的地

外交学院 2003级硕士研究生毕业论文陈宇虹

位并且起着核心的作用。

关键词：全球化，国家主权，非政府行为体

1

Table of Contents

Introduction..................................................................................................................1I Sovereignty: An Essential Link between Globalization and Nation-States..........3II IGOs and Their Impact on State Sovereignty.......................................................5

2.1 IGOs: An Increasingly Important International Actor.........................................................52.2 IGOs versus Nation-States..................................................................................................6

2.2.1 IGOs: Instruments for Nation-States........................................................................72.2.2 IGOs: Intrinsic Lack of Binding Force.....................................................................92.2.3 Dependency on Nation-State for Fund: A Restraint on IGOs.................................102.2.4 Predetermined Content and Extent of the Transfer of State Sovereignty to IGOs. 12

III NGOs and Their Impact on State Sovereignty..................................................163.1 Development of NGOs......................................................................................................163.2 NGOs: More of a Help, Less of a Threat to Nation-States................................................17

3.2.1 NGOs: A Helping Hand for National Governments:..............................................173.2.2 NGOs’ Dependency on Nation-States....................................................................183.2.3 NGOs’ Inherent Limitations Compared with Nation-State Governments..............22

VI MNEs and Their Impact on State Sovereignty...............................................264.1 Expansion of MNEs in the Era of Globalization...............................................................264.2 Challenges Posed by MNEs to Nation-States...................................................................274.3 Unchanged Role of Nation-States.....................................................................................28

4.3.1 MNEs’ Subordination to Nation-States: Home Nations and Host Nations............294.3.2 MNEs’ Dependency on Nation-States: Home Nations and Host Nations..............304.3.3 The Power Shown by Nation-States in Dealing with MNEs..................................33

4.4 Strong State, Strong Economy..........................................................................................354.5 The Enhancement of Nation-States’ Role as Required by MNEs.....................................37

V Marginalization and the Role of Nation-States...................................................395.1 The Phenomenon of Marginalization in the Era of Globalization.....................................39

5.1.1 The Scourge of Marginalization Brought by Globalization...................................395.1.2 Roots for the Marginalization.................................................................................41

5.2 Managing the Challenges of Globalization: the Role of Global Governance and National Governments...........................................................................................................................45

5.2.1 What the Global Governance Can Do....................................................................455.2.2 Challenge for National Governments.....................................................................47

Conclusion...................................................................................................................51Bibliography...............................................................................................................53


Introduction

The last two decades have been described as the era of globalization. The processes

of global economic integration, global patterns of communication, and the global

migration of people across territorial boundaries have contributed to the idea of a

global culture. Liberation of trade, investment, capital flows, rapid technological

change and information revolution are making the world increasingly interdependent

and interconnected. Globalization now dominates discussions on the direction of

social changes and representations of the world in which we live.

Globalization is a multidimensional phenomenon encompassing not just economic

but political, social and cultural transformations. The political impact of globalization

is fully reflected in the challenges it has posed to nation-states and their sovereign

rights. Globalization is pushing increasing number of countries to open their

economies and alter domestic as well as foreign policies. The fact that globalization

has generated immense impact on the sovereignty of nation-states is inarguable. But

views are divided on the future of nation-states and the destiny of sovereignty.

Globalists have come up with predictions that nation-state is to be made

anachronism and sovereignty a thing of the past by globalization. According to them,

state authority has leaked away, upwards, sidewards, and downwards and in some

matters, just evaporated. With the development of so many transnational processes, it

has been assumed that sovereignty of nation-states are being withered by

globalization; nation-states are about to be swamped by forces beyond their control,

and that the Westphalian system of absolute state sovereignty is failing into pieces.

Kenichi Ohmae, a great admirer of multinational enterprises, claimed the demise of

nation-state on the basis of four ‘I’s: investment, industry, information technology,

individual consumers. Susan Strange observed that national sovereignty has declined

from the assault of a matrix of forces unleashed by globalization.

However, this viewpoint is strongly opposed by another perception that sovereignty

of nation-state, despite the fierce repercussions from globalization, stays mainly

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untouched. Holders of this view acknowledge the rising influence of globalization on

the sovereignty of nation-state, but observe state sovereignty is still in control, and

nation-states remain the cornerstone of the international system. This echoes Hirst and

Thompson’s contention that the strength and scale of globalization are exaggerated

and the end of nation-state is an illusion rather than a reality. They take issue with

proponents of the perception that sovereignty is eclipsed and believe the opposite to

hold true, since states are to adapt their roles and improve their functions to harness

globalization to their advantage.

It is not difficult to notice that these two views are quite opposite from each other,

however, they share one thing in common: both note the immense impact

globalization has imposed on state sovereignty and the challenges nation-states face.

Globalization has unavoidably affected national sovereignty of Western and

developing countries alike. The effects of globalization on the sovereignty of nation-

state flow through two distinct but interconnected channels, political and economic

channels. The political effect as channeled by transnational governmental

organizations and nongovernmental organizations provides rationale for ‘low

stateness’. And the increasing weight of multinational enterprises has created a new

and more constraining context for state action in the economic field.

These three new international actors rising from globalization are held to be the

most prominent restraints on nation-states’ authority. Therefore, this paper is going to

make a study of these three actors and analyze the actual effects these actors have

imposed upon the sovereignty of nation-states, and on the basis of the analysis, try to

offer an answer to the question of whether globalization is really heralding the end of

nation-states and the demise of sovereignty.

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I

Sovereignty: An Essential Link between Globalization and Nation-

States

The international system is organized around sovereign states. Sovereignty means

that the state, or its representatives (the government), has the final say within its

territorial jurisdiction. This means that no higher authority exists in international

relations than the state.①

The Treaty of Westphalia signed at the end of the Thirty Years War in 1648 signaled

the establishment of the Westphalian system—the nation-state system, and of the

formal implementation of a comprehensive concept of national sovereignty with a

dual implication of both internal and external aspects. Sovereignty hence refers to the

absolute internal authority of a state within its territory and the freedom of

intervention from other states on the international platform. And ever since, the

principle of sovereignty is acknowledged as the basic principle governing

international relations.

As a historical concept, sovereignty has experienced a protracted process of

evolvement, withstanding waves of assault and skepticism as an ever-new

controversial problem of political discussion.

In face of the swamping torrents of globalization, nation-state and state sovereignty

come into the limelight again and questions arise as to whether we are living through

another political transformation which might be as important as the creation of the

nation-state. Is the exclusive link between territory and political power being broken

by globalization? A number of comments upon and analyses of globalization have

given rise to the fierce debate of whether globalization will destroy or marginalize

nation-states, since globalization has brought about the unprecedented activeness and

prominence of three groups of global actors: multinational enterprises, international

governmental organizations and nongovernmental organizations. The expanding role

① Kelly-Kate S. Pease, International Organization (New Jersey: Pearson Education. Inc., 2000), 6.

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and increasing influence of these actors have made them the focus of academic study

on international relations. They are believed by some to have eclipsed nation-states

and weakened state sovereignty.

In order to get a clearer picture of this phenomenon, it has to be noted that the

forms and patterns of exercising sovereignty are diverse. Just as an individual has a

variety of ways of disposing his property, including direct ownership, sub-ownership,

leases and licenses, a national government can also use sovereignty in different ways.

Both conceding and forfeiting sovereignty for the benefits of the state should wisely

be seen as the application of sovereignty rather than the destruction of the concept of

sovereignty per se. Activities such as entering into treaties, contracts that are good for

both parties sometimes entail encroachment upon part of the sovereignty of the

signatory states. In fact, since 1648, states have forfeited portions of their national

sovereignty in order to acquire the benefits arising out of a cooperative relationship

with other states.

The new trends and conditions in the twentieth century, especially the salient

escalation of globalization call for and also facilitate the flexibility of governments in

exercising sovereignty. Sovereignty has gained new forms of realization in this new

era. Globalization is not robbing states of sovereignty, making the states less central to

national opportunities for development than it was in the past. If anything, national

governments are even more important in deciding whether the world economy are

helped or hindered by globalization, which testifies to the robustness and continuity of

state sovereignty though there is no lack of misunderstanding amid the clamor that the

death knell of sovereignty is struck.

II

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IGOs and their Impact on State Sovereignty

2.1 IGOs: An Increasingly Important International Actor

An international governmental organization (IGO) is an organization composed of

sovereign, independent states that voluntarily enter into treaties, agreements and

conventions in a common pursuit of certain purposes. Therefore, a charter or a

constitution must be created and agreed to by states that wish to pursue objectives

within a formal organization. The United Nations (UN), the most influential IGO of

the world, is essentially an association of states following a certain course of action in

pursuit of world peace and development through a multilateral treaty, which is known

as the UN Charter.

The globalization era has witnessed a massive proliferation of IGOs. Active IGOs

now number well over 20,000. And they feature prominently in contemporary world

and regional politics; among them the United Nations (UN), World Trade

Organization (WTO), World Bank (WB), International Monetary Fund (IMF),

European Union (EU), North America Free Trade Agreement (NAFTA) and Asia

Pacific Economic Cooperation (APEC) are typical examples.

As a prime example of IGOs, the United Nations’ great achievements in various

fields shall be quite illustrative of the significance of IGOs in general. The UN is the

most important IGO with the widest recognition and largest membership of the

international community. Ever since the first day of its establishment, the UN has

served as a platform for communication, negotiation and cooperation between

different member states, which vary enormously in size and power; it has spared no

efforts in orchestrating operations for the common benefits of the whole human

society with obvious results scored; by pooling together efforts from different sectors,

the UN has contributed enormously to world economic development and the

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settlement of international conflicts， and has played a decisive role in addressing

issues of worldwide concern, such as disease, human rights and environment

problems. In a word, the United Nations occupies an irreplaceable place in the

international arena. And the role of the United Nations is expanding with the

deepening process of globalization.

Up until now, a wide range of developing countries have become an important

force in shaping the system of international relations through participating in IGOs,

such as Non-alignment Movement, G77 and OPEC in addition to the UN. This has

enhanced the representativeness of IGOs and expanded their scope of influence.

Such prevalent organizational ties are believed to have set in motion forces

encroaching upon the sovereignty of nation-state. State sovereignty is said to be

restricted by the growth of IGOs and the agreements legally contracted with other

states upon entering into membership of these organizations. Some extreme views

even claim that IGOs are taking the place of the nation-states in dealing with

international affairs.

2.2 IGOs versus Nation-States

In dealing with international affairs, however, one should constantly bear in mind

the principle of state sovereignty. Through hundreds of years of evolvement, this

principle still applies well and continues to play an essential role in both

contemporary international law and international affairs in spite of the increasing

entanglement of states with international organizations. In fact, the very establishment

of IGOs is based upon this principle. The concept of sovereignty which is

characterized by the unlimited authority of the state to exercise its will unchecked by

any superior or external control remains a fundamental condition of international

politics despite the overwhelming growth of IGOs.

The perspective on the robustness of the sovereign authority of nation-states and

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the irrationality of the forecast that IGOs are taking the place of national governments

will be reinforced by an analysis of the nature of IGOs and the interaction between

nation-states and IGOs.

2.2.1 IGOs: Instruments for Nation-States

The whole field of international organizations is likely to be perceived as a group of

more or less useful pieces of machinery through which to enhance national policy

aims. No country is going to sign any international treaty to enter an organization

from which no benefits can be expected. IGOs are organizations between sovereign

states not above states. They are created to serve the interests of states, not the other

way around. As a way for the collective pursuit of foreign policy goals, IGOs are

subject to evaluation by member states in terms of their utility. This instrumental

outlook means that, as with other modalities of foreign policy, the national

policymaker weighs the costs and benefits of participating in an international

organization or attempting to mobilize it for specific purposes.

The IGOs exist because nations find them convenient. Governments of member

states opted to join the UN not out of any sense of idealistic high-mindedness as they

may have claimed, but because the UN is an instrument for national foreign policy. In

somewhat similar vein, IGOs are often regarded as the tools of the great powers to

control lesser states without dominating them by force. They are agents of the

dominant powers and serve great-power interests at the expense of others. Many view

the IMF as an extension of the United States, with hostile intentions. Hong Kong’s

Sing Pao Daily News stated: As the biggest contributor to the International Monetary

Fund, the U.S. would like to push open the Asian market as well as to increase the

proportion of foreign enterprises by means of IMF loan conditions.①

In addition, major powers can often determine if organizations will be active at all

in areas of interest to them. The war crimes tribunals for the former Yugoslavia and

① Kelly-Kate S. Pease, International Organizations (New Jersey: Pearson Education. Inc. 2000), 200.

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Rwanda solve problems for the leading nations. A permanent war crimes tribunal is

judged inconvenient by the United States, which tries to block it or refuses to sign the

treaty. As Susan Strange states, “All those international arrangements dignified by the

label regime are only too easily upset when either the balance of bargaining power or

the perception of national interest changes among those states who negotiate them.”①

History has proved conclusively that an international organization, in a fashion similar

to a national government, can succeed only when supported by those it is to serve.

As instruments for nation-states, IGOs are not in themselves endowed with

sovereign rights since all the rights are attributed by member states through their

signing of treaties, agreements or conventions. IGOs do not have the rights to lead or

dominate nation states, and they are not supposed to interfere in any affairs that fall

into the domestic jurisdiction of nation states according to the principle of

sovereignty.

The UN was founded on the principle of sovereign equality of all members. This

simply means that each state, at least in the legal theory, retains the right to determine

its own internal and external affairs. As emphasized in Article 2 of UN Charter:

Nothing contained in the present Charter shall authorize the United Nations to

intervene in matters which are essentially within the domestic jurisdiction of any state

or shall require the Members to submit such matters to settlement under the present

Charter.② The UN Charter is agreed upon after the member states are convinced that

no infringement of the national sovereign interests exists and no invasion of ‘domestic

jurisdiction’ is sensed.

IGOs are often viewed as restraints on the behavior of states and begin to take on

independent like. But it is a limited sort of independence: the organizations are

created and sustained by the states in a collective act of self-limitation or self-

enhancement, and there is certainly no expectation that they will come to coexist with,

or even supersede, their creators as the dominant actors in the international system.

① Kelly-Kate S. Pease, International Organizations (New Jersey: Pearson Education. Inc. 2000), 52.② 中国联合国协会/编,《联合国基础知识》(北京:世界知识出版社, 2000), 159.

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The EU, best developed organization between states, is far from being a single

political entity with independent authority, since the way of EU seeking consultancy

and making decisions remains within the framework of diplomatic interaction

between states. The members of EU Parliament make decisions under the strict

guidance of their own nation states and in case of a conflict of interests, they will be

given unequivocal and direct order by their own governments. The EU is not a state

with sovereign rights and all its policies are subject to the will of its member states

which keep a strict control of their sovereignty.

2.2.2 IGOs: Intrinsic Lack of Binding Force

The lack of independent sovereignty determines that the decisions or resolutions of

IGOs are not binding on members states. The enforcement and implementation of the

decisions adopted by IGOs rely on the recognition and compliance on the part of

member states, or the pressure of the international community.

Unlike a national government which is able to punish violators, an international

organization can do no more than depend upon the good faith of its members to

respect its policies and decisions. In some cases, in spite of the existence of executive

and judicial agencies, no enforcement measures are available to be taken. The

limitations imposed by international treaties and conventions are not legal since they

are voluntary limitations, self-imposed, unenforceable by any higher authority, and

can be denounced by the sovereign state at its leisure. The UN, as the most important

organization of its kind, is far from being a superstate and nothing of a world

government, since it does not have the authority to legislate or tax, nor does it have

the power to enforce its decisions upon individuals. All the power it has originates

from its member states and in case of contempt, nothing can really be done except a

condemnation.

Obviously, the UN has played an important role in resolving global conflict and

maintaining world peace. However, it is not completely effective in dealing with

9


security issues over the past thirty years. A survey of UN mediation of interstate

conflicts has calculated that, of 355 mediations studied, a successful outcome was

achieved only on 35% of occasions. One explanation to this mixed record of success

and failure should be the opposition of states concerned. Without a consensus,

commitment is hard to establish. Member states may be willing to contribute to

enforcement actions, but when those actions run contrary to their national interests,

they will definitely go for the latter.

The UN Security Council is the sole agency entitled to take enforcement measures

on the legal basis of Article 1 and Article 40 of the UN Charter. Nevertheless, these

measures are strictly limited as the UN Charter provides the three principles for

peacekeeping operations: neutrality, self-defense and agreement. Peacekeeping is

successful only when all party states, including the belligerents, wish to undertake the

mission. The dominance of state sovereignty shatters any illusion that an international

police force is on the horizon since the various national components of UN peace-

keeping or crisis intervention forces remain under the influence and ultimate control

of national governments rather than the UN.

The UN relies on member states for efficient operation and it can never evolve into

a world government when sovereign rights remain firmly in the hands of national

governments.

The facts of present-day international life make it clear that despite the need for

good faith in interstate relations and the development of complex interrelations among

states, each state, in the final analysis, seeks to be its own interpreter of international

obligations and maintains the right to determine its own standards of international

conduct. Should a vital national interest be seriously threatened, a state, particularly if

it is a major power, may still pursue a unilateral course of action, supported by the

popular belief of its citizens that as a sovereign entity, it cannot be legally restricted in

its external as well as internal acts.

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2.2.3 Dependency on Nation-States for Fund: A Restraint on IGOs

IGOs depend upon the contribution and funding of member states for proper

operation. Shortage of fund constitutes a serious restraint upon IGOs, overshadowing

their ability to meet international commitments.

Most IGOs are faced with a dilemma. On the one hand, with the increase of

activities IGO engaged in, the expenditure is also on the rise. On the other, many

countries are very slow in making their contributions and the situation is worsening.

For instance, the UN seems to be in a perpetual financial crisis. The United States,

which is the UN’s largest contributor, is also its largest debtor. The U.S. arrears

account for approximately 60 percent of what is owed to the UN.

In addition, in most IGOs, the right of voting for member states is closely

associated with the percentage of budget they have accounted for. Therefore, this kind

of financial system subjects IGOs to the manipulation of the powerful states with solid

financial basis. Periphery societies are controlled politically because they are given a

voice in organizations like the UN in which that voice carries very little weight. The

United States’ manipulation of IGOs is often cited as an outstanding example. It is

said that the US hegemony is facilitated and exercised through IGOs.

Serving as a policy instrument to its member states doesn’t indicate that the UN has

become the policy instrument used by all its member states to the same degree.

Despite the accomplishments it has achieved, there is still concern about the goods the

UN can really deliver to the international society considering the problems hanging

around, such as financial problem, inefficiency of its operation and the unequal say

given to its member states. It is always unavailable to a cohesive underdeveloped,

anticolonial majority of its members. Certainly the organization’s priorities and

preoccupations have changed radically after the decolonization, which stimulated the

increase of independent states, and consequently enlarged UN membership, but so far

the increased organizational presence of the Third World has not been matched by

effective, concrete policy outcomes. The organization’s responsiveness is largely

11


verbal and symbolic, and is likely to remain so as long as the Western states, which

control the purse string, the bulk of the world’s military force, remain the dominating

actors.

2.2.4 Predetermined Content and Extent of the Transfer of State Sovereignty to

IGOs

In order to protect the essence of state sovereignty, domestic laws of member states

establish rules governing the whole process of transfer and impose conditions and

limits for the granting of state powers in dealing with IGOs.

First of all, the object of the transfer will be the exercise of certain sovereign

powers but not their ownership, which remains in the hands of the member states. The

powers or competences transferred from states to international organizations are not

wasted, since once the objectives of an IGO had been accomplished, or the

international organization beneficiary of the transfer disappeared, the powers would

revert automatically to states.

Even the most advanced international organization, the European Union, is entitled

to exercise only those functions expressly attributed to it by the member states.

The EU is the most developed international organization in terms of integration

level. It has attracted world attention with its dramatic process of involvement and

current status of development. The cession of sovereign rights by its member states is

indeed unprecedented, which includes the transfer of tariff rights by establishing tariff

agreement, the cession of territorial sovereignty by eliminating nationality

discrimination for free flow of nationals, and the transfer of monetary sovereignty by

issuing Euro. However, as we have said before, the cession of sovereign rights is a

form of exercising sovereignty by nation states, and what is transferred in the process

is the ‘exercise’ rather than ‘ownership’ of the rights.

In addition, it has to be pointed out that the cession of rights by EU member states

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is based on rational choice and systemic guarantee. In the era of globalization,

European countries have realized that there is no better way to meet the challenges

brought by an integrated world economy than the cooperation or integration between

states. A regime of collective decision-making guaranteed by the treaties relieved the

member states of worries about the encroachment on national interests by endowing

them the veto right on issues concerning the transfer of sovereignty and fundamental

interests of member states.

Secondly, there are material limits to the transferee. Powers can be transferred only

to a limited extent. Constitutions prohibit the transfer of the totality of the states’

powers which, although vested in Parliaments and other internal institutions, emanate

directly from the people. The new international entities that emerge from the transfer

of sovereignty may therefore exercise, within a very definite field, executive,

legislative and judicial functions but they can never take the states’ place.

Despite the striking amount of uniform policies, the EU still has some way to go

before it can claim a common foreign policy, and the member states still have much

individual freedom in their relationships outside Europe and in the way they define

and express their defense interests. The EU is slowly becoming a more distinctive

actor on the world states, most notably on trade issues and development aid to poorer

countries, but non-European governments must still approach each of the member

states individually on issues such as security threats in the Middle East, nuclear

testing, relations with former colonies and so on.①

Thirdly, there are temporal limits to the transfer. Delegation should not be

construed as a dereliction or a definite cession of sovereignty. Powers can be

transferred to IGOs with either a provisional or a permanent character, but, in any

case, transfer is not irreversible because for the states there is always the possibility to

recover the powers conferred by means of a unilateral withdrawal from the IGO.

There is no IGO, whether traditional or supranational, which can prevent the

secession of one of its members. In December 1984, the United States declared its

① John McCormick, Understanding the European Union (New York: Palgrave 2002), 120.

13


official secession from the United Nations Education, Science and Culture

Organization (UNESCO), claiming that it was unsatisfied with the inadequacy of

UNESCO’ s reform, its high operation fee and its failure to solve the problems

identified by the US government.

In light of the practical situation, some admit the inadequacy of integration of EU to

be called a superstate, but predict that EU will eventually evolve into a superstate in

the near future with permanent transfer of sovereignty of member states. The truth is,

in consideration of all the uncertainties, it is premature to conclude on the future of

EU as a superstate entity.

One problem is that the transfer of sovereign rights is a reflection of the national

will, and the willingness to cede sovereignty on a permanent basis on the part of the

states concerned is too vague to predict. In addition, the EU is a voluntary

arrangement and there is nothing in theory to prevent a member state from leaving.

There is also a problem at the grass roots for EU to act as a superstate, and that is

the problem of creating a sense of unity at the grass roots. Membership of the EU is

reversible, and several anti-European movements within the member states have

called for their country to leave the EU.① Although old hatreds, such as between

France and Germany, are certainly dying, no new pan-European nationalism is

emerging. For solidarity engendered by nationalism can exist normally only within

the national community, where sufficient mutual identification and common interests

among people can be found so as to induce minorities freely to consent to majority

rule and obey a common government based upon that. Such solidarity underpins a

people's allegiance to a government as ‘their’ government, and their willingness to

finance that government's tax and income-transfer system, thereby tying the richer and

poorer regions and social classes of the nation state together. The solidarities that exist

within nations do not exist between nations.

Indeed, the structure of IGOs rests upon the principle of sovereignty and their

① John McCormick, Understanding the European Union (New York: Palgrave 2002), 119.

14


operation is based on the recognition of member states’ sovereign rights. The EU, ‘the

most complex or ‘best developed’ regional organization in the world, is no exception

to this general rule. It appears to have limited the sovereign authority of member

states, but subordinating to these limitations is a form of exercising sovereignty by

national governments. The ownership of the sovereign rights remains firm in the

hands of member states.

IGOs are far from superseding nation-states, robbing them of their sovereignty.

States remain the principal and most essential actors in international relations, and

international organizations are subordinate to the dominant powers of the day, and

will continue to play secondary roles in the management of international affairs.

III

15


NGOs and their Impact on State Sovereignty

3.1 Development of NGOs

There is no universal agreement on what nongovernmental organizations (NGOs)

are exactly. A 1994 United Nations document describes an NGO as a non-profit entity

whose members are citizens or associations of citizens of one or more countries and

whose activities are determined by the collective will of its members in response to

the needs of the members of one or more communities with which the NGO

cooperates.① In a simple way, NGOs are often referred to as organizations which have

not been established by governments or agreements among governments, and

comprise usually of individuals and private associations, rather than states as their

members. In other words, nongovernmental organizations are any organizations

outside the government.

The emergence of NGOs is not new. The establishment of the famous International

Commission of Red Cross bates back to the 19th century. What is new is the recent

explosion in numbers, activity, and visibility of international initiatives by NGOs on a

variety of issues, linked to the rapid expansion of globalization of communication,

transportation and production. On the one hand, the increases of information flows,

human travel, and trade associated with globalization have on the whole made the

formation and operation of international NGOs easier and less expensive. And on the

other, globalization has contributed to the rise of new problems to which international

NGOs and alliances shall be relevant, such as environmental problems, including

global warming, ozone depletion, and cross-border pollution. In a word, NGOs are

springing up in the era of globalization to fill various needs.

Nowadays, a wide variety of NGOs are functioning at the local, national and

international levels, however, a narrow slice of the NGO spectrum is often focused

upon by analysts: the international ones which operate on a transnational basis with a

① 张贵洪/著，《国际组织与国际关系》（杭州：浙江大学出版社， 2004），298。16


worldwide scope. These NGOs are active in a number of areas, including

humanitarian issues, environment problems, human rights and other issues of social,

economic, and political importance. International Commission of Red Cross, the Save

the Children Fund, the World Wild Life Fund and Greenpeace, and the Amnesty

International are few of the most prominent NGOs in relevant fields.

3.2 NGOs: More of a Help, Less of a Threat to Nation-States

With the increase of NGOs’ involvement in global affairs and their growing impact

on national governments, some get worried that NGOs are taking over the functions

from national governments and encroaching upon the authority of nation-states.

Actually, if we take a closer look at the nature of IGOs, the activities they are engaged

in and the methods they adopt in fulfilling the initiatives, we will see that NGOs are

more of a help than a threat to national governments.

3.2.1 NGOs: A Helping Hand for National Governments

The growing popularity of NGOs proves helpful to national governments since

some humanitarian and development NGOs have a natural advantage in fields where

governments are reluctant to enter into, or slow at identifying problems and delivering

solutions. Due to their rich expertise and resources, grassroots connections and sense

of commitment, NGOs on the ground often make the impossible possible by doing

what governments cannot or will not do.

Governments find it convenient to turn to NGOs for innovative ideas and

information. NGOs are characterized by their capabilities of mobilizing the

community, channeling resources, as well as providing technical expertise and skillful

lobbying for the achievement of social justice and human welfare. NGOs make use of

their uniquely close touch with voiceless population and their wide linkage to media

17


to help give prominence to international problems that are not raised or solved

otherwise.

Governments’ functions are completed with the participation of NGOs. NGOs have

become the second largest source of development assistance behind national

governments. In many developing countries, NGOs have managed a significant share

of incoming assistance. An article in the New York Times just before the UN

Conference on Environment and Development in 1992 cited development successes

by NGOs such as the Trickle-Up Program, and stressed their low costs and high

impact.

Through orchestrating campaigns to formulate and enforce global public policies in

response to critical problems, NGOs help construct international values and norms

that can guide future international policies and practices. Greenpeace, as one of the

world’s most famous environmental NGOs, is recognized as a major factor in shaping

the environment debate. And the International Baby Food Campaign has produced a

code of conduct adopted by the United Nations.

NGOs’ focus on social problems and their ability of channeling resources for the

solution of identified issues predetermine the important role they are playing in

shaping the national and international policies. At the same time, the participation of

NGOs has heightened the influence of the public on governmental policies so as to

monitor accountability and transparency of national governments which are urged to

promote democratic principles and practices, deliver effective public sector policy and

services. They act as an extra hand of national governments in discovering and

addressing issues of importance to the welfare of people all over the world.

3.2.2 NGOs’ Dependency on Nation-States

The interaction between NGOs and national governments is not as smooth as we

have described above. The full picture is much more complex with conflicts and

18


contradictions cropping up between these two actors from time to time. Hence the

challenges posed to nation-state governments by NGOs both on domestic basis and in

the international arena. Nevertheless, no matter how influential NGOs become, they

are far from being a threat to the national governments, to the sovereignty of nation-

states.

NGOs are not shattering the Westphalian system, or rendering nation-states any less

relevant in handling domestic and international affairs. The phrase nongovernmental

is in itself Westphalian: organizations are either ‘governmental’ or they are not. Even

if NGOs are outside governments, their proper functioning is inseparable from the

support of governments. The aims and goals of NGOs can only be materialized when

governments are persuaded to accept the values and convinced of the benefits that

would follow once actions are taken.

An understanding of the means applied by NGOs may give us a glimpse of the fact

that governments are the key to the missions NGOs engaged in. NGOs may employ

both direct and indirect lobbying techniques. Direct lobbying techniques involve

contacting officials (and their staffs) in order to persuade them to adopt appropriate

initiatives or policies. Indirect lobbying techniques involve multinational advertising

campaigns aimed at shaping or mobilizing public opinion. These techniques also

include executing grassroots campaigns that take place at the international and

national levels, so as to produce pressure on governments to reconsider their

policies.①

From the means open to NGOs, we can see that state governments are crucial to the

proper functioning of NGOs. The practical application of these means in the pursuit of

certain aims by NGOs is even more convincing in this respect. The successful launch

of the Mine Ban Treaty is often cited to show the great influence possessed by NGOs,

which is of course more than justified. However it can also serve as a prime example

to illustrate the reliance of NGOs on nation-state for the materialization of their goals.

① Kelly-Kate S. Pease, International Organizations (New Jersey: Pearson Education. Inc. 2000), 34.

19


Initiated in 1991 by a group of NGOs, the International Campaign to Ban

Landmines calls for an international ban on the use, production, stockpiling, and

transfer of antipersonnel landmines and for increased international resources for

humanitarian mine clearance and mine victim assistance program. There is no

shortage of praise showered on NGOs for the successful signing of the Treaty because

of the great efforts they have made during the whole process of the campaign.

However, it should also be noted that the Mine Ban Treaty went through

unprecedented negotiations between governments and non-governmental

organizations.

From the very beginning, NGOs had realized that national governments were the

key and the target of this campaign. NGOs pulled out all stops to make sure that

governments would be convinced of the good this Treaty could do. Through a great

amount of efforts at research and skillful persuasion, NGOs managed to ensure

governments that there was scarcely a connection between the use of landmines and

national security, but a strong connection between landmine usage and humanitarian

disasters. Therefore under the impression of no national interests being harmed as

well as the heavy pressure from the international community, signing national

governments said yes to this Treaty.

While being amazed at the great power NOGs had exhibited during this campaign,

we can not fail to notice another important message this event has conveyed: the

NOGs’ dependency on governments for the realization of their aims. Through the

whole process of negotiation, the compromise and cooperation on the part of national

governments are crucial to the success of the Treaty. Moreover, several important

countries absented themselves from the unconventional negotiations and have not

signed the treaty. The United States attended the final negotiating conference in Oslo,

but after its proposed changes in the treaty's substance were rejected by the

conference, President Clinton said the U.S. would not sign the treaty for at least eight

years. Other non-signatories include Russia, China, India, Iraq, Libya, Pakistan and

North and South Korea. The response of these countries demonstrates once again that

20


nations-states have the final say on international issues. And the right to decide what a

nation should do remains firmly in the hands of national governments. In order to

fulfill their missions, NGOs have to make sure that nation-states are partners instead

of opponents of their advocacy.

In addition to policy backing, the support given by governments to NGOs also

includes financial assistance. IGOs are not as financially independent as national

governments, which have fixed sources of revenue, and are often dependent upon

states for fund in pursuit of advocated goals. And the fund given by governments is

often one of the main financial resources of many NGOs. Sometimes, the financial

support of state governments is indispensable in helping NGOs realize their values.

There is plenty of evidence that the growth in size and number of NGOs is fed by

increased governmental contributions along with greater contributions from

multilateral developmental organizations such as the World Bank. NGOs come to rely

more on public-sector funding which now accounts for around 40 percent of NGO

budgets versus only 1.5 percent in 1970. Many NGOs participate in projects and

services funded by governments. Some analysts already fear that formerly

independent NGOs may become more beholden to national governments.

Nation-state governments exercise supreme power within their territories. They can

decide whether to support and authorize NGOs, or restrict their activities.① Neither do

NGOs possess the political authority as nation-states, nor are they blessed with

massive economic resources as multinational enterprises. The sources of their

influence are mostly from their moral authority: representing the common will of a

part of the civil society on certain issues. In face of the refusal or restriction on the

part of governments, NGOs appear helpless and powerless.

When the US government saw more harm than good the Kyoto Protocol can do to

its economy, it sentenced the treaty to death for which the NGOs had lobbied hard and

long. In June, 2003, Egypt put into practice the law governing NGOs, which placed

① 王杰/著,《全球治理中的国际非政府组织》，(北京:北京大学出版社，2004), 34.

21


severe restrictions on NGOs. As a result, the Human Rights Watch documented

numerous cases where the security services rejected NGO registrations. And also

Russian President Putin has signed into law a restrictive bill regulating the work of

NGOs in January 2006, giving the Justice Minitry’s Federal Registration Service

broad authority to shutter NGOs for engaging in activities that are prohibited, or run

counter to the ‘political independence of the Russian Federation.

3.2.3 NGOs’ Inherent Limitations Compared with Nation-State Governments

(1) Lack of Legal Status

Unlike states, NGOs do not enjoy formal recognition (legal personality) under the

international law, although they have achieved recognition under domestic laws of

various countries. This can be reflected in the treatment of NGOs on the part of

international governmental organizations.

NGOs’ participation in international organizations is carefully limited.

Intergovernmental organizations sometimes allow representatives of NGOs to observe

departmental meetings and receive certain types of documents. On rare occasions,

NGO representatives are allowed to speak at meetings. NGOs, however, do not have

the power to vote at these meetings or execute any binding decisions. Some NGOs

have obtained ‘consultative status’ with international organizations. However, the

‘consultative status’ is at present granted only to a minority of NGOs. The majority is

thus excluded and cannot enjoy the advantages of this status. In addition, the term

‘consultative status’ simply governs relationships between a given IGO and a given

NGO and does not confer any right on an NGO capable of being exercised before any

other national or international authority. Article 71 of the United Nations Charter

permits NGOs to establish consultative relations with the Economic and Social

Council, which allows and only allows them to provide the UN with technical advice

and to express the views of the public.

22


The future is not necessarily bright for NGOs. It is a pessimistic sign that some

governments at the UN are now feeling uncomfortable with the extent of NGO

involvement. NGOs are not necessarily fully representative. Developed countries,

with a total population now forming a small minority of the total world population,

are disproportionately represented in the NGO community, while the voice of

developing countries is accordingly limited. Additionally, the growth of NGO number

at UN meetings causes administrative and security concerns. The discomfort has

already led to moves to reduce that involvement.

( 2) Weaknesses of NGOs

Despite the demonstrated capacity of NGOs to make contribution for the welfare of

human society, their inherent weaknesses have exposed them to heightened criticism.

Embracing a wide range of interests, goals and agendas, NGOs have the capacity to

disrupt as well as to create. The challenge facing national governments is not whether

to include NGOs in policy deliberation and implementation but the way to take

account of their strengths and weaknesses, their potential to do as much harm as good

while incorporating them into the international system.

NGOs are especially criticized for a lack of overall perspective, stability and

constancy. The fact that the states are inherently better equipped for large-scale

initiatives, just as the NGOs may be better equipped for small-scale local experiment

and innovation is self-evident. Most NGOs are created with very specific mandates

tied to their funding. They specialize in certain fields, with strictly delimited goals.

The narrow focus on one particular issue frequently excludes the wider context, which

limits the effectiveness of NGOs. As a result, NGOs always fail to see the ‘big

picture’ and are believed to be better at blocking than implementing large-scale

initiatives.

With the growth of the number of NGOs, a great diversity has been spawned that is

pushing in a multitude of different, even competing directions. The activity of

thousands of NGOs may create distracting ‘noise’ and information bottleneck. At the

23


same time, NGOs can easily become confused about their accountability due to the

intense competition among NGOs. The UN High Commissioner for Refugees warned

in 1996 that if national governments continue to rely too much on NGOs rather than

multilateral agencies in donor assistance, they may undermine important systems of

coordination and cooperation in large-scale emergencies.

Due to a lack of legitimacy and the restrictions placed by fund sources, NGOs are

vulnerable for manipulation. Even in recent years, some NGOs, aid organizations and

development institutions from the ‘North’ have been described sometimes as being

tools or part of the objectives of the foreign policy aims of the northern nation from

which they come. As extreme examples, in some countries, government officials have

set up their own NGOs as a way to work more creatively, access different resources,

and gain new opportunities. Similarly, some development NGOs amount to no more

than ‘briefcase companies’ founded for the purpose of tax evasion and private gain.

Today, in a phenomenon that one environmental activist bemoaned as the ‘rise of the

global idiots,’ any group with a fax machine and a modem slogan has the potential to

distort public debate as an NGO.

Many NGOs are not as democratic or accountable as they claim to be. Hailed as

promoters of more openness and participation in decision-making, they may instead

turn out to produce gridlock on a global scale. Even legitimate, well-established

groups sometimes seize on issues that seem designed more to promote their own

image and fundraising efforts than to advance the public interest. For example, in

1995, Greenpeace continued to attack the Royal Dutch/Shell Group for its plans to

sink an oil rig (the Brent Spar) in the North Sea, even after independent scientific

analyses showed that the environmental effects of doing so would be inconsequential.

Also, NGOs rise and fall based on consumer demand: fulfilling a need, they will

continue; not meeting a need, they will fail. After the World War II, there was a burst

of enthusiasm about NGOs, which was soon followed by a gradual decline during the

1950s. Then the trend got reversed as issues of environment, development,

population, and food aid were put up on the international agenda. Today, in the wake

24


of globalization boost in NGO activity, NGOs have got a wide recognition by national

governments and international organization. However, as to the duration of this round

of new enthusiasm, uncertainty hangs.

There has also been criticism on the use of the funding and other money that NGOs

have received or raised. Criticisms range from pointing out that only small

percentages go to people in need, and that a lot goes to recover costs, and some even

have been used to pay very high salaries of the people at the top. One recent study on

NGOs and peace-building in Bosnia criticized the use of advertising (from signboards

to t-shirts) by NGOs to promote their reconstruction programs to potential donors.

Such advertising, the study noted, had the effect of denigrating local rebuilding efforts

and raising questions about where NGOs were actually putting their money. In Sudan

and Somalia, NGOs have subsidized warring factions by making direct and indirect

payments to gain access to areas needing assistance. In other conflict settings such as

Ethiopia and Rwanda, NGO constructed roads and camps for civilian assistance

which have instead been used by combatants.

NGOs possess merits conducive to the overall development of the society and have

indeed played a crucial part in the settlement of a wide range of critical social

problems. But NGOs’ involvement depends on two factors: the needs of governments

and the capabilities of NGOs. The inherent limitations and weaknesses of NGOs and a

lack of legal status greatly restrict the role they can play in the international political

arena and render the expectation of them surpassing nation-states in status and

functions a mere fantasy. Faced with NGOs, nation-states remain irreplaceable and

unchallengeable in terms of sovereign authority and the ability of managing domestic

and international affairs.

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VI

MNEs and their Impact on State Sovereignty

The core of international integration lies in economic integration. This is especially

true in contemporary world, as the impact of globalization is best reflected in the

economic sphere. With the continuous expansion and penetration of market economy,

all nations are involved in this huge wave of economic integration. In this process,

multinational enterprises (MNEs), one of the main actors of globalization, are the

main driving force of this immense economic transformation. As Malcolm Waters put

it, “The main focus for many hopes and fears about economic globalization is the

MNE or TNC (Transnational Corporation).”①

4.1 Expansion of MNEs in the Era of Globalization

MNEs are private, for-profit organizations that have commercial operations and

subsidiaries in two or more countries②. MNEs usually engage in foreign direct

investment and own, or control, activities in these countries where they are present.

As in the case of many of the components of globalization, the development of

MNEs is a long-term process with a recent acceleration rather than a sudden and

qualitative shift. The origins of MNEs go back to the period from 1870 to 1900 when

enterprises began to set up foreign branches and become involved in FDI.

Globalization, however, has opened golden opportunities for MNEs to expand. Now

the scale and number of MNEs have grown exponentially in the process of

globalization.

According to the statistics of the United Nations, there were 7276 MNEs all over

the world in 1968 and 1969, and the number reached 15,000 in 1980, 37,00 in 1992,

① Malcolm Waters, Globalization (New York: Routledge, 2001),46.② Kelly-Kate S. Pease, International Organizations (New Jersey: Pearson Education. Inc., 2000), 36..

26


and eventually 53,000 in 1997. The affiliates of these MNEs increased from 270,000

to 450,000, present in more than 160 countries. MNEs account for 40% of GDP, 50%-

60% of international trade, 60%-70% of international technology transfer, and 90% of

foreign direct investment.① The fields for MNEs which were initially restricted to

industry or raw material extraction and processing, now extend to the rapidly growing

service sector, including banks and insurance companies, accounting, advertising and

consultancy bodies, and the hotel and leisure industries, such as Citicorp, American

Express, McKinsey and the Hilton and the Sheraton Hotel chains. The growth of

information industries also changed face of MNEs within the global economy.

Information technology has not only created new MNEs, such as Microsoft, Sun

Microsystems, and Apple, but has also enhanced the capacity of other multinationals

to operate across geographical and political boundaries.

The power of MNEs has become too massive to be neglected. The colossal scale of

transnational economic operation, solid financial basis and well-established networks

explain the prominent position MNEs have secured nowadays.

4.2 Challenges Posed by MNEs to Nation-States

MNEs are sources of investment, technology transfer and upgrading of labor force.

In recent years, MNEs’ rise to prominence has enhanced their restraining impact on

state control over economic affairs.

Obviously, MNEs are encroaching upon the territorial sovereignty of nation-states,

as they operate on a global basis, defying the restriction of borders, blurring the

concept of territory and accentuating the uncertainties of national jurisdiction. At the

same time, MNEs try to get rid of the supervision and regulation of national

governments, and try to avoid taxation, sharpen their competitive edge through

merger and acquisition, and monopolize production and consumption of certain

products, which consequently leads to the destruction of the economic governing

① 杨宇光/著，《经济全球化中的跨国公司》（上海：上海远东出版社，1999），1。27


system of nation-states.

MNEs make decisions on the basis of optimizing the private profitability of the

corporations rather the economic health of particular nations. Such decisions include

whether and where to locate investment, how to articulate flows of resources and

semi-finished products within the global operations of the corporation, what intra-firm

prices to charge, and where to generate profit within the organization. Indeed, the

decisions made in such circumstances affect individual nations in multiple,

intersecting ways. MNEs thereby reduce the influence that governments can exercise

over the economic activities.①

Moreover, MNEs’ influence upon nation state is not just confined to the economic

field, but prevalent in cultural, social and political sectors. We might say MNEs are

placing restrictions on the capabilities of national governments in regulating economic

activities, protecting national economy and even in managing social and political

affairs. The expansion of MNEs arouses concern about the challenges faced by nation

states, as MNEs have grown so large and powerful that they are believed to be

undermining the sovereign authority of the nation-states, taking over the authority

from national governments and making nation-states a thing of the past.

4.3 Unchanged Role of Nation-States

Malcolm Rifind, Britain’s former Conservative foreign minister, once said to the

effect that multinational corporations operating freely across national borders does

not, however, mean that sovereignty has no future and most important of all, the

nation-states remain the cornerstone of international system. To say that nation-states

cannot ignore multinational enterprise is not to say that MNEs are typically beyond

any kind of national regulatory control or influence. And as we shall see, the

prediction that sovereignty would be held at bay and that the nation-states, confronted

with ever larger and more powerful transnationals, would wither away, is somewhat

① Robert J. Holton, Globalization and the Nation-state (Basingstoke: Macmillan Press, 1998), 95.

28


exaggerated.

This perspective is reinforced by the fact that MNEs’ dependency on the nation

states is evident in a number of ways, resulting from common or compatible interests

rather than unilateral domination. In addition, in light of the high cost of

incompetence in the era of globalization, MNEs are not making nation-states

disappear, but on the contrary, are impelling nation-states to improve governance in

order to make full use of the presence of MNEs and harness globalization to their

advantage.

4.3.1 MNEs’ Subordination to Nation-States: Home Nations and Host Nations

Generally speaking, as an entity surviving in the world political system, MNE is

willingly subordinated to and naturally dependent upon nation-states.

First of all, MNEs are profit-making corporations not only set up in accordance

with the laws and regulations within certain nations, but also operate in strict

compliance with these laws and regulations. They will and have to try to remain

consistent with the domestic policies and strategies instead of running the risks of

defying the positions of home nations. For example, in 1995, in order to isolate Iran

more effectively, American government decided to exercise more severe economic

sanction against Iran, including forbidding all the American oil corporations and their

overseas subsidiaries and branches in buying and selling oil in Iran and illegalizing

any other relevant trade activities. Despite the expected huge loss, American MNEs in

oil business made no other choice but to follow the nation’s policy.

In the case of host states, MNEs and their subsidiaries also have to operate within

the legal limits as legal persons since their rights and obligations are derived from the

laws of the host states. Respect on the part of MNEs must be shown to the laws, rules

of the states in which their profits are at stake. In many countries, especially the

developing countries, the financial status, the direction and scale of investment of

29


MNEs and even the introduction of foreign technology are subject to governmental

control. MNEs have to accept the jurisdictions of nation-states in which they are

present.

4.3.2 MNEs’ Dependency on Nation-States: Home Nations and Host Nations

Of course, obedience of MNEs doesn’t stem from their nature of making sacrifice,

but the reliance on national governments for survival and prosperity. The key

functions of nation-states are crucial to the development of MNEs, since high levels

of political stability and well-established infrastructure would certainly offer a reliable

environment conducive to the growth and expansion of their businesses. This applies

not merely to countries of home market, but also to host nations where affiliates are

based.

Generally speaking, MNEs depend on nation-states for a good economic

environment. Markets do not, by themselves, solve all problems with which they are

confronted. Markets and individuals do not behave rationally; rather, markets and

investors often react irrationally, spurred by rumor and driven by unwarranted panic.

Market failure, government can make up by providing certain key functions: stability,

social order, property rights protection. As we know, states in the 19th century were

required to provide rules to regulate excessive competition and also structures to

encourage social consensus in face of economically generated conflicts, for example

between capital and labor. In the 20th century, similar state functions were required.

These included the intervention of economy by governments in 1930s, when it was

acknowledged that the economy is a government’s responsibility which should not be

left solely to the market.

Michael Porter has argued that the multinationals’ home market is a major base for

expansion and that national policies have a major bearing on the competitive

advantages that accrue to home-based MNEs. He links this point with the observation

that some nations’ MNEs, for example, those of the Japanese, have recently been

30


growing faster than those of other nations, irrespective of the industrial sector within

which they are located. Also consider Boeing, Inc. Boeing receives billions of dollars

a year in defense contracts for its products—aircraft ranging from high-performance

fighter jets of transport and freight planes. These defense contracts permit Boeing to

develop aeronautical innovations paid for by taxpayer dollars, innovations that also

have commercial applications for civilian aircraft. Thus Boeing has a considerable

advantage over foreign producers seeking to compete in the civilian aircraft market.①

The national policies that have been seen as relevant to home-based competitive

success include the quality of the public education system, management training,

protection, and the investment in infrastructural items such as telecommunications.

These policies have been evident in Japan and Western Europe, and have contributed

to productivity growth, profitability, and employment.

In the addition to the creation of agreeable economic environment, home state

governments, more often than not, act as the strong backing behind the MNEs,

especially when their interests are threatened in other countries.

The actions of home-country governments of the MNEs which were in conflict

with the Mexico state during 1960s and 1980s exemplify the support home nations

can provide. The Mexico state was to nurture a national auto industry, and minimize

the proportion of foreign auto MNEs whose strong presence was obviously

obstructing the implementation of that policy. When Mexico State exhibited great

efficiency in dealing with the MNEs involved, MNEs had to resort to their own state

governments for a stronger bargaining power. In case of the Ford and GM (General

Motors), they were able to muster a formidable ally—the United States government.

Given Mexico’s dependency on the United States in matters of trade, finance, and

investment, pressure by the U.S. government had to be taken seriously. When the U.S.

government voiced its concern over the treatment of Ford and GM, the Mexican

government felt a need for circumspection, lest policy in the auto sector threaten the

wider growth strategy. Consequently, both Ford and GM were approved as wholly

① Kelly-Kate S. Pease, International Organizations (New Jersey: Pearson Education. Inc., 2000), 158.

31


foreign-owned subsidiaries. Likewise, Nissan the Japanese MNE of automobile was

able to gain entry to the Mexican market as another wholly foreign-owned firm since

the Japanese government had a lever that it was able to use: Mexico’s dependence on

Japan as an export market for its cotton. About 70 percent of Mexico’s cotton exports

went to Japan, Mexico’s most important trade partner after the United States.

A further type of governmental support to MNEs is best demonstrated in the

military and political support of the USA as a superpower. This power was

instrumental in the restabilization of Europe and Japan, which were to become major

sites for the operation of American MNEs.

Dependency on nation-states of MNEs is also evident in countries rather than of

their home base. MNEs need the host nations to exercise reliable policies, put into

place adequate infrastructures, and apply predictable regulations in order for them to

enjoy a preferential and stable investment environment. The destinations of the

investment of MNEs are illustrative of the differences nation-states can make in

attracting MNEs and also MNEs’ reliance on these differences in making their

decisions. The more stable a country is the safer MNEs profits will be, and the more

attractive the country will become.

Singapore, as an established economic power, is one of the favorite locations

attractive to MNEs. Political stability, open and honest markets-both for financial

services and a continued large commodity trade-constitute a fundamental attraction of

Singapore for foreign MNEs. Singapore has a long tradition of strong governmental

administration, which accounts for the adaptability of Singaporean economy in

meeting the changes in the international economy. In order to secure the gains from

the new flow of MNEs expansion, accept and cater for a very high foreign presence,

Singapore State paid attention to infrastructural development, government control of

the labor market as well as of savings and efficient planning, which proved irresistible

to foreign multinational enterprises. Singapore took in its entirety the MNE ‘package’

of capital, technology, entrepreneurship, management and marketing①, which is one

① W.G.Huff, The Economic Growth of Singapore (Cambridge: Cambridge University Press, 1994), 36.

32


of the explanations for Singapore’s successful economic development.

Nations without a sound economic environment will fail to attract MNEs. For

instance, Russian government’s intervention in economic sector has built up a

reputation for unreliable environment, thus hindering the influx of foreign investment.

And French government’s intervention of foreign take-overs of and joint ventures

with French businesses has also thwarted the adventure of MNEs. In the case of

volatile governance, the corrosive power is most fateful for the MNEs. Countries in

chaos or with temporary governance are the least likely places MNEs’ money will go.

4.3.3 The Power Shown by Nation-States in Dealing with MNEs

In considering the impact of MNEs on the sovereignty of nation-states, developing

countries draw the limelight, since on the one hand, most influential MNEs originate

from developed countries and on the other, developing countries appear more

vulnerable than developed countries in face of the penetration of MNEs.

National autonomy is clear in the case of economically advanced nations. Bailey et

al. in their review of relations between MNEs and governments, point to major

limitations on inward foreign investment, most notably in post-war Japan. Despite a

slow trend toward liberalization, the evidence is that Japan has only eased barriers

against foreign multinationals when circumstances were deemed to be in Japanese

interests. The key role of government policy in Japanese capitalist development is

evident.①

Doubts may rise concerning the robustness of the sovereignty of developing

countries when faced with the unprecedented challenges by MNEs. The dilemma for

most developing countries is that economies may stagnate without MNE involvement,

but the price for bringing them in may be too high in terms of loss of control over

economic affairs or in relation to opposition for domestic economic and political

interests. In order to bring in MNEs for the interest of national economy, developing

① Robert J. Holton, Globalization and the Nation-State (Basingstoke: Macmillan Press,1998), 96.

33


countries are paying high costs. Deregulation, reduction of control over economy and

formulation of preferential policies towards MNEs are few among the numerable

moves taken by developing countries to attract MNEs. Some say changes like these

are shadowing states sovereignty, making the state less central to national

opportunities for development than it was in the past.

As we understand, MNEs remain dependent on nation-states for certain types of

resources in a range of circumstances. And it is not all clear that nations in general

lack bargaining power in dealing with MNEs. East Asian states- from Korea in the

North to Singapore in the South with the People’s Republic of China in the middle-

have used various strategies in which the state played a central role to cushion the

dramatic impact on domestic economy brought by MNEs.

Douglas C. Bennett and Kenneth E. Sharpe’s study of the strong role played by

Mexican government in safeguarding national interests has fully demonstrated the

resilience and power shown by a developing country when faced with the expansion

of MNEs.

The Mexico state adopted an industrial policy in an effort to shape industrialization

in the automobile sector between 1960 and 1980. In 1961-1962, in 1968-1969, and

again in 1977, there were there major episodes of bargaining between the Mexican

state and the transnational automobile firms.

In 1958, the Mexican state set itself the task of creating an automobile

manufacturing industry in Mexico. The conflict that ensued pitted for the first time the

Mexican state against foreign corporations in a manufacturing sector. And as a

strategy of the administration, MNEs of different nations were pitted against each

other, and competition among each single MNE got intense. In the end, Ford had

expressed a willingness to commence manufacturing under the right conditions, and

the others were then quick to indicate their willingness as well.

The second round followed shortly. Scarcely seven years after it had compelled the

world’s major automobile firms to commence manufacturing vehicles in Mexico, the

34


Mexican government had pushed them a step further into undertaking automotive

exports. MNEs agreed to the governmental policy o exports because the alternative

proposal of merger policy for a single large Mexican firm would make it even harder

for MNEs to compete under such requirements. The export-oriented automobile

policy promised to generate foreign exchange to meet the country’s import bill, spur

further industrialization, and provide new sources of employment.

For the third round, the 1977 decree pressed forward vigorously with export

promotion. The MNEs were compelled to make substantial investments in their global

operations in any event. GM announced the start of an investment program designed

to generate sufficient export volume to comply with the decree. Once GM had made

its move, the other firms quickly followed suit.

The efficiency and capability presented by Mexico State during these rounds of

negotiation with MNEs shows that national governments are strong and capable in

bringing MNEs under regulation and control, rather than remain weak and helpless as

some may have claimed. The study of is in defiance of the arguments that states are

passive and powerless in face of MNEs. It captures the consequences of MNEs for

developing countries, and the possibilities for altering these consequences by state

action. Although it is a study focusing on the time period from 60s to 80s, it serves as

an instructive way to look at the relationship between nation-state and MNEs

nowadays.

4.4 Strong State, Strong Economy

The expansion of MNEs, alongside other processes of globalization certainly

contributes to the impact on state authority, but the impact is not as fully negative as

some views have claimed: state involvement in economic affairs is seriously

restricted. Existing cross-national statistics suggest that greater reliance on trade is

associated with an increased role for the state rather than a diminished one. Moreover,

a look at the nations that have been most economically successful over the last thirty

35


years suggests that high stateness may even be a competitive advantage in a

globalized economy. Singapore is the most obvious case in point.

Singapore is an economic development success story. With three million people, the

island ranked in 1990 as the world’s eighteenth largest exporter of merchandise, and

thirteenth in commercial service exports; merchandise exports were three times those

of the whole of India. By the 1990s few commercial decisions relating to Southeast

Asia could be taken without reference to Singapore; almost any multinational

enterprise, whether in manufacturing or services, planning to expand outside North

America, Western Europe or Japan world naturally consider it as a location①.

Singapore is not only a highly internationalized economy in terms of its extreme

reliance on trade, but it is also exceptionally dependent for its local economic

dynamism on foreign direct investment by MNEs. At the same time, it is equally

renowned for the capacity and power of its state bureaucracy. Its success suggests that

successful participation in global markets may be best achieved through more intense

state involvement.②

Singapore’s development relied on a combination of external free trade and strong

internal economic control. In Singapore’s economic development, the commitment of

the political leadership to economic development was total, and featured strong, if

selective intervention.

An activist government committed to development guided Singapore’s economic

transformation. With the development of globalization since 1960s, a new flow in the

world economy quickly began to gain strength: the investment made by MNEs in

search of low-cost locations for the manufacture- or, often, assembly- of goods with

low value-added per worker for export to the West. Interventionism in Singapore

aimed to adapt the domestic economy to the requirements of the international

economy. Singapore turned decisively to achieve export-oriented growth almost

entirely through foreign multinationals.

① W.G.Huff, The Economic Growth of Singapore (Cambridge: Cambridge University Press, 1994), 1.② Peter Evans, The Eclipse of the State? Reflection on Stateness in an era of Globalization, World Politics 50.1, (1997): 62-87

36


In order to attract foreign MNEs, Singaporean government made heavy

infrastructural investment. The Economic Development Board (EDB), as the

government’s agent, was set up as ‘the spearhead for industrialization by direct

participation in industry’ and building necessary infrastructure.③ In addition to

infrastructural development, great planning was effected through government control

of the labor market as well as of savings. Together with the political stability, sound

and open market, Singapore was able to attract a majority of the MNEs and took great

advantage of the presence of MNEs for the development of its economy.

The means by which Singapore achieved its rapid manufacturing development are

summed up in the explanation that they imported entrepreneurs in the form of

multinational corporations and the government itself became an entrepreneur in a big

way. Although interventionism could therefore be regarded as selective, there was

total government control of those parts of the domestic economy crucial to

international competitiveness. The Singapore model carries the lesson-perhaps in its

most emphatic form- that an extensive role for the government is helpful to the

development of national economy in face of the expansion of MNEs.

4.5 The Enhancement of Nation-States’ Role as Required by MNEs

From a different perspective, the expanding influence and undeniable importance of

MNEs does not necessarily cast clouds over the future of nation-states’ authority. On

the contrary it offers opportunities and incentives for national governments to

undertake a wide range of institutional reforms and organizational changes for

effective public sector policy and service delivery operations in order to adjust to the

requirements of MNEs and secure a promising future.

The costs of incompetence can be high in volatile and integrated markets. Therefore

nation-states are forced to improve their efficiency in economy management and

public administration. Governments are motivated to improve governance which

③ W.G.Huff, The Economic Growth of Singapore (Cambridge: Cambridge University Press, 1994), 307.

37


emphasizes flexibility, responsiveness, transparency and accountability. This is what

Singaporean government has always done to respond to changes in the international

economy and the resulting requirements of foreigners. Its willingness to accept

foreign enterprise from the late 1960s continued a long tradition of adaptability. These

shifts optimize governments’ capabilities in economic management and public

administration, thus consolidate the sovereign authority of nation-states.

And in order to safeguard the national interests, the governments of developing

countries are driving a hard bargain against MNEs and taking as many measures as

possible to offset the undesirable side effects. In addition to the essential improvement

of domestic governance, developing countries are also keen on inter-governmental

cooperation to take into consideration of the whole scenario. OPEC was set up in

denial of the argument that nation-states remain weak or powerless victim. Its

achievements show that there are strategies open to governments in an era of MNE

penetration. The availability of these strategies and the improvement of governmental

administration indicate the possibility of government autonomy in the setting of

national goals and the implementation of national strategies in face of the penetration

of MNEs.

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V

Marginalization and the Role of Nation-States

5.1 The Phenomenon of Marginalization in the Era of Globalization

It is very true that globalization is a significant phenomenon transforming the world

more rapidly and dramatically than ever before. Globalization does bring faster

growth, higher incomes and enormous opportunities. However, it should be noted that

globalization has generated as many benefits as it has engendered new risks. It can

serve to consolidate inequality between nations, and lead to the exclusion of states and

individuals left behind by this progress.

The problem of course lies in the uneven benefits brought by globalization, in the

fact that some are blessed with unparalleled opportunities, while others have been

completely marginalized. This force is storming through the developing countries like

a tornado, with consequences that are far from beneficial for most of the

disadvantaged countries. For these countries, instead of flourishing economic scenes,

what they get familiarized is the slow growth of the industrial sector, sluggish

evolution of the agricultural sector and an infantile level of technology application.

5.1.1 The Scourge of Marginalization Brought by Globalization

The signs of imbalance in world economic development, especially between the rich

countries and the disadvantaged countries, are evident amid the highly-claimed

universal prosperity.

While the share of developed countries in world income increased from less than 73

percent in 1980 to 77 percent in 1999, that of developing countries stagnated at

around 20 percent (UNCTAD, 2002, Chapter 3). The share of developing countries in

the global distribution of wealth has shrunk. UNDP data on the global distribution of

39


wealth between industrial countries, developing countries and the former USSR and

Eastern Europe (table 1) show that wealth distribution has become more unequal.

Between 1960 and 1994 the share of developing countries, and particularly that of the

former socialist countries of Central and Eastern Europe, shrank while that of Western

industrial countries increased.①

TABLE 1

Industrial countries Developing

countries

Former

USSR&Eastern

Europe

1960 67.3 19.8 12.9

1970 72.2 17.1 10.7

1980 70.7 20.6 8.7

1989 76.3 20.6 3.1

1994 78.7 18.0 3.3

Sources: UNDP data base.

We may be amazed at the fact that the world’s total product has quadrupled and the

real per capita world product has doubled. But it is equally shocking to realize that a

large proportion of humankind is denied the participation in world economic

prosperity. As one author has recently summarized their conditions:

1.3 billion persons, that is 22 percent of the world’s population, lives below the

poverty line… As a consequence of such severe poverty, 841 million persons (14

percent) are today malnourished; 880 million (15 percent) are without access to health

services; one billion (17 percent) are without adequate shelter; 1.3 billion (22 percent)

① Paul Streeten, “Globalization: Threat or Salvation?” in Globalization, Growth and Marginalization, eds. A.S. Bhalla, (Basingstoke: Macmillan Press Ltd, 1998), 24.

40


are without access to safe drinking water; two billion (33 percent) are without

electricity; and 2.6 billion (43 percent) are without access to sanitation.①

Apparently, marginalization is most pronounced on the African continent. Among

the 49 least developed countries reported by the United Nations, 34 are in Africa.

Locked in an unequal exchange with the developed world, Africa has been

transformed into undeniably the poorest continent. In the past half century,

globalization proceeds at an accelerating pace, but it is during the same half century

that Africa is more marginalized within the world economy than at any time.

The inadequacy of Africa’s global integration is evident in its falling share of world

trade, investment and IT, which have declined to negligible proportions. According to

research, Africa with 11% of world population accounts for only 1% of world GDP,

1.5% of world trade, and attracts only 1% of world FDI. The low GDP levels and poor

growth rates of most African countries have resulted in poor telecommunications

infrastructure and low teledensity levels. The number of internet users across the

whole African continent is less than that of Luxemburg, a country with only 440,000

people.

5.1.2 Roots for the Marginalization

From the above, we come into face with the disquieting fact that gap has widened

in the phenomenon of globalization while it is expected to narrow the disparities and

slash the number of poor countries with its instruments of free trade and liberalization.

Many developing countries, mainly but not exclusively in Africa, are truly

marginalized. And the universal goals of halving poverty and providing universal

primary education by 2015 seems to be mere figures with no hope whatsoever of their

being achieved in light of the present situation.

A saddening factor contributing to the marginalization is the unfair trade

environment created by the economic dominance of the developed countries. Trade is

① David Held, A Globalizing World? (London:Routledge,2004),174.

41


supposed to present enormous potential to accelerate the process of achieving

Millennium Development Goals. But the potential is undermined by the existing trade

policies. The unfair trade policies adopted by developed nations frustrate the efforts of

poor countries in wriggling out of the grip of poverty, and cast this inequality into

eternity.

UNCTAD still maintains that developing states are caught in a perpetual cycle of

poverty and underdevelopment because of their disadvantaged position in the

international division of labor. Their export income is derived from low-profit

primary products, rendering them vulnerable to economic expansions and contractions

in the global economy.①

In 1999 for almost all developing countries imports expanded faster than exports,

resulting in a deterioration of their trade balance. What is crucial here is the category

of goods that are being exported. The UNCTAD report suggests that exports from

developed countries are products with high global demand and large market potential,

while that of developing countries mainly comprises of products with sluggish

demand and potential excess supply. Table 2 shows the share of the world market held

by developing countries and the main exporters of what UNCTAD identified as the

ten most market-dynamic products for 1998.②

Table 2 shows that developing countries are enjoying a share in the markets for

some dynamic products, but developed countries continue to dominate most markets

in these goods. There are no examples here of African or South American countries

being able to derive much advantage. Furthermore, the table hides the fact that much

of the contribution of developing countries is in low-skill, low value-added assembly

stages of global production networks, as in electronics.

Protectionism in the guise of social, environmental, health and safety standards is on

the rise, despite the accentuation on free trade promised by globalization. Tariff levels

and the frequency of subsidy peaks are still high in many areas of export interest to

① Kelly-Kate S. Pease, International Organizations,2nd Edition,34 (New Jersey: Pearson Education. Inc. 2000).② David Held, A Globalizing World? 2nd Edition, 119(London:Routledge,2004)

42


developing countries.

TABLE 2 Exports of market-dynamic products

Product group Share of world

market held by

developing

countries(%)

Main exporting

countries(%)

Transistors and semiconductors 46 USA(17) Japan(15)

Computers 36 USA(13) Singapore(13)

Parts of computers, office machines 38 USA(17) Japan(14)

Optical instruments 30 Japan(22) USA(17)

Perfumery and cosmetics 10 France(28) USA(12)

Silk 87 China(70) Germany(9)

Knitted undergarments 57 China(16) USA(8)

Plastic articles 23 USA(14) Germany(13)

Electric power machinery 37 USA(11) Germany(10)

Musical instruments and records 18 USA(20) Japan(12)

Source: adapted from UNCTAD, 2002, Table 3.2

Although rich countries have always promised to lower the tariff on imports from

developing countries and slash subsidies by a large margin, neither of these promises

are delivered. The highest trade barriers are erected against the poorest countries in

the world, and generally speaking, the obstacles faced by developing countries in

43


exporting to rich countries are three times that of the exporting between rich

countries.

Developed countries must realize that the scourge of under-development can shake

the very foundations of the international system devised by them. Global equity is the

only assurance of shared peace and prosperity. However, as a percentage of their

GDP, the total development assistance of low-income countries according to the

World Bank classification fell from 2.1 percent in 1985 to 1.3 percent in 1998. For

middle-income countries it fell steadily from 0.9 to 0.4 percent, while for the subset of

these countries classified as lower-middle-income countries it fell from 2.0 to 1.0

percent. We therefore find that development assistance as a whole, to low- and

middle-income countries, has been declining in importance. (see table 3.)

TABLE 3 Development assistance percentage of GDP①

1985 1990 1998

Low-income

countries

2.1 2.6 1.3

Middle-income

countries

0.9 0.7 0.4

Lower-middle-income

countries

2.0 1.2 1.0

Source: World Bank, World Development Report, various issues.

Transfer of resources in the form of international assistance from the rich countries

has continued to decline while the transfer of resources from the poor countries to the

rich in the form of debt repayments has continued to swell. The total external debt of

① Amitava Krishna Dutt, “Globalization, North-South uneven development and international institutions” in The Role of International Institutions in Globalization, eds. John-ren Chen (Massachusetts:Edward Elgar Publishing Inc., 2003), 120.

44


developing countries has increased almost by 6 per cent over the amount of debt in

1997 and stands at 2.5 trillion dollars. The debt burden is like cancer to their

economies, eating away their meager resources. While piecemeal efforts are being

made to address the issue, we believe that only a comprehensive and durable solution

of the external debt problems would help in releasing resources for development.

5.2 Managing the Challenges of Globalization: the Role of Global

Governance and National Governments

Globalization brings unprecedented economic integration, but also intensifies

inequality. Managed well, globalization can create foundations for economic growth

and development at both the national and international levels. Managed poorly

globalization could lead to further marginalization and impoverishment of the

disadvantaged world. Neither outcome is predetermined. It depends on the policy

choices adopted by national governments and the international institutions. This has

posed severe challenges to national governments as well as global governance to

reverse the unhealthy trend introduced by globalization by improving their service and

policy delivery.

5.2.1 What the Global Governance Can Do

The international community has an important responsibility in ensuring the equal

benefits distribution of globalization. The challenge before us is to ensure that

developing countries are well positioned to take advantage of the opportunities

offered by integrating into the world economy. We must undertake collective action to

realize the goal of universal prosperity, as enshrined in the UN Charter.

No amount of globalization, marketization, liberalization or interdependence is

going to make a difference, unless it is based on democratic principles, applicable to

world development. Furthermore, as the Pakistani Ambassador so eloquently spoke

45


on behalf of his country, what is needed is not globalization of the world economy but

globalization of development. Unless a modicum of balance and symmetry is restored,

the world will probably be heading toward implosion.

We need more effective global governance to achieve a wider distribution of

opportunity in the international economy and manage globalization so that it includes

rather than marginalizes poor people. The international economic system remains

based on an unequal power structure. The imbalance of economic power between the

developed countries and the developing countries are deep-rooted. There is need for

strengthening global cooperation and action to address the growing problems of the

unequal economic system. Remedy the imbalances in the structures of global

economy with new efforts to create a more equitable system.

The priority area that needs immediate attention is to strengthen the capacity of

multilateral institutions to address the issues of trade, finance and development in an

‘integrated manner’. The institutions responsible for ‘rule-making’ in the

globalization process (IMF, WTO, and the World Bank) should be made more

democratic and transparent. There is ‘a fatal flaw’ at the heart of the existing system

of multi-layered global governance-namely, its lack of democratic credentials and

legitimacy. At present, international institutions, including the World Bank, the IMF,

and the WTO, have done little to stem the strong forces of uneven development in the

international economy, and by promoting the liberalization of trade and capital flows,

and by protecting intellectual property rights, and by not promoting the greater

mobility of labor, they may well have exacerbated the forces of global uneven

development.①

The last decades have enabled us to understand more clearly the interdependence

which now unites all the nations. It is clear today that the countries of the ‘North’ can

no longer formulate their economic policies without reference to the countries of the

‘South’, any more than the latter can define their development strategies without

① Amitava Krishna Dutt, “Globalization, North-South uneven development and international institutions” in The Role of International Institutions in Globalization, eds. John-ren Chen (Massachusetts:Edward Elgar Publishing Inc,2003), 128.

46


taking into account the situations and actions of the industrial nations.① The industrial

countries’ policies will in part determine the results obtained by the developing

countries. The elimination of protectionist support measures, especially in agriculture,

textiles and clothing sectors and the issue of debt relief, access to technology and

development finance should be addressed on a sustained basis by the developed

countries as well as the global governance as a whole.

5.2.2 Challenge for National Governments

While stressing the need for new integrated structures of global governance, we

must also accept that it is important for governments in developing countries to make

efforts to avert political alienation and social exclusion. It is clear that the prime

responsibility for their development will lie with the disadvantaged countries

themselves and that their economic performance will depend mostly o their own

efforts.

Since globalization can have economically and socially destructive consequences it

is a great challenge for national governments to improve governance at both the

national and international levels for successful management of globalizations.

Internationally, globalization is creating new forms of political inequality as some

states and powers lie at the heart of the contemporary system of regional and global

governance and others—essentially the developing countries—remain at the edge of

involvement. Participation in global governance is skewed. Smaller and poorer

developing countries have little voice in global decision making. Under these

circumstances, developing governments shall enhance cooperation and solidarity

between each other in order to form a stronger voice in the world system. As Julius K.

Nyerere once said, “We the countries of the Third World, are thus being forced to face

up to another reality; that while we are weak separately, we could have strength if we

① Jacques Loup, Can the Third World Survive? (Baltimore: the Johns Hopkins University Press, 1983), 212.

47


acted in unity.”① The developing countries shall work together for the new

international economic and political order. The efforts made to achieve policy unity of

the main developing continents are impressive. However they are far from enough in

terms of the extent and scope. Much more remains to be done.

Within the territories, national governments of developing countries are challenged

by the inflow of external forces. Clearly, The Asian financial crisis shows that

developing countries lack the capacity to regulate financial markets and foreign

investment. It is an ungentle awakening to the need for rapid reform in financial

institutions and the need to move quickly to put regulatory system in place and

maintain macroeconomic stability in the midst of international volatility and national

vulnerability. Moreover, in face of the acceleration of globalization, national

governments are being increasingly forced to cope with the commercial clout of

MNEs, which are growing more powerful than ever before. This has resulted in the

need of market reform to take advantages of MNEs for the national economic

development.

It is equally important for governments in developing countries to combine markets

reforms with reforms to retool governance institutions. There is thus a need to

undertake a wide range of institutional reform and organizational changes for

effective public sector policy and service delivery operation. The focus should be on

increasing the democratic nature of existing governance institutions and designing

new institutions that can promote equitable participation and decision-making, so as

to address the pressures for enhancing democratic space. This shift reflects a

conceptual change in governance that features transparency and accountability.

Another crucial point lies in policy and management. For the disadvantaged

countries a modification of development policies seems necessary. Several priorities

appear to be essential for such reorientation.

The experience of three decades has shown that economic growth did not always

① Ahmad Abubakar, Africa and the Challenge of Development: Acquiescence and Dependency versus Freedom and Development (New York:Praeger Publishers, 1989), 53.

48


suffice to ease the burden of poverty. The reorientation of governmental policies

toward the underprivileged should be a priority. Taking into account the needs of the

poorest, the development of agriculture, on which the vast majority of these destitute

depend, will play a fundamental role. Statistical evidence has challenged the idea of

an automatic diffusion of the profits of growth and a majority of destitute people earn

their living from agriculture, a reorientation of development strategies in favor of this

sector could lead to an improvement in their living conditions.① Only if we undertake

to improve directly the living conditions of the destitute will poverty eventually be

eradicated.

Reconciling the two imperatives of high growth and equitable distribution

constitutes a real problem which cannot be evaded. Part of its solution presumably lies

in giving priority, among the measures in favor of the poorest, to those programs

which increase these people’s productivity. Statistical studies have shown that not

only improvement in nutrition and health but also education has a significant impact

on the productivity of the poorest workers. It became possible to declare that

‘investing in man’ would increase productivity and consequently accelerate economic

growth.

At the same time, the ongoing efforts to reduce demographic growth must be

intensified. The development of commercial and traditional energy resources will

have to receive equal attention too. Finally, because of the foreseeable increase in

their import requirements, these countries will have to strive to increase their exports

in order to obtain the foreign exchange required for these purchase.

After all the suggestions for policy orientation above, one more thing should be

noted is that the importance of policy lies not merely in terms of shift of emphasis to

agriculture and rural development or form outward-looking to inward-looking

development strategy, but also in durability. Policies of African governments seem to

be characterized by rapid change and consequent inconsistencies and hence are

marked by lack of clearly defined long-term goals.② And the same is true of other ① Jacques Loup, Can the Third World Survive? (Baltimore: the Johns Hopkins University Press, 1983), 164.② Ahmad Abubakar, Africa and the Challenge of Development: Acquiescence and Dependency versus Freedom

49


developing countries. Constancy and durability of government policies are essential to

the efficient implementation of the national strategies and planning of economic

development and the final eradication of poverty.

Marginalization is one of most severe challenges faced not only by the

disadvantaged countries but the world as a whole in the era of globalization. National

governments, especially those of the marginalized world, are entrusted with the great

mission of putting an end to this destructive trend. With the improvement of

governance and enhancement of international cooperation, states are posed to

eliminate this phenomenon and manage globalization to the benefit of the whole

human society. In accomplishing this great cause, the central role of national

governments is once again accentuated.

Conclusion

The irreversible trend of globalization has generated enormous impact on the

and Development (New York:Praeger Publishers 1989), 48.

50


sovereignty of nation-states. The new forces nurtured by globalization are affecting

national sovereignty in various ways. The growth of international governmental

organizations (IGOs) and international non-governmental organizations (NGOs) are

threatening the authority of nation-states on the national and international levels; the

expansion of multinational enterprises (MNEs) and the intensification of

marginalization of the poorer countries are challenging the capability of national

governments in shaping domestic policies and dealing with global affairs.

However, it is found out that nation-states possess the power to regulate or override

these global forces. National governments are not so much losing power but having to

adjust to a new context in which their sovereignty is exercised in a more flexible and

efficient way.

IGOs are organizations within the framework of the principle of sovereignty. As

instruments of nation-states for the pursuit of national interests, IGOs are based on the

recognition and support of member states, which proves unsupportive of the

unrealistic prediction that they are superseding nation-states in handling international

affairs.

NGOs are more of a help, less of a threat to nation-states. Their inextricable

dependency on nation-states in fulfilling missions, lack of legal status and serious

inherent weakness all show inarguably that NGOs are not surpassing nation-states

either in status or in terms of function.

MNEs can influence the actions of governments as they carry enormous weight in

promoting economic development. But nation-states appear confident in dealing with

the restrictions placed by MNEs in managing economic affairs. This confidence stems

from MNEs’ subordination to and reliance on nation-states for their very existence

and development. MNEs have to abide by the laws and regulations of the nations in

which they are present and need the relevant governments to deliver key functions for

a reliable economic environment conducive to their development. The nation-states,

whether in Western world or developing world, have proved much more resilient in

51


matters of economic self-determination than some have predicted. The compromise

and cession of certain sovereign rights by nation-states under certain circumstances

are ways to achieve greater purposes.

Globalization has been given credit for the unprecedented economic growth, but

marginalization of the poor low-income countries is the other side of the coin. The

exclusion and marginalization of the disadvantaged countries have posed a severe

challenge to the whole world, especially the national governments of the developing

countries. It is important for the governments of developing countries to strengthen

sovereignty in order to fight against the unjustness entailed by the present unequal

international economic system, and enhance governance to ensure the benefits of the

global economy are extended equitably. During this battle with poverty, the key role

of nation-states stands crucial.

An analysis of the real situation shows that globalization is not heralding the end of

nation-states or the demise of sovereignty. Rather than the end of the nation-states,

globalization is reaffirming the centrality of national governments to the management

of human affairs. And the sovereign authority of nation-states remains fast and firm.

Therefore we say despite global changes, state sovereignty remains king.

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