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y Round of General Agreement on Tariff and Trade (GATT) armed the WTO with a strong enforcement system to coordinate fair trade among countries and impose sanction on those exceeding the agreed boundary. This regulatory power is demonstrated in the body’s sanction on the US when the latter tried to impose 100% tariff on certain European exports in retaliation to the 1999 WTO ‘banana wars’(Cavanagh and Mander; 2004. 66). The power to impose sanction, regulate trade and maintain order shows how the system is managed.
On-going plans by the WTO to further annihilate territorial barriers include the bid to prohibit government from making policies in banking, media and policy that give local investors preference over their foreign counterparts (Cavanagh and Mander; 2004,69)
The same economic arrangement is in the regions by regional banks such as the African Development Bank, (ADB), the Inter-America Development Bank and the Asian Development Bank (ADB). These banks work with the various finance ministries and Central Banks in their region to tailor economies after the World Bank model.
Closely related to that is complimentary change in the commercial sector. Duffield asserts that liberalisation of the economy gives transnational corporations and private security firms economic powers to regulatory the economy and influence government policies. Therefore it is no longer possible for states to have a separate economy as all economies are controlled by transnational companies.
Willetts (Baylis and Smith; 2001, 430) observed that government have lost the control of financial flow as demonstrated by the currency crisis of 1980s and 1990s. During this period the dollar, the pound, the French franc and the yen were hapless against the transnational banks
The impact of these reforms is felt by countries trying to regulate internal commercial activity. Under unfavourable state economic policies, transnational corporations threaten to move their investments out of the country. Relocating these investments will ignite serious economic problems for the host countries such as unemployment and a fall in the gross domestic products.
Governments in their efforts to attract foreign direct investment formulate policies that accommodate transnational companies. Hence a government that imposes least demanding health safety, welfare and environmental standards is an investors’ haven (Baylis and Smith; 2001,431).
However, transnational corporations are not a low to themselves. Regulations on their conduct are arrived at between the corporations and the UN, an example is the 1999 UN Global Compact Initiative which deals with issues of labour, human rights and the environment. Transnational corporations also carry out various development projects in host communities under the principle of corporate social responsibility. Corporate social responsibility ensures that corporations make business decisions that meets the ethical, commercial and public expectation of how business should be managed (Garsten, C: 2003, 360).
While building alliances with NGOs such as the Amnesty International and Transparency International, some transnational corporations adopted the voluntary codes of conduct and industrial human rights within their governing principles. A recent example of adhering to human rights principles is the recent withdrawal of some products from the market in by GAP, a transnational company following discovery that child labour was