DIPLOMACY OF GLOBAL AND TRANSNATIONAL

FIRMS

GEOFFREY ALLEN PIGMAN

THE OXFORD HANDBOOK OF MODERN DIPLOMACY

EDITED BY
ANDREW F.COOPER,JORGE HEINE,AND RAMESH THAKUR

ONLINE PUBLICATION DATE

AUG 2013

DOI:
10.1093/OXFORDHB/9780199588862.013.0011

PRESENTED BY
RAMESH KUMAR RAJ
TRIBHUWAN UNIVERSITY
FOHSS,MIRD-TU,5TH BATCH,2018
1ST- SEMESTER, ROLL NO-24
MAY-18,2018
 OUTLINES
• INTRODUCTION
• FIRMS AS DIPLOMATIC ACTORS
• CONTEMPORARY FIRM-GOVERNMENT DIPLOMACY
• SPECIAL CASE: DIPLOMACY BETWEEN GLOBAL FIRMS AND
GOVERNMENTS
• DIPLOMACY BETWEEN GLOBAL FIRMS AND OTHER NON-STATE ACTORS
• CASE STUDIES:
• 1. DOING DEALS-WAL-MART AND SOUTH AFRICA
• 2. MOVING HEADQUARTERS-HSBC, CHINA, AND THE UK
• 3. POWER POLITICS- GAZPROM, RUSSIA, UKRAINE, AND THE EU
• 4. ASSET PROTECTION-GOOGLE, CHINA, AND THE US
• 5. CRISIS/DISASTER DIPLOMACY- UNION CARBIDE, INDIA AND THE US
 INTRODUCTION
GLOBAL AND TRANSNATIONAL FIRMS:- COMMERCIAL ENTERPRISES
THAT OPERATES SUBSTANTIAL FACILITIES, DOES BUSINESS CROSS-BORDER;
RESPONSIVE TO MARKETS AND DEMANDS
 FIRMS AS DIPLOMATIC ACTORS
• FIRMS AS ANALOGOUS TO GOVERNMENTS OF
NATION-STATES, MLIs, CSOs.
• INTERACTION, NEGOTIATION, LICENSING, RENTING
MARKET STALL, ORGANIZING SUMMIT, MEETING
BETWEEN CEOs, UNDERTAKING PUBLIC DIPLOMACY
AND OTHER ISSUES
• OPENING REPRESENTATIVE OFFICES IN NATIONAL
CAPITALS HEADED BY CORPORATE AMBASSADORS.
• BoP BETWEEN FIRMS AND GOVERNMENT SHIFTS TO
POINT APPROACHING FOR ESTABLISHING
RELATIONS AND NEGOTIATIONS FOR MUTUAL
OFFERING AND BENEFIT.
 COMPARING FIRMS TO
• HAS GOVERNMENT
CORPORATE REGISTRATION AND HEADQUARTERS IN ONE
COUNTRY BUT PERFORMS CROSS-BORDER ACTIVITIES:-
I. MANUFACTURES ITS PRODUCT IN A SINGLE COUNTRY AND EXPORT
AROUND THE WORLD;
II.IT MAY PRODUCE USING A FULLY INTEGRATED GLOBAL PRODUCTION
CHAIN AND POSSESS A GLOBAL DISTRIBUTION CHAIN FOR FINAL
PRODUCTS;
III.IT MAY PRODUCE IN MANY COUNTRIES FOR CONSUMPTION IN LOCAL
MARKETS.
IV.A HOLDING COMPANY BASED IN ONE LOCATION MAY SERVE AS AN
UMBRELLA FOR SUBSIDIARIES IN DIFFERENT COUNTRIES.
V. A FIRM MAY LICENSE ITS BRAND, PRODUCT, OR PROCESS FOR USE IN
DIFFERENT COUNTRIES BY FRANCHISEES OR OTHER FIRMS.
VI.FIRMS SELLING SERVICES MAY SELL THEIR PRODUCT ELECTRONICALLY
TO A GLOBAL MARKET WITHOUT THEIR STAFFS EVER LEAVING THE HOME
COUNTRY; ALTERNATIVELY THE FIRM'S STAFF MAY TRAVEL TO CUSTOMERS
WORLDWIDE; OR GLOBAL CUSTOMERS MAY TRAVEL TO THE POINT OF
DELIVERY TO CONSUME THE SERVICE.
 COMPARING FIRMS TO
GOVERNMENT
Government
 PRIMARY MISSION- DEFEND AND PROMOTE
PROSPERITY OF GEOGRAPHICAL TERRITORY
AND ITS INHABITANTS.
 OPERATES IN LEGAL DIPLOMATIC REGIME IN
WHICH FORMAL SOVEREIGNTY, WHICH BEARS
WITH IT NOTION OF EQUALITY IN THEORY ( IF NOT
IN PRACTICE)
 RELY UPON MILITARY FORCES, OVER WHICH
THEIR SOVEREIGNTY IS ACKNOWLEDGED TO
GRANT THEM MONOPOLY, TO DEFEND THE
TERRITORIES UNDER CONTROL.
 STAKEHOLDERS- INCLUDE VOTERS (IN
DEMOCRACIES ) AND INHABITANTS, TAX PAYERS,
CSOS, FIRMS, OTHER INSTITUTIONS
 DIPLOMATIC REPRESENTATION-
EMBASSIES/CONSULATE OF DELIGATION
 DIPLOMATIC SUMMITS AND STATE VISITS
Firms
 PRIMARY MISSION – MAKES PROFIT IN
MARKETS IN WHICH IT OPERATES
 FIRMS INDEPENDENT OF OTHER ENTITIES TO
DEFINE THEIR STATUS AS INTERLOCUTORS,
RELYING UPON POWER RESOURCE
 FIRMS ENGAGES PRIVATE SECURITY FORCES
TO PROTECT THEIR ASSETS IN SOME
CIRCUMSTANCES BUT OFTEN DEPEND UPON
SECURITY ARRANGEMENT OF GOVERNMENT
LIKE POLICE AND MILITARY.
 STAKEHOLDERS- STOCKHOLDERS,
CUSTOMERS, EMPLOYEES, SUPPLIERS AND
OTHER BUSINESS COMMUNITIES .
 REPRESENTATION THROUGH GOVERNMENT
RELATIONS OR POLITICAL COMMUNICATION
 SUMMIT AND VISITS. EG- BILL GATES VISITED
INDIA IN 2004 AND ANNOUNCED $ 400 MILLION
IN NEW MICROSOFT INVESTMENTS IN INDIA
 CONTEMPORARY FIRM-GOVERNMENT
DIPLOMACY
• FIRMS NEED TO MAINTAIN RELATIONSHIP WITH GOVERNMENT OF
POLITIES IN WHICH OPERATE, PROBABLY WITH CSOS, MLIS, OTHER
TRANSNATIONAL FORMS ACCORDING TO NATURE OF THEIR BUSINESS.
• MAINTAINS AN OFFICE OF THEIR CORPORATE HEADQUARTERS K/N AS
GOVERNMENT RELATIONS ANALOGOUS TO MOFA OR SATELLITE
GOVERNMENT RELATIONS OFFICES IN MANY COUNTRIES ANLALOGUS
TO EMBASSIES OR FOREIGN MISSIONS.

•
 DIPLOMACY BETWEEN GLOBAL FIRMS AND
OTHER NON-STATE ACTORS
• RATHER THAN GOVERNMENT, FIRMS NEED TO ESTABLISH
RELATIONSHIP WITH OTHER NON-SATE ACTORS LIKE-
MULTILATERAL ORGANIZATIONS (E.G.-UNITED NATIONS, THE WORLD
BANK, ETC) CIVIL SOCIETYO RGANIZATIONS (E.G.- GREEN PEACE, THE
INT’L COMMITTEE OF THE RED CROSS )
• FORMS RELATIONSHIP WITH CSOS AND MULTILATERAL ORG. TO UNDERTAKE
CHARITABLE PROJECTS AS PART OF THEIR CORPORATE SOCIAL RESPONSIBILITY
(CSR) AGENDA.
EG- IN 2007, GLOBAL PHARMACEUTICAL AND CHEMICAL FIRM MERCK FORMED PARTNERSHIP WITH WHO
TO DISTRIBUTE ITS DRUG PRAZIQUANTEL TO COMBAT THE TROPICAL WORM DISEASES
SCHISTOSOMIASIS, WHICH AFFECTS 200 MILLION IN AFRICA AND KILLS OVER 200,000 ANNUALLY. IN
EFFORT TO AID 27 MILLION SEVERLY AFFECTED CHILDREN, MERCK IS DONATING THE MEDICATION
AND LOGISTIC SUPPORT, WHILST THE WHO COORDINATES DISTRIBUTION OF TABLETS.
• FIRMS FINDING DISPUTE WITH OTHERS ACROSS NATIONAL BORDERS, NOT
RESOLVED THROUGH DIPLOMATIC NEGOTIATION, GOES FOR DOMESTIC LEGAL
SYSTEM OR JURISDICTION
• HOWEVER, AN ALTERNATE VENUE FOR RESOLVING CROSS-BORDER DISPUTES
BETWEEN FIRMS IS THE INT’L COURT OF ARBITRATION, WHICH FUNCTIONS
UNDER THE AUSPICES OF THE INT’L CHAMBER OF COMMERCE (ICC), A CSO
ESTABLISHED TO PROMOTE THE INTEREST OF GLOBAL BUSINESS AND
COMMERCE AND WHOSE MEMBERSHIP CONSISTS OF DOMESTIC BUSINESS
FEDERATIONS.
 CASE STUDIES : DIPLOMACY OF GLOBAL
FIRMS
1. DOING DELAS- WAL-MART AND SOUTH AFRICA
 DIRECT INVESTMENT BY GLOBAL FIRMS IN THE FORM OF A JOINT
VENTURE OR ACQUISITION IS THE COMMON DEAL REQUIRED IN
DIPLOMACY BETWEEN FIRMS AND GOVERNMENT.
• IN 2010 US-BASED GLOBAL RETAILER WAL-MART PROPOSED TO
ACQUIRE 51 % OF SOUTH AFRICAN RETAILING FIRM MASSMART FOR
SAR 16.5 BILLION/US $ 2.4 BILLION.
• WAS 1ST MAJOR INVESTMENT IN AFRICA, CONTROVERSIAL; FEARED
AFRICAN TRADE UNIONS THAT TAKEOVER COULD LEAD TO JOB LOSSES
AT MASSMART AND OTHER FIRMS, SHIFT TOWARD MORE IMPORTS,
RESULTING IN LOWER DEMAND OF DOMESTIC PRODUCTS.
• CONGRESS OF SOUTH AFRICAN TRADE UNIONS (COSATU); HISTORICAL,
IMPORTANT POLITICAL ALLY OF THE GOVERNING AFRICAN NATIONAL
CONGRESS (ANC), PRESSURIZED ON PRESIDENT JACOB ZUMA’S
GOVERNMENT TO APPOSE WAL-MART ACQUISITION.
• WAL-MARTS OFFICIALS NEGOTIATED WITH SOUTH AFRICA’S
COMPETITION AUTHORITIES, OFFERING GUARANTEE NOT TO CUT ANY
JOBS FOR 2 YEARS AND TO HONOUR EXTANT LABOUR AGREEMENTS
FOR 3 YEARS. IN RESPONSE, COSATU UNSUCCESSFULLY SOUGHT
ADDITIONAL GUARANTEES THAT WAL-MART WOULD CONTINUE TO USE
LOCAL SUPPLIERS.
• SOUTH AFRICAN COMPETITION TRIBUNAL APPROVED WAL-MART’S
OFFER IN MAY 2011. WAL-MART OFFICIALS ARGUED THAT THE DEAL
WOULD CREATE JOBS BY ENABLING MASSMART TO EXPAND INTO
SIGNIFICANT AFRICAN MARKETS; DEMOCRATIC REPUBLIC OF CONGO
AND SENEGAL.
 CASE STUDIES : DIPLOMACY OF GLOBAL
FIRMS
2. MOVING HEADQUARTERS- HSBC, CHINA, AND UK
OVERCOMING POLITICAL/OTHER RISKS OR TO RESPONSE BETTER
‘OFFER’ FIRMS DECIDE TO MOVE THEIR CORPORATE HEADQUARTER.
•HONG KONG AND SHANGHAI BANKING CORPORATION (HSBC)
HEADQUARTER IN BRITISH HONKING BY 1990S WERE GLOBAL
FINANCIAL SERVICES FIRM WITH OPERATION WORLDWIDE.
•HANDOVER OF BRITISH SOVEREIGNTY OVER HONG KONG TO PEOPLE’S
REPUBLIC OF CHINA IN 1997; APPROACHED NEGOTIATION BETWEEN
BRITISH AND CHINESE GOVERNMENT TO MOVE BANK’S HEADQUARTERS
FROM HONG KONG TO LONDON BECAUSE OF MANAGER’S DECISION
THAT THE LEGAL STRUCTURE, BUSINESS CLIMATE AND POLITICAL
TRANSPARENCY OF BRITAIN WAS MORE FAVORABLE.
•ALTHOUGH CHINESE GOVERNMENT IN BEIJING PREFERRED THAT
HSBC’S HEADQUARTERS REMAIN HONG KONG, PRIOR TO ASSUMING
SOVEREIGNTY OVER HONG KONG THEY DID NOT HAVE SUFFICIENT
LEVERAGE OVER HSBC TO DISSUADE MANAGEMENT FROM THEIR
DECISION
 CASE STUDIES : DIPLOMACY OF
GLOBAL FIRMS
3. POWER POLITICS-GAZPROM, RUSSIA, UKRAINE, AND THE
EUROPEAN UNION.

•RECCURRING BUSINESS DISPUTE SINCE 2006 BETWEEN

RUSSIAN NATURAL GAS FIRM GAZPORM AGAINST THE
GOVERNMENT OF UKRAINE AND ITS STATE GAS COMPANY
NAFTOGAZ.
•ONGOING DIPLOMATIC CONTRETEMPS DRAWNING THE
GOVERNMENT OF RUSSIAN FEDERATION AND THE EU
•GAZPROM; PUBLICALLY TRADED MAJORITY OWNED BY
FEDERATION OF RUSSIAN GOVERNMENT, RUSSIAN LARGEST
FIRM AND WORLD’S LARGEST GAS PRODUCER,
 CASE STUDY: DIPLOMACY OF GLOBAL
FIRMS
4. ASSET PROTECTION-GOOGLE, CHINA, AND THE US
 IN 2006, GOOGLE LAUNCHED CHINESE-LANGUAGE SEARCH SITE FOR
PRC, GOOGLE.CN ADHERING BEIJING’S GOVERNMENT STRICT
CENSORSHIP RULES PREVENTING ACCESS TO POLITICALLY SENSITIVE
WEBSITES.
 GOOGLE FACED GLOBAL PUBLIC CRITICISM.
 IN 2010, GOOGLE ACCUSED CHINESE GOVERNMENT OF HACKING INTO
THE ACCOUNTS OF GOOGLE CUSTOMERS IN CHINS, INCLUDING HUMAN
RIGHT ACTIVIST ACCESING WEBSITES AND GMAIL ACCOUNT.
 FIRESTROM CRITICISM OF CHINESE GOVERNMENT, US BASED GLOBAL
FIRM; US SECRETARY OF STATE HILLARY RODHAM CLINTON STATED- ‘
THE ABILITY TO OPERATE WITH CONFIDENCE IN CYBERSPACE IS
CRITICAL IN A MODERN SOCIETY AND ECONOMY’.
 GOOGLE LATER CLOSED GOOGLE.CN AND REDIRECTED CHINESE
LANGUAGE SEARCHES TO ITS UNCENSORED HONG KONG SITE, LEAVING
CAPACITY TO FILTER CONTENT TO USERS WITHIN CHINA.
 CLASH BETWEEN CHINA AND GOOGLE LEFT CHINESE GOVERNMENT
WORSE AND GOOGLE BETTER.
 CASE STUDY: DIPLOMACY OF GLOBAL
FIRMS
5. CRISIS/DISASTER DIPLOMACY-UNION CARBIDE, INDIA, AND THE US
TOXIC GAS DISCHARGE AT THE UNION CARBIDE FACILITY IN BHOPAL, INDIA IN DECEMBER
1984
 GAS LEAKED KILLED 3800 PEOPLE IMMEDIATELY AND DISABLED SEVERAL THOUSAND
MORE.
DISAGREEMENT BETWEEN UNION CARBIDE CORPORATION (NOW PART OF DOW CHEMICAL)
OR ITS INDIAN SUBSIDIARY UNION CARBIDE INDIA LTD. (UCIL) BORE FOR ACCIDENT
WHETHER SABOTAGE CAUSE BY TERRORISTS OR DISAFFECTED EMPLOYEES OR INADEQUATE
SAFETY PROCEDURES.
CLAIMS FOR DAMAGE FILED IN US COURTS BY VICTIMS
1985, MARCH, INDIAN GOVERNMENT PASSED THE BHOPAL GAS LEAK DISASTER ACT,
INTENDING TO DELIVER FAIR COMPENSATION TO VICTIMS APPOINTING THE INDIAN
GOVERNMENT AS SOLE REPRESENTATIVE OF BHOPAL VICTIMS IN INDIAN AND FOREIGN
COURTS.
PAVED WAY HEAR CASE IN INDIAN LEGAL SYSTEM AND US PRECEEDINGS WERE TERMINATED
INDIAN SUPREME COURT MEDIATED AND SETTLED DISPUTE IN WHICH UNION CARBIDE
MORALLY ACCEPTED AND PROVIDED COMPENSATION OF $470 MILLION INTO FUND FOR
VICTIMS.
EFFECTIVE DIPLOMACY BETWEEN THE GLOBAL FIRM, ITS INDIAN SUBSIDIARY, AND THE
INDIAN GOVERNMENT FACILITATED ORDERLY ADJUDICATION OF THE VICTIMS.
QUESTIONS???
 LEARNING
AND
EARNING
IS
INFINITE...
EXPLORE, LEARN AND EARN….

- RAMESH