SUNS  4308 Friday 23 October 1998



Trade: US-EC manoeuvring towards WTO investment talks ?


Geneva, 22 Oct (Chakravarthi Raghavan) -- While the United States and leading European nations seem to be at odds over the negotiations for multilateral investment rules at the OECD, there are increasing signs that the US, EC Commission and some of its members may in fact be manoeuvring to take the issue to the World Trade Organization (WTO).

According to the NGO coalition that has been campaigning against the OECD-MAI, the insistence of the United States -- at the renewed consultations this week at the OECD (which lasted only one day, as against the scheduled two-days) -- that the MAI talks remain at the OECD, may be "just a lure" and part of a concerted strategy of the US and EC "to confuse the opponents and the media?".

Meanwhile, critics of multilateral investment rules at the WTO, have received powerful support from a "free-trade ideologue", Prof. Jagdish Bhagwati, who has said that corporate rights have to be balanced by corporate obligations, including to host communities, and if these are to be addressed at the WTO, it would be difficult to exclude labour and environment issues either, and such an overloaded agenda would risk the WTO's main remit of promoting 'free trade'.

Bhagwati has said that the whole range of issues including rights and obligations relating to investment, labour and environment issues should be looked at together in a proactive way in a different forum.

The investment issue is now before a WTO Working Group on Trade and Investment (WGTI) which was established at the 1st Ministerial meeting of the WTO at Singapore in December 1996. According to that mandate, the WGTI is to report on its work by the end of the year, when a decision is to made on how to proceed further, with a specific consensus needed if the study process is to move into negotiations.

At more recent meetings of the WGTI (which began as a study of investment meaning FDI issues), several of the industrial countries including US, EC, Canada and Japan have been pushing for including a wider definition to include all kinds of property rights and investments - including short-term flows and portfolio flows.

In a letter published in the Financial Times of 22 October, Prof. Bhagwati who by December 1997 emerged as a strong critique of the IMF/WTO drive for capital liberalization and convertibility, has come out against negotiating the investment issue at the WTO.

And the EC Commission may be attempting to use the European Parliament, and its conservative and socialist members, including the French and the German groups, to get endorsement for this.

Both the Commission and the European Parliament would "gain" in the turf battle between member-states and their national parliaments on the one hand, and Brussels and Strassbourg on the other - given that the foreign investment issue is partly in the EC domain and partly in the domain of members.

If the investment issue is taken to the WTO, thus expanding the EC Commission jurisdiction and mandate in this area, even if the Commission negotiates at the WTO on behalf of the EU members (with the accord still needing to be approved unanimously by the Council of Ministers), this would still give a handle and leverage to the Commission over its member-states.

And anything that gives the Commission an authority automatically brings in the European Parliament.

Just as the 'fast-track' authority in the US enables an administration to balance and play off one lobby against another, including the backers of such lobbies in the Congress, the EC's negotiating mandate would enable the Commission to play the differing interests.

The ability of the Brussels bureaucracy to prevail over national bureaucracies is also the reason why the EC favours a round of negotiations, involving several issues, and to be completed as a single undertaking.

And after her recent visit to Brussels, USTR Mrs. Barshevsky has cautiously given support to the idea of a round of negotiations involving several issues.

And even as the OECD talks or consultations resumed, and the US was expressing its preference for the investment talks at the OECD, the EC Commissioner Sir Leon Brittan went before a plenary session of the EP to declare that he was in very much in support of the idea of shifting the MAI to the WTO.
In announcing that France would no longer participate in the OECD talks, French Prime Minister Lionel Jospin had made a similar suggestion that investment negotiations should be at the WTO.

Third World delegations at the WTO say that it has been obvious to them that the reason why Canada and France want the negotiations at the WTO is that they could use the developing countries and their opposition to water down the US demands on them at the OECD.

The US, from its own experience of the Uruguay Round and the negotiations on GATS and TRIMS, also concluded that the better route for its objective of freedom for investors is to secure a "high
quality" agreement at the OECD, where all members are committed to capital mobility, and then take it to the WTO and get as much as possible from the developing world.

Brittan told the European Parliament meeting that a negotiation on the investment issue at the WTO was his idea and has been a major concern since the beginning, i.e. since the publication of the Commission's paper in 1995 for "A level playing field for foreign investment worldwide" in 1995.

Brittan referred to the scheduled resumption of the WTO Working Group on Trade and Investment (chaired by the Thai ambassador to the WTO), and said in his view this would be the moment to launch the negotiations.

According to European Parliamentary sources, all MEPS except those belonging to the Green group, came out in support of Brittan and were strongly in favour of the shifting of the negotiations to the WTO.

Green MEPs Wolfgang Kreissl-Doerfler (Germany),  Paul Lannoye (Belgium) and Inger Schoerling (Sweden) however warned against such shifting.

Very few of the French MEPs appear to have taken part in the discussions. Socialist MEPs Mme Mutin and German MEP Erika Mann are reported to have strongly supported Brittan and Strangely, there were only very few French members taking part in the discussion. The socialists were only represented by Mme Mutin and German MEP Erika Mann who strongly supported Leon Brittan, and warned against "the take over" of parliamentary power by NGOs!

In his letter to the Financial Times, Bhagwati argued that the MAI in its present form was unbalanced in three ways: it sought to eliminate restrictions on corporations in order to ensure efficiency in world allocation of resources, but does not prohibit subventions (or incentives) given by countries to attract corporations, even though these too distort efficiency.

But even more, argues the free trade exponent, the MAI provides for a set of rights for corporations, but does not systematically include any obligations on them, such as "stake-holders" obligations of
corporations to the communities where they operate. The MAI made little concession either to the political sensibilities of host countries and their views of their economic interests.
While listing the obligations of corporations to host communities and the economic interests and objectives of host countries could be fixed if the MAI is negotiated in the WTO, there were other "powerful reasons" why the issue should not figure on the WTO agenda, says Bhagwati.

The WTO being a 'single undertaking', any such revised MAI would be mandatory on all its members. The issues raised by an MAI are controversial, and this would "take the WTO gratuitously into the politically supercharged domain, and endanger its real mission to free trade."

Bhagwati notes that he and other like him had been arguing for labour and environment to be pursued "pro-actively" by other trade treaties and institutions - leaving the WTO to pursue free trade.

It is hard to tell lobbies pushing these agendas into the WTO not to do so, even as the MAI agenda was being pushed on to the WTO.

It was bad enough, says Bhagwati, to push Intellectual Property Protection (IPP) -- an issue of enforcement of property rights against essentially poor nations rather of trade where all gain -- into the WTO as the Uruguay Round closed.

But with IPP and MAI both in, it would be hard to refute the charge that what is good for capital at the WTO is not good for "labour" or "nature", he adds.