The Multilateral Agreement Investment

(The following is adapted from an article in Winter 97 Corporate Watch)

The proposed Multilateral Agreement on Investment (MAI) is the latest step in the globalisation of the world economy. It is the invention of the OECD which provides research and analysis on economic conditions in order to assist its members' development. It is less well known for its role in setting rules and regulations.

The MAI will be a treaty between signatory nations that will signal a further opening up of markets. It provides a single predictable set of rules to replace the myriad bi-lateral agreements between countries and as such will replace all previous agreements that have been made between signatory states and will over-rule all laws that conflict with it. It enshrines the right to own or acquire any asset; related rights such as the ability to operate a business; and the freedom to transfer funds and capital as and when desired. The only economic sector exempted from the scope of the agreement is defence.

The stated intention is innocent-sounding enough: to level the playing field for all investors so that all parties be they small local companies or giant transnationals will be treated equally regardless of nationality. The bulk of the MAI is devoted to specific ways of preventing discrimination. Any and all performance requirements on investors will be banned. Under the terms of the agreement kinds of obligations on investors (amongst others) which are specifically outlawed include prescribed levels of export of goods even though a nation's balance of payments may suffer; setting required levels of domestic content in the products of an enterprise; the transfer of technology or other proprietary knowledge to the local community; requiring that enterprises must be joint ventures with local partners; to achieve a given level or value of production, investment, manufacturing, sales, employment or R&D within a nation's territory.

In short, none of the obligations that are traditionally used to protect and manage local economies may be placed on an investor. Furthermore governments will be barred from interfering with companies because of the nature of their operations elsewhere in the world. If a company exploits slave labour in Burma no government may take this as grounds to hinder or in any way interfere with their free entry into a market. TNCs will be free to bring into a country the personnel they choose. Obligations will also be included that will require the remuneration of investors in the event of their assets being expropriated or interfered with.

Much of the document comprises a long list of prohibitions, imposing limitations on the power of central and regional government to regulate the actions of business: the MAI goes a great deal further than previous treaties which have maintained the sovereignty of national governments to manage their own economies in line with their development objectives. Yet there are further provisions giving even greater power to investors.

A Bill Of Rights For Transnationals

The MAI grants investors the right to directly challenge national and local laws when they are deemed to be in breach of MAI provisions, and cause, or are likely to cause loss or damage to an investor or investment. This may lead to absurd situations of cash-strapped local government being vulnerable to legal action directly from TNCs which have far greater resources.

Rules are provided for settling government-to-government disputes and for investor-to-government disputes. No reciprocal mechanism is provided for taking legal action against TNCs, a point that has been made much of by campaigners against the agreement. The reason for this is very simple. There is nothing in the agreement that an investor could be found in breach of. The MAI constitutes a bill of rights for transnational investors, but whilst it bestows new rights and freedoms on investors there are no responsibilities or obligations placed upon them.

Further sections of the agreement provide for a 'rollback' of existing legislation that conflicts with the MAI and a 'standstill' mechanism preventing the enactment of new legislation.

No nation will be allowed to withdraw from the agreement for at least five years after it is signed. All existing investments will be covered by the full range of protections for a further fifteen years after withdrawal. How the MAI will work out cannot be precisely predicted. The world has never had such a far reaching agreement before but in every one of the hundred or so cases brought before it in its three years, the WTO has ruled in favour of corporate interests. There is little reason to imagine that MAI procedures will be any less partisan.

Opposition Grows

So many special exemptions from the scope of the MAI have been filed that the negotiations, due to finish in May 97, have been dramatically slowed. Few governments, except it seems the UK's, are actually daft enough to believe their own rhetoric about free markets. America, the most vocal champion of free trade and yet traditionally the most protectionist of capitalist economies, has produced the longest list of exemptions and has the muscle to insist on them. The UK delegation, by contrast, has now dropped its one proposed exemption of fishing rights.

Worldwide, a coalition of NGOs has formed to try to stop the negotiations and is led in the UK by the World Development Movement, Friends of the Earth, Oxfam and the WWF. Focussing on environmental and labour issues, these groups are highlighting the dangers of deregulation. One of the chief concerns is that as capital is given greater mobility countries are put under pressure to provide the most favourable conditions to investors. Across Europe countries have been dropping corporation tax and deregulating the labour market for years in an effort to attract foreign investment. At the same time there is a tendency for the most polluting and labour intensive industries to shift to countries with lower standards and costs. Exactly the same phenomenon has been occuring within the NAFTA area.

Much of the 'developing' world is expressing deep concern about the OECD's plans. Their fear is that the MAI will not stay within the OECD nations, but will form the basis for a global agreement. Also developing nations will be under pressure to sign up to the MAI on a take it or leave it basis, without having had any input into its design. If they do not sign up investment can simply go elsewhere.

The Campaign

In October this year the NGO coalition returned to Paris to consult with the OECD. The group of NGOs, 29 strong, issued an ultimatum. If their list of eight demands was not met in full they would devote their combined resources to campaigning against the MAI. Their demands included the immediate halting of negotiations, independent assessments of likely environmental and social impacts, and the incorporation of binding regulations on multinational investors. They were ignored

Failure Of Global Regulation

After intense lobbying by the NGOs the British government is now pushing to have the OECD's 'Guidelines For Multinational Enterprises' closely associated with the MAI. Unfortunately the guidelines are purely voluntary and non-binding. There are no binding international regulations in effect today that impose obligations or responsibilities on the multinationals. At a global level there are still no guidelines, even voluntary ones, regarding the conduct of TNCs.

The Post Democratic World

If enacted, the MAI will inevitably spell further degradation of environments and societies, by further deregulating the activities of TNCs. It will also increase the power of the corporations at the expense of elected governments. For national governments to sign away their own power seems, at first, highly unlikely. On the other hand, perhaps it betrays the true nature of the relationship between government and industry in the rich nations. Could this be why there has been no public consultation?

Negotiations at the OECD began in 1995 and were intended to conclude in May 1997. Throughout they were conducted in absolute secrecy with minimal media coverage. It was only in late 1996 after leaked drafts of the report were published on the internet that the NGOs were allowed consultations with the OECD. The CBI however, which is affiliated to the Business and Industry Advisory Council - the OECD's business lobby - reports that industry groups have been actively involved in lobbying for such an agreement since the early '90s.

It seems reasonable to conclude that in the quest to create what one OECD spokesperson describes as "the constitution of a single global economy" democracy has become an expendable notion.