Feb 18, 1998

Paris, Feb 16 (IPS) -- Ministers from 29 industrialised nations met as planned Monday to restart talks on a global investors' rights pact even as the United States Trade Representative has said that the US is not in a position to accept the MAI in its present form.  

The Multilateral Agreement on Investment (MAI), under negotiation by the 29-member Organisation for Economic Cooperation and Development (OECD) in Paris since May 1995, has drawn criticism from both supporters and critics of free movement of foreign capital.  

Two days of talks opened Monday to take a political decision whether to complete the MAI negotiations by April, or extend further.  

An estimated $8.3 trillion in foreign direct investment (FDI) is currently in place around the world, and annual FDI flows from OECD member countries alone totalled $259 billion in 1996.  

The MAI pact was supposed to protect these trillions by making sure governments treat foreign and domestic investors equally.  

But supporters of the pact say the current draft is too weak and subject to too many national exemptions that water it down, while critics say the proposed MAI would free up international corporations while stripping rights from ordinary citizens.  

And on Friday the US said it would not sign the treaty now in its present form and did not anticipate that it could be revised sufficiently to suit its needs by April 28, when it is supposed to be signed by OECD ministers at their annual meeting.  

Many thought this could be the coup de grace for the floundering pact, a treaty that the head of the World Trade Organisation, Renato Ruggiero, has been quoted in media reports as describing the "constitution of a single global economy".  

[In Geneva Monday, the WTO denied that Ruggiero had used such terms in relation to the MAI, being negotiated among only 29 members of the OECD, but that he had used the terms about the WTO and its Multilateral Trading System, with over 120 members.  

[However, NGO critics have noted that many of the criticisms against the MAI process at the OECD applied equally to the WTO processes. They note that the WTO head has been supportive of the European Commission proposals to negotiate WTO rules for multilateral investment rights for foreign investors, that a WTO working party is addressing these issues, that there are efforts to set in motion a process at the 1998 Ministerial that could lead to launching WTO negotiations on this at the 1999 Ministerial, and that these WTO negotiations would be conducted away from the public and in even greater secrecy and non-transparency than the OECD.  

[Meanwhile, some 21 leading international NGOs from the North and the South, took out an advertisement in the International Herald Tribune, against the OECD-MAI negotiations, posting the question: "Should Corporations Govern the World?"  

[The advertisement said that "From the same wonderful people who brought you NAFTA, the WTO, 'Fast Track' and the Asian Financial Crisis, comes the MAI...", and that the 'secret treaty' being negotiated by the 29 countries would give unprecedented powers for global investment bankers, money speculators and TNCs. The MAI, they charged, would reverse present-day regulatory processes and instead of governments regulating corporations, the MAI would regulate municipal, provincial, state and national governments, and in effect corporations would govern the world.

[The ad outlined some effects of the MAI:

[* instead of sovereign governments deciding the conditions under which foreigners could buy up domestic businesses, banks, TV stations and utilities or making rules preventing foreigners from having controlling shares or asking new foreign businesses to go to disadvantaged regions or employ a percentage of local workers or have local content in their manufactures, democratic societies would cede control over these to foreign corporations;  

[* would impose restrictions at all levels of government;  

[* would forbid 'performance requirements' for investors,  

[* would prevent countries from ensuring foreign profits do not exit a country or prevent such fiascoes as the Asian Financial Crisis, or place restrictions on portfolio investments or put 'speed bumps' requiring foreign investors to keep their investments for a minimum period of time -- rules without which countries would be subject to ravages of 'currency attacks' and whims of giant banks; 

[* would give foreign corporations a status equal to "most favoured nations"; 

[* would define 'expropriation' to include investors experiencing a 'lost opportunity to profit from planned investment' and prevent governments from expropriating investments 'directly or indirectly' - which means even government public health laws against pollution could become 'expropriation' since they affect 'future profits from planned investments' and make tax-payers liable to pay corporations for this;

[* private corporations would get unprecedented legal standing to sue sovereign governments.

[The ad challenged the claim that an MAI would help the Third World, "thus helping feed a hungry world" and called this "deeply cynical" as the exact opposite would be the case: "the MAI would enshrine the abilities of rich investors to dominate the poor countries." All the controls that these countries have to encourage local businesses and workers to build a base for the future would be dead under the MAI and all countries would be submerged under the new freedoms of multinational capital. "And just who gets fed: Hungry investment bankers only", the ad said. 

[The ad noted that the MAI negotiations had been going on at the OECD for two years without any public scrutiny or involvement, with the public and the press excluded. The draft text was never released until after a purloined copy appeared on the Internet. Nations were represented only by their business-oriented trade agencies and by business lobby groups while consumer groups, democracy groups, environmentalists, small businesses, labour unions and other NGOs have been excluded, the ad said and posed the question: "What goes on here? Whatever happened to democracy?" 

[Another international NGO coalition, People's Global Action (PGA), the coordinator of an international movement against economic globalisation, accuses the MAI of aiming to eliminate every last trace of regulation and control of capital flows.  

[The PGA plans to launch a non-violent civil disobedience movement against free trade and the World Trade Organisation (WTO). The campaign also begins next week in Geneva, with a series of press conferences leading up to a Feb 23-25 international seminar.  

[A previous PGA statement said the countries of the industrialised North were pushing for approval of the MAI in their aim to extend the rights already enjoyed by foreign investors in most countries.  

[According to the PGA, the MAI represents the most significant attempt to expand the process of globalisation and liberalisation to "abolish the power and legitimate and sovereign right of states and peoples to determine their own economic and social policies."]

French culture minister Catherine Trautmann, speaking at meeting of filmmakers in Paris Monday, said the signs were that "the agreement will not be concluded in the spring, as had been expected".  

However a year ago, when faced with similar obstacles, the 29 nations extended the negotiating deadline for another year, and that option remains open.  

Alternatively other OECD countries might proceed without the United States to wrap up a framework pact by April. The European Union brokered a partial deal on an earlier global financial services pact when the US rejected an original draft, signing up only when a much stronger deal was agreed in 1996.  

Critics says that if passed in its current form, the MAI would have an even greater impact on governments than previous trade agreements such as GATT and NAFTA.  

Speaking at the same meeting as Trautmann, Mac Gudgeon, screenwriter from Australia compared the MAI to a 'stealth bomb' that was "sneaked in on us and which we must resist". Award winning director Costa-Gavros said that in the US, "there has been a certain arrogance' since the fall of the Berlin Wall. The GATT and now the MAI are the results of this arrogance".  

"The MAI is a threat to democracy and the environment," said Kevin Dunion, chairman of Friends of the Earth International on Monday. "It will elevate foreign corporations to rulemakers and reduce the power of government to regulate in the public interest. The treaty process must be stopped in its tracks if it is not to do untold damage to people and the planet."  

Several key issues are outstanding in the MAI. The two day talks at deputy ministerial level here will establish whether the political will remains among the other OECD members to make the necessary compromises on the various disputes.  

These include such tricky problems such as protection of intellectual property rights, identifying and stopping de facto discrimination and calculating the value of indirect investment.  

These issues are further complicated by the fact that pact's terms of reference have always fluctuated according to national agendas. Almost unlimited wrangling over dozens of possible national exemptions in various sectors is possible.  

Meanwhile suspicions have deepened among emerging market nations that the US and unregulated capital market traders will use the MAI as a weapon -- particularly in the wake of the South East Asian crisis, largely attributed to uncontrolled movements of foreign investment.  

The experience has turned governments against providing more freedom to global investors than they already have, undermining the draft pact's original concept as an agreement that countries outside the OECD would want to join.

 Most of all, while negotiations have been going on since 1995 in relative anonymity, public opposition to the pact has grown significantly in recent months.  

In a joint statement released to the OECD, endorsed by 565 environmental, development, labour, consumer, church and women's organisations in 68 countries, a coalition of NGOs has called on the OECD to suspend the negotiations on the MAI. "We hope that the combination of public pressure and government cold feet will keep the MAI from being finished by April," said Dunion. "But negotiators should know we mean business. If the agreement is signed, we and our allies will be ready to fight its ratification in all the major capitals of the world."  

Under the pact, countries would agree to treat foreign investors and their investments as they would treat investments by their own citizens. Investment laws and regulations must be open, transfers of capital, profits and dividends must be freely permitted and investments protected against nationalisation.  

States would be prohibited from imposing binding performance targets, such as export targets for goods and services or reinvestment requirements, and would open nearly all their business sectors to foreign investment. It would restrict countries' ability to impose labour and environmental standards on their local employers. It would also give foreign corporations the right to sue governments through a special dispute resolution panel.  

But the pact could also force Washington to lift laws imposing sanctions on foreign companies operating in the United States who trade with Cuba, Libya or Iran.