Toshiba Affair: Interlaced Multinationals
The illicit sale by Toshiba Corp. of sensitive defense technology to the Soviet Union is not a Japan-bashing issue, although some are trying to use it as such. Rather, it manifests a dramatic shift in international trade and the relationships among governments and corporations.
Banning imports from Toshiba (or its Norwegian collaborator, Kongsberg Vaapenfabrikk), as members of Congress have proposed, makes no sense. The United States is in no position to enforce extraterritorial demands in most countries, and the Reagan Administration is certainly not eager to contribute to the climate of protectionism.
The big issue is no longer just the size and power of individual multinational corporations--firms that have attained positions of such global power, size and complexity that they cannot be easily monitored or controlled by parent firms or government. Rather, it is also the strategic alliances between these gargantuans, creating tightly interwoven global fabrics of firms with different corporate/national interests and cultures.
Take, for example, AT&T;, which is involved in ventures with Toshiba and Olivetti of Italy and with the Netherlands’ Phillips, which in turn has extensive Japanese linkages to Matsushita, Sharp, JVC and Sony. AT&T; is also involved with Japan’s NTT, and NTT is involved in turn with IBM, which has linkages to Nissan Motors and Mitsubishi. Mitsubishi is part of a group that includes Sumitomo and Mitsui; the latter, with Matsushita, is working with C. Itoh (which orchestrated the Toshiba-Kongsberg affair) as part of a new Japanese telecommunications entity in which Toyota, which has a joint venture with General Motors, is also heavily involved. Meanwhile, GM, through its relation to Hughes, is connected to Mitsui, Toshiba and C. Itoh, not to mention Daiwoo in South Korea. Siemens of West Germany is linked to Toshiba and to Emerson Electric, Canon and others. Boeing’s arrangement with Japan involves 31 firms, including Toshiba. Boeing’s European competitor, Airbus, is a multicountry subsidized consortium.
Thus the Toshiba-Kongsberg affair helps bring the issues into some focus: the difficulty that giant firms have in controlling their many operations, how small transactions by foreign firms can have monumental consequences for third parties, the lack of a global consensus and a common base of ethics and world views regarding interdependencies, the inability to impose effective sanctions, and the complex web of international relationships. These issues also point toward solutions.
We need action in two areas: an enforceable system of agreements among the transnational corporation countries, and improved internal and external technology intelligence.
The system of agreements, which might be named the General Agreement on Multinational Enterprises (or ethics) and Technology--GAMET--could complement the existing General Agreement on Tariffs and Trade--GATT. Its domain would be much wider than that of denying technology to the Soviet Union, and its international reach would go beyond the already rich countries. Covering such issues as multinational-country relations, technology and information transfer, pollution and environmental controls, the protection of intellectual and physical property rights and a mutually agreed-on code of business and trade ethics, it would require each country to embody the standards and penalties in its own laws. This must be done to recognize the supremacy of local law as well as the wider need for global standards to enhance trade, technology and security.
The lack of good technical intelligence along with the inadequacy of monitoring and control was evident in the Toshiba-Kongsberg affair. More generally, this shortcoming is one of the greatest weaknesses in national and corporate strategy and management. Attention to this vital area is a proper subject for international cooperation and could be an important element of GAMET. Strengthening technology intelligence should also be a national priority, and certainly one deserving far more attention from American firms.
To work, GAMET must contain incentives for all of the key parties. Thus it must be a vehicle to limit the improper and sometimes corrupt pressures that are imposed on multinationals and to give them equitable protection of technology. Reciprocally, it should provide redress to countries that are exploited or harmed through multinational trade and technology practices. While distinguishing GAMET from Third World-dominated attempts in the United Nations to orchestrate codes of conduct for multinational trade and technology transfer, the agreement must nevertheless become a forum in which the voice of developing countries is given a proper hearing. Countries that are unwilling to abide by and to enforce GAMET agreements could be denied technology and trade access, limiting their ability to play off multinationals against each other, as they do now.
This global problem, requiring cooperation among the powerful economies, has crept up on us; the time for action is now. Without such action, many more Toshiba-Kongsberg affairs are inevitable.
