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Unions, multinationals and the world economy



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UNIONS, MULTINATIONALS AND THE WORLD ECONOMY

Speech by the Leader of the Oppositd on

The Hon. E. G. Uh.it lam, Q.C., M.P,

to a seminar of the

AUSTRALIAN COUNCIL OF SALARIED AND PROFESSIONAL ASSOCIATIONS

Melbourne, 22 November 1976

This is my second appearance in a month at a. gathering-

organised by A.C.S.P.A. I am particularly honoured to open this

conference in such distinguished company because it is dealing

with issues of great.contemporary importance and urgency. It

has been sponsored by the senior and most representative bodies

in the trade union movement and has the full support of the

Australian Labor Party. My own Government made a grant tovardo

the cost of arranging' this meeting and bringing two of its

speakers to Australia. It is not long since tho Liberal Party

had Margaret Thatcher oh public display in this country. Labor

has gone one better and organised a double bill - Hugh Scanlon

and Clive Jenkins - two of the most vigorous, talented and

outstanding trade unionists in the world. I am sure their

message will be much more convincing than the one we heard

recently from Malcolm Fraser's female counterpart. ·

This seminar was originally planned for last December.

It would have been held a year ago had ibo conservative parties

in Australia not sought to fabricate powers for the Senate and

resurrect powers of the monarchy. That is not, 1 hope, an

inappropriate note on which to begin because 1 want to

emphasise a principle that will be central to all I have to say

and all your subsequent discussions: the trade union movement

is based firmly on the highest democratic ideals and the

oldest democratic traditions.

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It is one of the foundations of a free society. For more than

75 years in this country - and for longer in Britain - all

political and industrial activity has had its roots in a

democratic consensus. It has observed certain conventions and

forms and followed certain rules; it has depended on trust

and goodwill be tween competing interests. In Australia in the

past year we have seen a conservative attack on those conventions

in the political spherd; and increasingly - rib tably in this

State last week - an attack on the corresponding conventions

in the industrial sphere. Bob Hawke has defended democratic

practice and tradition in industrial matters; I have tried to

do the same in our parliamentary life. To that extent I suppose

we are both traditionalists; in a sense, conservatives. You

hear a lot of talk about anarchy whenever conservatives criticise

the trade unions and their activities. The real anarchists in

society are not those who try to live by the rules but those who

would tear them up. And their numbers are growing - here and

in Britain, and in most of the industrialised countries.

' I make this rather sombre observation because it is clear

that the industrialised western world is moving into a deeply

uncertain, unstable, perhaps perilous phase in its history.

The process has been apparent since the late 1960s. Whereas in

the 1950s our preoccupations were largely with military and

external dangers, our concerns today are with social and economic

problems. Australia's economic problems are shared to a greater

or less degree by the entire western world. The social problems

which spring from these economic problems are likewise common to

all advanced democracies - unemployment, insecurity, a growing

disillusionment with the institutions of society, and a general

loss of faith in "thd system", particularly among the young, who

are more and more the victims of our economic malaise.

.../3

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In such conditions there is a growing danger that established

democratic rules and conventions wi11 be ignored or challenged.

It has happened before. Insecurity breeds fear; fear breeds

repression; repression breeds conflict. The first victims

of this slide are likely to be the institutions on which

democracy is founded - among them a free trade union movement

and the parliamentary system itself.

I do not think I am being melodramatic in pointing to

the risks which I believe the democracies are facing. The answer

lies in something more than just ending the world recession or

promoting economic recovery, important as that is. On that point

it has to be said that the economic policies of the present

Australian Government are not only tragically mistaken and manifestly

unsuccessful, but out of step with those of other comparable

western countries. The Fraser Government is pursuing a

deliberate policy of creating unemployment. It is following a

strategy carefully -worked out by respectable public servants in

the Treasury whose object is to put men and women out of work

and thereby inhibit their demands for wages. It is a .plan that

is fundamentally inhuman and there has never been any secret about

it. It is the Fraser Government's answer to inflation: destroy

jobs. It is a policy that leaves factories idle and saps business

confidence. In this respect at least the Government can claim

some success: its policies are designed to produce unemployment

and that is exactly what they are doing. I wi11 not labour the

point except to say this: while most other western countries,

are stimulating economic activity, boosting consumption and

consumer confidence and selectively increasing public spending

in order to create jobs, the Fraser Govornmeait is doing the

opposite. It is making the recession worse. .. . / h

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" ,

That is a cross that Australians may have to bear until

the next election: the wider problems for all western countries,

for all mixed economies, go deeper. The question is not merely·:

Can governments end the recession and get business moving again?

The question is: Can even a healthy world economy continue to

provide for people's legitimate needs and aspirations? There are,

as I see it, three basic needs which must be met if western

democracy is to survive in its present form, and increasingly

they lead us t6 a paradox. We need to preserve personal freedom;

we need to provide for rising expectations of material satisfaction,

especially in the underdeveloped world; and we need to provide

a sense of personal dignity and fulfilment which comes from

secure and useful employment. For most of i-nis century those

needs have been supplied, more or less, by the mixed economies

of the capitalist system; it has not worked perfectly but at least

it seemed to present no obvious internal contradictions.

The situation today looks very different. Can material standards

of living be maintained without gross inequalities of income and

intolerable levels of unemployment? We cannot be sure. Can the

vast multinational companies which supply many of our material

needs be regulated by governments in the public interest?

We cannot be sure. Can our economic problems be solved in ways

that do not stifle corporate enterprise or abridge traditional

freedoms? The paradox seems to be that the more we depend on

multinationals for essential goods and services the more we are

vulnerable to economic conditions which governments cannot control.

The more capital we bxlng to Australia to develop our resources

and provide work for our people the more \/e are exposed to

overseas domination in ways that may be socially harmful. '

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The main feeling among government economists and policy­

makers in today's world is a sense of powerlessness. Governments

are no longer confident that traditional economic measures work

in the way they used to. In countries like Australia this

impotence and uncertainty are compounded by the knowledge that

more and more of our economy is in the hands of decision makers

not accountable to elected governments. Decisions affecting

Australia's future are increasingly taken by overseas corporations.

A few years ago this problem seemed to be one of mere national

pride and self-confidence. Under previous Liberal Governments,

for example, economic nationalists like Mr. Gorton and

Sir John McEwen wanted to "buy back the farm" more for emotional

and patriotic reasons than anything else. As the influence of

the multinationals has grown, however, it is more and more obvious

that the challenge they pose is not just to our pride but to our

economic sovereignty. In Australia foreign control of manufacturing

industry grew from about 29 per cent in 1966-67 r.o 3'4 per cent

in 1972-73· About one-third of all manufacturing'industry in

Australia is foreign owned. About half the mining industry is

owned by transnational companies and almost half our finance

companies are foreign owned. Overseas ownership of the mining

industry rose from 39 per cent in 1971-72 to 52 per cent in 197^-75·

The simple fact is that more and more of the 'technology, marketing

and credit needed by Australian firms is outside Australian control.

Vast sections of our economy are for all practical purposes outside

the control of elected governments in Australia.

Does this’ really matter? Conservative governments, or .

purely business-oriented governments like the Fraser Government,

tend to think it does not: so long as foreign companies observe

Australian laws and the host country retains cerrain ultimate

weapons, like the power of expropriation, the Liberals see Ixtxle harm in foreign control of our industries and resources. .../6

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Social democratic governments take a different view. Quite

obviously no Labor Government can hope to achieve its social objectives

unless it has a substantial measure of control over the national

economy. Just as obviously, trade unions cannot protect their

members from exploitation and preserve their living standards if

the working conditions of employees are largely determined by

overseas managements. The early socialists believed that Labor's

objectives could be achieved by nationalisation. It was held that

nationalisation would not only eliminate exploitation but produce

greater work satisfaction and give employees more say in the

running of their enterprises. It did work out that way.

Nationalisation in Australia is a dead letter. Nobody now believes

that a government-run enterprise is necessarily a workers'

paradise; on the contrary, it is more likely to be the

opposit§. For modern Labor governments,"internationalisation"

is a far more important and urgent objective than nationalisation

ever was. .

Let me explain what I mean by that term. Obviously

I do not mean that multinational enterprises can be taken over

and run by governments. I do mean that governments can and

must come together to establish common laws and international

arrangements for the regulation of transnational companies.

This is obviously just as rational an objective as the establishment

of, say, uniform company laws within a federation like Australia.

Companies in Australia have been able to avoid penalties for

anti-social behaviour and resort to restrictive practices by

exploiting differences in company laws in different States.

The system has produced so many anomalies and abuses that even

the Liberals have grudgingly come round to the view that uniform

company laws are essential. Something similar will be needed on

an international scale.

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My Government sponsored and supported international commodity

producer organisations for bauxite, copper aiid iron ore. We took

the view that the pricing and marketing of these commodities should

be the subject of international agreements. -'in example of

an industry that is already internationalised is aviation.

If it were not so international aviation would be domincited by

a handful of huge airlines with no agreements on routes, services

and safety standards and little protection for passengers from

price cutting and restrictive practices. In the same way I believe

that.governments will have to cooperate to see that ports, ,

shipping lanes and sea-bed resources are subject to international

control. Either that or the multinationals will control' them for us.

Once the democracies achieve some measure of .international­

isation there will be less risk to countries like Australia from

the inflow of foreign capital. Foreign capital is a crucial

element in this discussion. The Liberals have never had any

qualms about foreign capital because they tend to regard all

money with equal veneration. It is not particularly important

to the Liberals whether the country is owned by their friends in

Australia or their friends in boardrooms overseas. At the moment,

as we know, the Fraser Government is desperately looking for foreign

investment to stimulate the economy because of its ideological

reluctance to do the job itself. . The trouble is that the Liberals

rarely discriminate between investment that is beneficial and .

investment that is potentially harmful. The 'National Times'

reported three weeks ago that the Foreign· Investment Review Board,

established by the Fraser Government in April, had considered

more than 600 investment proposals put before it and recommended

against two of them. The paper commented:

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These figures are a clear sign of the extent to which the Government has been prepared to sacrifice

Australian equity in projects in an effort to secure a faster rate of growth through foreign investment ... The trouble for the Government is that

despite its virtual open door policy on foreign investment very little is actually coming into the country.

The problem for Labor governments is more difficult. We want to

ensure that decisions on foreign investment are made in the

public interest and will hot jeopardise Australian ownership

and control of our resources and industries. My Government made

a thorough study of foreign investment and I announced our

conclusions in September last year. I said then:

, Australia will, for the foreseeable future, continue to require foreign capital, including equity capital, if we are to achieve our basic aim of ensuring that Australia's resources and industries are developed

in such a way as to bring maximum benefits to the Australian people. With this overriding goal, however, the Government, while continuing to welcome beneficial foreign capital, has a major long-term

objective of the promotion of Australian control and the maximum Australian ownership compatible with our long-term capital requirements and our need

for access to markets, advanced technology and knowr -how.

A Foreign Investment Advisory Committee was established

to evaluate the net economic benefits of investment proposals.

Would they increase employment and training, develop now markets,

or introduce new teclmology and managerial skills? The Fraser

Government takes no account of these factors. For mining we set

a maximum level of 50 per cent foreign ownership except for

uranium, where 100% Australian ownership was required.

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Other specific policies were set for various industries,

in addition to the long-standing restrictions on foreign

investment in banking, broadcasting, T.V. and some aspects

of civil aviation. So the end product of our study was

machinery which would have effectively evaluated all foreign

investment, and set standards for Australian ownership in many

important industries. It was a comprehensive and clear statement

of official policy. We were determined to encourage foreign

investment where it was needed, under controls that would have

been clear to all potential investors.

Contrast the attitude of the Fraser Government.

Mr. Lynch made a statement on the new Government*s foreign

investment policies on 1 April. Superficially, these policies

seem very similar to Labor's but scattered through them are

a number of qualifications which may well weaken our control

over foreign investment and make for uncertainty in the minds

of investors themselves. For example, Mr. Lynch said:

"We will place major emphasis on Australian participation in

new projects but without preventing projects chat are clearly

not against the national interest ...". This is a much more

negative approach than that set out in Labor's guidelines for

the Foreign Investment Advisory Committee, which stressed

that new investments should be evaluated in terms of their net

economic benefits. The Fraser Government's Foreign Investment

Review Board is chaired by a banker; its other members are

a businessman and a public servant. Labor's Advisory

Committee had members from Government departments and the

Reserve Bank. Moreover, the Fraser Government1s Review Board

has contradictory roles: on the one hand it has responsibility

for examining investment and take-over proposals; -

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on the other hand it has the task of "fostering an awareness

and understanding of the Government's policies in the community

at large, and in the free enterprise section in particular".

These tasks are in conflict: one organisation cannot both

seek overseas investment and effectively regulate it.

In such areas as mining* agriculture, forestry and fishing, the

Fraser Government set a minimum level of Australian equity of

50 per cent, but this guideline is qualified. Mr. Lynch said

that in order not to delay unduly the development of Australia's

natural resources it might be necessary to allot/ a project to

go ahead which had less than 50 per cent. Australian equity.

Even the standard of 75 per cent Australian ownership of

uranium is qualified. Mr. Anthony has announced that

"individual foreign portfolio shareholdings of less than

10 per cent in an Australian uranium company would be disregarded

(in evaluating the extent of foreign ownership) unless.there

were special circumstances that would need to be taken into

consideration in a particular case". This suggests that total

Australian ownership could be much less than 75 per cent and still·

meet the Government's guidelines for uranium mining companies.

. The Fraser Government's attitude to foreign investment .

is a response to the economic problems its own policies have created.

Those policies are retarding recovery and increasing unemploymoji I;.

It is turning to foreign investment as a way out. The Lynch Budget

gave enormous concessions to the mining industry to encourage

exploration and investment: the measures do not discriminate in

favour of foreign companies but they are clearly intended to

attract potential investors from overseas. Ministers and niembors

of the Foreign Investment Review Board have travelled overseas

seeking investment in this and other areas.. Yet much bettdr·

alternative policies are available for stimulating the economy and

curbirg inflation;

•··/11

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V

v

Labor was leading the way with them in the Hayden Budget.

For example, by doing away with the Fraser health levy and cutting

indirect taxes the consumer price index could be substantially

reduced and inflationary expectations dampened. At the same time

the economy would be stimulated by the indirect tax cuts and

reductions in company tax. Selective stimulatory increases in

public spending, particularly in regions where unemployment is

highest, would help create jobs and sustain industries and services

we need for further economic development. Imaginative manpower

policies, such as the modified R.E.D. Scheme which I proposed

publicly two weeks ago, would contribute also to employment.

Commonwealth Government support for wage indexation would give

the labour force confidence in the continuation of an orderly wage

setting program and stimulate recovery of consumer confidence.

All these measures would be preferable to the headlong scramble

for foreign capital we are seeing nbw.

I emphasise that Labor is not opposed to foreign

investment. I am simply saying that it is essential in Australia's

long term interests to specify clearly the areas in which it will

be encouraged and the conditions under which it can take place.

My Government did so and the next Labor Government will do so.

The Fraser Government wi11 be seriously misleading the Australian

people if it says on the one hand it is protecting Australia's

interests and it turns out chat Australian resources are being

sacrificed to overseas interests. Other countries have had to

face up to the issues raised by international investment. One

outcome of this worldwide concern has been the O.E.C.D. declaration

on international investment and multinational enterprises.

Unfortunately, the O.E.C.D. guidelines are vague and generalised.

There is no discussion of the dangers of over-concentration of

economic power and minimal discussion of labour relations.

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The section on employment and industrial relations begins by

saying that "enterprises should respect the right of their

employees to be represented by trade unions" - a right which

one would have hoped was so clearly entrenched that it would

hardly be necessary to emphasise it. Clearly, the trade unions

and international organisations have a long way to go in formulating

policies for dealing with multinationals.

A much more positive approach to multinationals

was put forward by the Jackson Committee appointed by my Government.

The committee included two of Australia's leading businessmen -

Mr. Gordon Jackson, the General Manager of C.S.R., and

Mr. Rod Carnegie, the Chairman of C.R.A., itself one of the

principal multinational companies in Australia. The committee's

views, therefore, embody the enlightened thinking of prominent

business leaders as well as trade union and other interests.

It is instructive to read the committee's recommendations concerning

multinationals in Australia. I emphasise that these views are

not necessarily my own or those of the Labor Party, but their

tone of urgency and their concern for Australia's national interest

are unmistakable, I quote from the Jackson Committee's report:

' Each large foreign firm should be expected to develop a gradual long-term program to transfer at least half ownership to Australian hands over, say, fifteen

years and majority ownership shortly thereafter.

In parallel with the change of ownership, directors to be appointed by Australian shareholders at least pro rata to ownership.

The trade practices legislation should be amended where it overlaps foreign takeovers legislation.

At present, foreign takeover activities approved . under the foreign takeovers legislation may be excluded from the sCope of the Trade Practices Act.

Regulation of new foreign investment and foreign

takeovers should continue.

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. Should large foreign firms need additional funds and wish to raise them within Australia, they should

be expected to seek Australian equity capital on

realistic terms rather than loans until majority of Australian ownership is attained.

Large foreign firms should be required to report

regularly to an appropriate authority full details

of their international competitive stance including transfer pricing calculations and export franchise arrangements.

Almost all senior management and directors of large

foreign firms in Australia should be Australians.

Foreign firms should be expected to undertake in Australia a reasonable proportion of work requiring professional, technological and other advanced skills.

• Large foreign firms not listed on Australian Stock • Exchanges should disclose at least as much information as Australian listed public companies.

. Just as governments must seek new policies and new

international arrangements to deal with multinationals, so too must

unions. The trade union movement in Australia is based on a

British model of SO years ago, made more complex by differing

State laws and a compulsory system of arbitration. Just as our

political institutions have blown up in our faces, so too have

the industrial institutions we inherited from Britain. Craft

unions and governors alike are anachronisms! Clearly the unions

in Australia face an enormous Challenge in dealing with the

tactics of multinational corporations. A multinational, for example,

can easily abort legitimate claims by employees in one sector of

its operations by shuffling resources between its other sectors.

;../l4

A union is more vulnerable to "strike-busring·" if a management

. can step up production of affected products in a subsidiary

overseas. Equally serious would be a threat by multinationals

to locate future investment in countries where the union movement

was more docile. The United States is already facing redundancies

created by multinationals building up their investments and

operations in more "favourable" environments abroad. The

struggle of trade unionists to combat exploitation in the

developing world is seriously threatened by this phenomenon.

It is easy to imagine governments in some countries - and State

Governments in Australia - competing with each other to produce

anti-union legislation considered attractive to potential investors.

It is hard to avoid the conclusion that unions need to wrork out new

policies and organisations to deal with the challenge of multi­

national enterprise.

The next Labor Government will cooperate to the full

with the trade union movement in devising policies to deal with

these problems - problems that are novel and urgent for

democratic governments and free trade unions throughout the world.

Our approach to the multinationals will demand international

initiatives on Australia's part. I give my pledge that a

Labor Government will take those initiatives. We seek no

confrontation with multinational companies: we will always

welcome investment in Australia that helps develop our resources

while offering an appropriate equity to Australian investors and

benefits to the Australian people. Labor's objective in government

will be to preserve.as far as possible Australian ownership and

Control of our industries and resources. In this way wre can best

Safeguard the living standards of our people, preserve a free and

vigorous trade union movement, and maintain our status as an

independent nation, master of our own house, mistress of our own

destiny.