6.1.2 Threats to Political and Economic Sovereignty Notes

Challenges to State Control and Governance

1. In an interconnected world, states face mounting challenges to governance and political as well as economic sovereignty.
2. These include tax avoidance, disruptive technologies, and more.

Perceived Loss of Control and Loss of Sovereignty

1. Multi-governmental organizations like the EU or Mercosur have gained power over certain aspects of life like trade and migration rules traditionally depending solely on national governments.
2. This combined with the "Shrinking World" and unchecked, or perceived as such, flows of people, goods and ideas have amplified the perception of losing control among certain societies.
3. This in turn has led to renewed political, cultural, and economic nationalism.

Tax Avoidance and Profit Repatriation

How TNCs Use Tax Havens

1. Tax havens are jurisdictions with low or zero tax rates, attracting TNCs seeking to minimize tax liabilities. They are mostly small island states (e.g. in the Caribbean), but also countries like Ireland, Panama or Switzerland are considered to be tax havens.
2. Strategies include:
   1. Transfer Pricing: Manipulating prices of goods or services traded within subsidiaries to shift profits to low-tax regions.
   2. Profit Repatriation: Moving profits from high-tax countries to tax havens.

Impacts on Governments

1. Reduced Revenues: Tax avoidance deprives governments of funds for public services like healthcare and education.
2. Inequality: TNCs gain advantages over local businesses, widening economic disparities.
3. Erosion of Trust: Citizens lose faith in governance when TNCs exploit loopholes.

Disruptive Technologies Altering Institutions and Everyday Live

Unmanned Aerial Vehicles (UAV, Drones): Challenge to Traditional Governance Practices and Individual Privacy

1. Access and Cost Efficiency: UAVs have made aerial surveillance, data collection, and delivery more accessible and affordable compared to traditional manned aircraft, allowing a wider range of industries to utilize aerial capabilities.
2. UAVs are a powerful innovation allowing to operate in various environments and perform diverse tasks, such as monitoring, mapping, and inspections, has transformed sectors like agriculture, logistics, and public safety, introducing new operational models.
3. UAVs are also widely used in law enforcement and military operations.
4. UAVs introduce challenges to public institutions and people:
   1. Regulatory and Legal Issues: Governments face the challenge of developing comprehensive regulations to ensure safe integration of UAVs into national airspace while addressing concerns about privacy, security, and air traffic management.
   2. Safety and Security Risks: UAVs pose potential risks, including accidents, technical failures, or misuse by malicious actors, leading to safety concerns for both civilians and infrastructure.
   3. Public Perception and Acceptance: Concerns about surveillance, invasion of privacy, and noise pollution have to be addressed.
   4. Ethical and Legal Implications: The use of UAVs in military operations raises significant ethical questions regarding targeted strikes, civilian casualties, and the potential for decision-making to be delegated to algorithms, complicating accountability and legal frameworks.

3D Printing: Decentralized Production and Risks

1. 3D printing allows on-demand manufacturing but introduces challenges:
   1. Intellectual Property (IP) Violations: Designs can be copied and shared without permission.
   2. Weapons Manufacturing: 3D printers can produce untraceable firearms, complicating regulation.

Balancing Innovation and Regulation

1. Tax Avoidance:
   1. Global Cooperation: Initiatives like the OECD's Base Erosion and Profit Shifting (BEPS) aim to close tax loopholes.
   2. Digital Taxes: Some countries levy taxes on digital services to capture revenue from TNCs.
2. Disruptive Technologies:
   1. Regulation: Laws governing drone use and 3D printing must balance innovation with security.
   2. Public Awareness: Educating citizens on privacy rights and ethical technology use is crucial.