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...Moral Principle offers resolve the situation by lying flat and letting Material Interest walk over it. Not content with this solution, Material Interest insists that Moral Principle leave the bridge entirely and throw itself into the river.
A simple yarn, Bierce's tale portrays the classic and familiar contradiction between profit and principle, a conflict the old cynic tells us is resolved at the expense of principle. Of course, Bierce lived in a different time, in the era before the rise of complicated free trade agreements. If Bierce were alive today, his fable would go something like this: Material Interest and its junior partner, Moral Principle, are on a team negotiating a free trade agreement with a country ruled by a repressive government. The advantages of the agreement to Material Interest are clear, but Moral Principle is concerned that the pact will exacerbate human rights abuses and the exploitation of workers in the other country. Cognizant that Moral Principle--and Material Interest's sworn enemy, Protectionist Material Interest--have a significant number of votes in Congress, Material Interest takes Moral Principle into the back room and explains that pursuing the course of action recommended by Material Interest will, by its very nature, satisfy the quibbles of Moral Principle. After all, the rich market countries in today's world are also the long-standing democratic nations. Trade, explains the patient Material Interest, will provide a positive catalyst for change in the repressive country. Now of the same mind, Material Interest and Moral Principle return to the negotiating room hand-in-hand and approve the agreement.
Notably, Material Interest's conception of economic integration as social progress by other means has an impressive pedigree. In the post-War era, trade and economic integration have been justified, not simply as a method for maximizing prosperity, but ultimately as a means of serving laudable political ends. For example, the linchpin of the modern trade regime, the General Agreement on Tariffs and Trade, was the brainchild of policy makers persuaded that the prolonged Depression of the 1930s and the Second World War were, in part, the product of beggar-thy-neighbor trade policies.(2) These policies were in turn the result of an anarchic international trade law regime.(3) Similarly, the European Coal and Steel Community, the precursor of the European Economic Community, and now the European Union, was explicitly an effort to internationalize control over those smokestack industries most closely associated with armament production.(4)
In more contemporary foreign policy circles, the position advocated by Material Interest is often called "constructive engagement." More political ideology than economic theory, one variant of constructive engagement posits that trade with, and investment in, repressive countries will promote political liberalization and greater respect for human rights by exposing populations to liberal, human rights-supporting values. The theory, by marrying material interest and moral principle, is immensely appealing, creating a natural constituency amongst both the most myopic profit-seeking companies and the most conscientious, human rights-sensitive policy makers.
That said, there remains a very vigorous dissenting view on the moral advantages of economic engagement. Though difficult to isolate with any certainty, the shared vision of the loose amalgam of globalization opponents, labor unions and non-governmental groups protesting in the streets of Seattle, Prague, Washington, Quebec City and elsewhere, is that economic integration undermines national sovereignty, entrenches social disadvantage between social classes and between North and South, debases national labor and environmental standards, and sometimes props up repressive regimes. If true, the natural consequence of such liberalized trade and investment will be continued class and North/South exploitation, some form of political backlash and a measure of political instability.
Clearly, assessing the merits of these two contrasting visions--economic engagement as panacea versus economic engagement as villain--is an empirical exercise. Yet, the empirical evidence, such as it is, is neither entirely dismissive nor completely supportive of either position, at least when examined with an eye to human rights. Instead, these data tend to support a nuanced approach to constructive engagement, one that might be termed "responsible engagement." In particular, engagement is appropriate so long as it does not induce the very human rights ills it is said to cure. Where constructive engagement via economic integration augments the staying power of a human rights-abusing regime, or prompts it to engage in additional human rights abuses, the net impact of that integration may not be positive. In these circumstances, the appropriate policy response will be economic disengagement. Accordingly, under a responsible engagement model, there remains an important role for economic sanctions, both as a means of affecting the behavior of nation-states and to stave off the possibility that citizens of one country are contributing to the persistence of a repressive regime in another nation.
Yet, while the objectives of "responsible engagement" are simple to articulate, achieving these goals presents a host of difficulties. Economic sanctions often are, after all, a blunt mechanism. Poorly tempered, these sanctions run the risk, not of penalizing elite decision-makers or centers of strategic power, but of devastating an already much-abused populace. Recent rethinking of sanctions leveled against Iraq since the Gulf War has led to new discussions at the U.N. and elsewhere about "smart sanctions": limited and carefully tailored measures applying leverage in those areas where leverage is most important, particularly against political elites. Yet, rendering these "smart sanctions" effective raises substantial legal, economic and political questions. Not least among these problems: the legal apparatus governing economic integration is, on the whole, built without an eye to a responsible engagement policy. Developing a real policy of "responsible engagement", therefore, demands a rethinking of the way international law governs international economic relations.
The Article that follows explores these assertions. Part II examines the economic and political merits of constructive engagement, on the one hand, and economic sanctions on the other. It highlights both the strengths and weaknesses of each approach, focusing on apartheid-era South Africa as a case study. Part III proposes a halfway approach to promoting human rights-sensitive development through economic relations: responsible engagement. It then examines the legal context in which economic relations operate and points to international legal impediments to a sophisticated system of responsible engagement. The Article concludes that a full-fledged strategy of responsible engagement obliges reconsideration and clarification of several facets of the World Trade Organization.
II. ENGAGING REPRESSIVE REGIMES
A. Constructive Engagement as a Tool of Political Liberalization
Like many terms expressing a highly politicized concept, "constructive engagement" has a mutable and sometimes very amorphous meaning. The expression seems to have originated in the mid-1970s to describe U.S. policy towards apartheid-era South Africa. In that context, the concept comprised, on the one hand, a rejection of trade and economic sanctions and, on the other, a continued diplomatic relationship with Pretoria aimed at resolving the issues of Rhodesia, Namibia and apartheid.(5)
Notwithstanding its region-specific origin, the term is now regularly invoked in popular discussions surrounding current U.S. relations with contemporary repressive governments. Asked in 1997 what "constructive engagement" meant in the context of the United States' China foreign policy, then-Secretary of State Albright spoke rather obliquely of "a relationship with [the Chinese] where they feel a part of the responsibility for the international community."(6) From other sources, it is clear that for the State Department and other foreign ministries, "constructive engagement" describes a diplomatic relationship involving dialogue rather than isolation.(7) Further, for governments and businesses, "constructive engagement" is more than a species of diplomatic intercourse. Instead, it is often taken to mean accelerated economic integration.(8)
For at least some of its proponents, the justification for the latter, economic element of "constructive engagement" reflects a variant of "modernization" or "trickle-down" development theory. Trade with, and investment in, repressive countries, it is urged, will promote political liberalization and greater respect for human rights by exposing populations to liberal, human rights-supporting values and fostering the economic growth viewed as a pre-requisite to democratization. Thus, with respect to China, business leaders have asserted, "the web of contacts between Chinese citizens and U.S. investors that develops in the course of business relationships promotes the transfer of liberal democratic values from this side of the Pacific to the East."(9) Contact with transnational businesses is also viewed as "promot[ing] greater integration of the host country in the international community, thereby enlarging its exposure to the shared values of civilized nations."(10) Companies, it is urged,
can serve U.S. strategic, political, and economic interests by their
enormous contributions to the development of emerging
markets ... [and] have a positive impact on:(1) basic
infrastructure, such as schools, roads, electrification, and medical
facilities;(2) the creation of a stable middle class that is often the
first step toward attaining accountable government;(3) improved
labor conditions and rights; and(4) protection of the
environment.(11)
The vision of "constructive engagement" as a form of subversion through economic development has been enunciated most succinctly by the U.S. anti-sanctions lobby group USA*Engage. In its paper, Economic Engagement Promotes Freedom, the organization urged that "[m]arket-oriented economic development causes social changes that impede authoritarian rule."(12) The key proxies of social change are said to include "widespread education, the opening of society to the outside world, and the development of an independent middle class."(13) An emerging middle class, fueled by economic growth, "does not depend on the state for economic advancement, and thus is far more free to challenge political control. A government faced with this change must seek the support of the middle class and must respond to middle class demands for greater political freedom, the rule of law, and the elimination of corruption."(14) Contact with the outside world, meanwhile, is said to expand "the flow of information. The internet, television, books, newspapers, copying machines, foreign magazines, all the various forms of popular entertainment and intellectual thought begin to flow, spreading ideas like democracy, human rights, and the rule of law."(15) USA*Engage further asserts that "American businesses and agricultural concerns transplant American values and culture to the host country."(16)
U.S. business is said to foster political liberalization in a number of ways. First, American companies support the rule of law by seeking "certain assurances when operating in foreign countries, including respect for the rule of law (honoring contracts, arbitration of disputes, objective legal systems, etc.), protection of intellectual property rights, and restraints on conduct that generates commercial uncertainty (corruption and nepotism)."(17) Second, U.S. investment prompts the development of local infrastructure that supports business operations, resulting in "significant benefits to the locality, such as telephone systems, roads and health care facilities or even food production."(18) Third, U.S. businesses demand, and contribute to the training of, skilled workers. Executives retained by U.S. investors are usually drawn from "the class that is most opposed to a corrupt and repressive government.(19) For the same reason, corporate independence from such a government frequently is essential to successful recruiting: the very fact that the corporation is American, and brings with it American values and practices, is a powerful draw."(20) Fourth, the very production systems used by American companies have an anti-authoritarian bent. In particular, "[t]he operating and productions systems of American businesses assume that employees are prepared to think and act independently, to show initiative, and to be creative.... When introduced overseas, such systems require fundamentally different organizational systems and ways of thinking, particularly in formerly authoritarian workplaces."(21) Last, U.S. investment is said to prompt the development of a local supply chain run by local entrepreneurs.(22)
U.S. companies are not alone in urging constructive economic engagement as a viable human rights-sensitive foreign policy. In Canada, for example, the Business Council on National Issues (BCNI), the country's foremost business lobby group, has argued that companies should engage in more business with non-democratic countries because "trade will act as a positive catalyst for change."(23) Canadian business people have defended Canada's policy of strong constructive engagement with China by urging "that exposure to western products, technology and the free market will inspire Chinese citizens to pursue freedom and democracy."(24)
1. Constructive Engagement and Causality
Although persuasive on its face, the constructive engagement thesis presents a difficult empirical question. As USA*Engage correctly notes in its paper, there is a "strong correlation between per capita income and freedom."(25) The wealthier Northern countries are, generally speaking, more democratic and more respectful of human rights than are their poorer Southern counterparts. Unfortunately, as statisticians repeatedly remind, correlation does not prove causality. Thus, noted political scientist Samuel Huntington, though generally supportive of constructive engagement, has observed that while "[a]n overall correlation exists between the level of economic development and democracy ... no level or pattern of economic development is in itself either necessary or sufficient to bring about democratization."(26) Other scholars have gone even further, concluding, "democracy and respect of human rights are not linked to economic development."(27)
Governments have taken varying positions on this question of causality, a point the United Kingdom Foreign Office made recently in setting out its own view:
[S]ome governments, particularly from parts of the developing
world, assert that economic development can and should come
before political freedom.... But human rights have a profound
impact on economies and societies. It is possible for a country's
economy to grow in the short term even when its human rights
record is poor. But the evidence is that those economies where the
rule of law is respected and government is transparent and
accountable grow more quickly and more sustainably. Regimes
that govern by fear and repression stifle creativity and innovation.
Without a solid basis of transparent rules and good governance,
markets cannot function effectively and investors--both domestic
and foreign--will shy away. Respect for political rights is not a
luxury of growth, but a condition of that growth.(28)
Reflecting a mild resistance to the simple economic determinism of the USA*Engage approach, the U.K. vision has been shared by other countries. Thus, in a 1999 speech, President Clinton observed, "[g]lobalization is not an unmixed blessing. In fact, the benefits of globalization--openness and opportunity--depend on the very things globalization alone cannot guarantee--peace, democracy, the stability of markets, social justice, the protection of health and the environment.... Globalization can bring repression and human rights violations and suffering into the open, but it cannot prevent them."(29) Similarly, in a 1996 speech, then-Canadian Foreign Affairs Minister Axworthy urged, "both trade and the promotion of human rights can serve the same purpose--namely bettering the well-being of individuals,"(30) but then noted in a November 1998 statement:
The issue [of the relationship between trade and human rights] has
never been a crude trade-off between promoting commerce or
human rights. They are not mutually exclusive but mutually
reinforcing. The promotion of good governance, democracy and
human rights are essential to the creation of a climate for
sustainable economic development which benefits everyone.
Economic prosperity in turn enhances the prospects for stable
societies that allow human rights to flourish. The Asian crisis
shows what can happen when this equation is out of balance.(31)
The Australian government, for its part, took the following position in its 1997 foreign policy White Paper:
There are grounds for some confidence that human rights improve
with economic growth. Respect for human rights is generally a
force for stability, not least because it tends to moderate political
behaviour. At the same time, the relationship between economic
growth and political freedoms is a complex one and should not be
reduced to a simple equating of economic growth with political
liberalisation.(32)
2. The Empirical Case for Constructive Engagement
The empirical record largely supports the policy view that simple maximization of economic integration is insufficient to prompt human rights-sensitive development. A theory adopted by the famous political sociologist Seymour Lipset and cited with approval by USA*Engage posits that if developing nations were to become as rich as their developed counterparts, it is most probable that they would become democracies.(33) If true, this position suggests "transitions to democracy would be more likely when authoritarian regimes reach higher levels of development."(34) However, as at least one recent empirical study has concluded, "transitions are increasingly likely as per capita income of dictatorships rises but only until it reaches a level of about $6,000. Above that, dictatorships become more stable as countries become more affluent."(35) This study also found that "the causal power of economic development in bringing dictatorships down appears paltry"(36) and that "there are no grounds to believe that economic development breeds democracies."(37) On the other hand, once democracies are established, economic growth does seem to increase their prospects of surviving. In summarizing its findings, the study concluded that
[t]he emergence of democracy is not a by-product of economic
development. Democracy is or is not established by political actors
pursuing their goals, and it can be initiated at any level of
development. Only once it is established do economic constraints
play a role: the chances for the survival of democracy are greater
when the country is richer.(38)
Other studies have come to similar conclusions. Londregan and Poole, in their 1996 research, found "that even after correcting for many features of the political and historical context, the democratizing effect of income remains as a significant factor promoting the emergence of democratic political institutions. However, the small magnitude of our estimated income effect suggests the democratizing effects of high income are modest."(39) Accordingly, they hold that policies directed at increasing "the economic development of countries with authoritarian governments as a means of changing them into democracies, such as the current policy of many democracies towards China, may take more years to have an effect than current policymakers imagine."(40)
Taken together, these conclusions suggest that unalloyed economic integration, even when it prompts significant economic growth, is no guarantee of political liberalization. Indeed, these findings suggest that over a certain per capita threshold, further economic growth reduces the chances of a transition from dictatorship to democracy. This position is consistent with the "dissenting view," harbored by some civil society groups that engagement in the form of trade and investment can augment the staying power of repressive regimes. In other words, constructive engagement may prolong dictatorships rather than undermine them.
3. Where Engagement is not Constructive
If the answer to the question "does constructive engagement via economic integration work?" is "not always", there is a clear need to isolate instances where the policy is inappropriate. In other words, under what specific circumstances will economic engagement acerbate repressive regimes and human suffering? Clearly, this is an enormous question, one that cannot be dealt with definitively in the context of this paper. Nevertheless, it is possible to cite instances when economic engagement prompts behavior strongly inconsistent with the constructive engagement thesis. Speaking broadly, there are instances when economic integration causes governments to engage in human rights abuses and instances when engagement enhances a repressive government's capacity to fend off politically liberalizing elements.
i. Repressive Activity
Past experience suggests that there are several ways in which economic integration with a nation with an oppressive government can encourage the regime to increase its repressive activity and engage in human rights abuses that would otherwise not occur. For example, the regime may use repressive means to produce infrastructure designed for use by multinational business. In Burma, for example, the military dictatorship--now known as the State Peace and Development Council (SPDC)--has been accused of using forced labor to build infrastructure for the Yadana pipeline, a project involving major U.S. and French multinational companies.(41)
Further, the regime may use repressive means to guarantee a firm access to resources. In Sudan, a November 1999 report from the U.N. Rapporteur on Sudan indicated that the Sudanese regime has used its military to "clear a 100-kilometre area around the oilfields" operated by a consortium of multinational companies.(42) More recently, the Canadian government-sponsored "Harker mission" to Sudan concluded that "there has been, and probably still is, major displacement of civilian populations related to oil extraction.... Sudan is a place of extraordinary suffering and continuing human rights violations, even though some forward progress can be recorded, and the oil operations in which a Canadian company is involved add more suffering."(43) Amnesty International confirmed these findings very graphically in May 2000. In its report, Amnesty noted that Sudanese forces have used ground attacks, helicopter gunships and indiscriminate high-altitude bombardment to clear the local population from oil-rich areas. Government troops, notes Amnesty, have reportedly committed mass executions of male villagers. Women and children are said to have been nailed to trees with iron spikes. There are reports from villages north and south of the oilfields that soldiers slit the throats of children and killed male prisoners who had been interrogated by hammering nails into their foreheads.(44)
In Colombia, meanwhile, Human Rights Watch criticized two major multinational oil consortiums in the late 1990s for retaining the services of the Colombian military to protect their pipelines. These security forces have been implicated in massive human rights abuses, including killings, beatings and arrests.(45) In Indonesia, government army officials hired as security at a mining site on Irian Jaya have been accused of torturing and extra-judicially executing local people opposed to the mine.(46) In Nigeria, oil companies have been implicated in "the systematic suppression by Nigerian security forces of protesting local communities."(47) In Burma, Burmese forces providing security for the massive Yadana pipeline are said to have committed "violations against villagers along the pipeline route, including killings, torture, rape, displacement of entire villages, and forced labor."(48) In Chad and Cameroon, a coalition of European and African environmental groups and German parliamentarians have pointed to a "noticeable increase in human rights violations" in the region surrounding another multinational corporation pipeline project. In particular, through the first eight months of 1998, there were persistent reports of "increased ... killings of civilians by government forces" in this area.(49) More recently, in India, Human Rights Watch has accused the multinational firm Enron of being complicit in efforts by security forces to quash protest against its power project. Specifically, the company
benefited directly from an official policy of suppressing dissent
through misuse of the law, harassment of anti-Enron protest
leaders and prominent environmental activists, and police
practices ranging from arbitrary to brutal.... The company ... paid
the abusive state forces for the security they provided to the
company.(50)
Finally, and most visibly, regimes may resort to repressive means of keeping labor cheap and pliable for international firms. The OECD, in a 1996 study, found "evidence that some governments felt that restricting certain core labor standards would help attract inward FDI."(51) In addition, the OECD conceded that some firms may in fact respond to the cost advantages of repression. The OECD noted that "in a number of ... countries which are among the primary destination for OECD investment, the record of compliance with core labor standards is tarnished, particularly with respect to freedom-of-association rights, although to different degrees."(52) According to the OECD, "there is no definitive evidence on the extent to which FDI responds to the level of core labor standards."(53) In fact, "low or non-existent labor standards may have a detrimental effect on FDI decisions. They indicate a risk of future social discontent and unrest, and include the risk of consumer boycotts."(54) However, "it is readily admitted that expectations of high profitability due to the economic environment provided in host countries may be able to outweigh some of the concerns foreign investors [have] about low levels of observance of core labor standards by host...
NOTE: All illustrations and photos
have been removed from this article.
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