The Guardian: Analysis - the Multilateral Agreement on Investment
Corporations v states: Meet the new world government: Multinationals will be able to take governments to court, under a worrying new agreement to be finalised next week. What happened to democracy? By David Rowan
YOU may not have heard of a new international accord called the Multilateral Agreement on Investment. There's no reason why you should have: the MAI has been debated over the past three years in extraordinary secrecy, and none of the parties to it has been keen to publicise the process (indeed, it has been mentioned barely two dozen times in the British broadsheets over the last year).
But if you have ever reflected on the growing power of the trans-national corporations, and feared that at some stage national governments might finally be forced to bow to their chief executives' demands, you ought to inform yourself rather sharply. Next week that moment will arrive: we may have been busily conducting a loud public debate over Brussels' infringements on our national sovereignty, but we are about to ceding to international investors some of our more fundamental democratic rights.
Over the weekend, representatives from the world's 29 richest countries will gather in Paris to put the final touches to an agreement that will give multinationals power like never before. It will let them sue national governments for any profits lost through laws which discriminate against them. It will put at risk international UN treaties on climate change and over-fishing, and will threaten workplace and environmental legislation we have elected politicians to enact. More crucially, it will acknowledge for the first time that corporate capital now has more authority and freedom to act than mere national and local governments.
The MAI is a comprehensive accord being finalised by the Organisation for Economic Cooperation and Development (OECD) designed to give international investors a 'level playing field'. It amounts to a new set of investment rules that would grant corporations the right to buy, sell and move their operations wherever they wish around the world, without government regulation. This new investor freedom, the OECD says, will give a new impetus to growth, employment and higher living standards.
The agreement, being prepared in Paris next week for signature by OECD ministers in April, is a logical extension of existing international trade treaties such as the General Agreement on Tariffs and Trade (Gatt) and the North American Free Trade Agreement (Nafta). But more than them, it seeks finally to create a world where capital can move entirely free of restriction. As Renato Ruggerio, director-general of the World Trade Organisation, put it: 'We are writing the constitution of a single global economy.'
The trouble, according to the increasing numbers of groups campaigning against the accord, is that this constitution's bill of rights extends only as far as the investors. It was initiated by business organisations - 477 of the Fortune Global 500 companies are based in OECD countries - in order to make international investment easier. More than 85 per cent of the world's foreign direct investment (known as FDI) flows out from OECD nations, increasingly to developing countries. And the amount is rising rapidly (see panel, left): as business grows more global, FDI is growing faster than trade flows.
Currently, investors are concerned that they cannot compete on equal terms with nationals of a host country. So the MAI was designed according to three key principles: non-discrimination (foreign investors cannot be treated worse than domestic companies); no entry restrictions (signatories cannot refuse any form of foreign investment, including the purchase of privatised companies, in any sector apart from defence); and an absence of special conditions (such as to ensure local employment or control currency speculation). 'Investment' is defined broadly, to extend to intellectual property, real estate and shares. Once a country signs, it cannot withdraw for 5 years and will be bound by the agreement for 15 years. In the case of any breach, a multinational can take the offending national or local government to an international tribunal. There it can sue for past and potential future damages.
Non-governmental organisations - and so far more than 600 from 67 countries have united to oppose it - warn that the MAI will make your vote irrelevant. They talk of 'supercitizens', corporations freed from the normal citizens' obligations to the environment or to workers. They point to an early concrete example of the anti-democratic legal actions likely to result. Last April, the Canadian government banned a petrol additive called MMT, which Canada considers to be a dangerous toxin. The additive's sole manufacturer in Canada is Ethyl Corporation, which responded by filing a $251 million lawsuit against the government to cover losses resulting from the 'expropriation' of its MMT production plant and its 'good reputation'.
The case, brought under clauses in Nafta, is still in progress, but even now it is not an isolated one. Two Mexican local
authorities are also being sued under Nafta clauses by US companies prevented from establishing toxic-waste dumps in their jurisdictions. Signatories to the MAI will also face such actions, held in special international courts, should corporate lawyers identify breaches.
'The MAI creates a precedent that elevates the rights of companies over the democratic rights of citizens,' according to the World Development Movement. The group is warning that UK local authorities, for instance, would be prevented from campaigning against South African wine, as many did during the anti-apartheid boycotts of the 1980s. The South African vintners would simply sue for compensation. Those local battles to stop McDonald's opening a branch - such as is now being given some official backing in Bermuda - would stand no chance.
And what of a national government that decided to prevent an international press baron from pricing his newspapers below cost? Mr Murdoch's lawyers may well claim that such a strategy sought to discriminate against the multinational News Corporation. A government cheque may eventually have to be forthcoming.
Even the OECD's own guide to the MAI admits that, 'as with all binding international agreements, this will moderate the exercise of national authority to some degree'. It then offers this not entirely reassuring concession: 'Governments will remain free to regulate in most fields provided the non-discrimination rule is respected.'
Then there are the environmental implications. MAI would, according to Friends of the Earth, let companies oppose the Kyoto agreement, under which industrial countries gave developing countries 'climate friendly' technology in return for pollution rights: for such rights would be an anti-competitive subsidy. Similarly, the MAI could challenge the UN Convention on Biological Diversity, designed to protect developing countries' genetic resources, as foreign multinationals demand equal access to such resources.
The greatest concern comes from those who represent developing countries. They will be invited to sign the agreement when completed, but without having influenced its content. And they will find it hard to resist signing if they want the investment that many consider vital: of the Dollars 112 billion invested in developing countries in 1995, more than 80 per cent ended up in just 12 countries. The 48 least developed (with 10 per cent of world population) attracted just 0.5 per cent of global investment. Yet being 'in' will open them up as unlimited new markets for cigarette companies, infant-formula marketers, and those seeking to exploit forests and minerals.
There are, however, indications that the growing opposition to the MAI may still be in time to postpone its signing. NGOs have made the issue a priority: according to Nick Mabey, economic policy officer for WWF, 'this is bigger now than global warming. Type in 'MAI' on the Web, and you'll get more than 1,000 sites - virtually none in favour, apart from the OECD sites.'
There are also increasing concerns among the signatories themselves. The US, in particular, has sought many exemptions to protect federal and state governments. Organised labour, too, is concerned that the agreement will override workers' rights. As a result, the final text is facing heated debate. Further, French filmmakers and musicians plan a protest on Monday amid fears that France and the EU would have to offer the same creative subsidies to Hollywood under the deal.
Herman van Karnebeek, deputy chairman of the Dutch chemicals group Akzo Nobel, who heads the OECD business and industry advisory committee, said last month: 'We now hear of disturbing signs that many of the elements we were hoping for may not be possible. What, then, we are beginning to ask ourselves, is in the MAI for us?'
The NGOs believe they can now exploit the growing divisions. 'There's a lot of tension in every European government between the environment and development people and the trade people,' says Nick Mabey of WWF. He believes concerned citizens should lobby MPs and ministers to urge a delay in negotiations. 'The decision to rush it through was taken in 1995, but most of those ministers are not around now, so there's no political faith to be lost in delaying,' he says. 'And faced with the problems of a hostile Congress, even the Americans are smiling on the idea of a delay. . .'
[PANEL]
Ultra vires
Many nations have laws which will run into direct conflict with the MAI's requirements. As drafted, the agreement will override the following states' laws:
Australia
Requires foreign investors taking a substantial stake in an existing Australian business worth A$5 million, or establishing a new one worth A$10 million, to submit to a screening based upon a 'national interest' test.
Taiwan
Forbids foreign investment in 'highly polluting industries'.
US
Some states restrict non-residents' use of public land for grazing and for mineral, oil and gas extraction.
Mexico
Bars foreign ownership of development-banking institutions and credit unions.
Canada
Requires a 'benefits plan' to encourage the employment of Canadians, and offer opportunities for Canadian contractors, before approving foreign investment in the oil and gas sectors.
Venezuela
Limits the number of foreign employees in companies with more than 10 workers to 10 per cent, with a 20 per cent payroll limit for foreign employees.
Colombia
Bars foreign investment in the processing or disposal of toxic or radioactive waste not produced in Colombia.
New Zealand
Requires aproval for foreign direct invesment that results in control of 'significant' assets, such as businesses worth more than NZD 10 million.
Chile
Bars the repatriation of capital until one year after a foreign investment is made.
David Rowan is editor of the Analysis page;
(The Guardian, February 13 1998)
YOU may not have heard of a new international accord called the Multilateral Agreement on Investment. There's no reason why you should have: the MAI has been debated over the past three years in extraordinary secrecy, and none of the parties to it has been keen to publicise the process (indeed, it has been mentioned barely two dozen times in the British broadsheets over the last year).
But if you have ever reflected on the growing power of the trans-national corporations, and feared that at some stage national governments might finally be forced to bow to their chief executives' demands, you ought to inform yourself rather sharply. Next week that moment will arrive: we may have been busily conducting a loud public debate over Brussels' infringements on our national sovereignty, but we are about to ceding to international investors some of our more fundamental democratic rights.
Over the weekend, representatives from the world's 29 richest countries will gather in Paris to put the final touches to an agreement that will give multinationals power like never before. It will let them sue national governments for any profits lost through laws which discriminate against them. It will put at risk international UN treaties on climate change and over-fishing, and will threaten workplace and environmental legislation we have elected politicians to enact. More crucially, it will acknowledge for the first time that corporate capital now has more authority and freedom to act than mere national and local governments.
The MAI is a comprehensive accord being finalised by the Organisation for Economic Cooperation and Development (OECD) designed to give international investors a 'level playing field'. It amounts to a new set of investment rules that would grant corporations the right to buy, sell and move their operations wherever they wish around the world, without government regulation. This new investor freedom, the OECD says, will give a new impetus to growth, employment and higher living standards.
The agreement, being prepared in Paris next week for signature by OECD ministers in April, is a logical extension of existing international trade treaties such as the General Agreement on Tariffs and Trade (Gatt) and the North American Free Trade Agreement (Nafta). But more than them, it seeks finally to create a world where capital can move entirely free of restriction. As Renato Ruggerio, director-general of the World Trade Organisation, put it: 'We are writing the constitution of a single global economy.'
The trouble, according to the increasing numbers of groups campaigning against the accord, is that this constitution's bill of rights extends only as far as the investors. It was initiated by business organisations - 477 of the Fortune Global 500 companies are based in OECD countries - in order to make international investment easier. More than 85 per cent of the world's foreign direct investment (known as FDI) flows out from OECD nations, increasingly to developing countries. And the amount is rising rapidly (see panel, left): as business grows more global, FDI is growing faster than trade flows.
Currently, investors are concerned that they cannot compete on equal terms with nationals of a host country. So the MAI was designed according to three key principles: non-discrimination (foreign investors cannot be treated worse than domestic companies); no entry restrictions (signatories cannot refuse any form of foreign investment, including the purchase of privatised companies, in any sector apart from defence); and an absence of special conditions (such as to ensure local employment or control currency speculation). 'Investment' is defined broadly, to extend to intellectual property, real estate and shares. Once a country signs, it cannot withdraw for 5 years and will be bound by the agreement for 15 years. In the case of any breach, a multinational can take the offending national or local government to an international tribunal. There it can sue for past and potential future damages.
Non-governmental organisations - and so far more than 600 from 67 countries have united to oppose it - warn that the MAI will make your vote irrelevant. They talk of 'supercitizens', corporations freed from the normal citizens' obligations to the environment or to workers. They point to an early concrete example of the anti-democratic legal actions likely to result. Last April, the Canadian government banned a petrol additive called MMT, which Canada considers to be a dangerous toxin. The additive's sole manufacturer in Canada is Ethyl Corporation, which responded by filing a $251 million lawsuit against the government to cover losses resulting from the 'expropriation' of its MMT production plant and its 'good reputation'.
The case, brought under clauses in Nafta, is still in progress, but even now it is not an isolated one. Two Mexican local
authorities are also being sued under Nafta clauses by US companies prevented from establishing toxic-waste dumps in their jurisdictions. Signatories to the MAI will also face such actions, held in special international courts, should corporate lawyers identify breaches.
'The MAI creates a precedent that elevates the rights of companies over the democratic rights of citizens,' according to the World Development Movement. The group is warning that UK local authorities, for instance, would be prevented from campaigning against South African wine, as many did during the anti-apartheid boycotts of the 1980s. The South African vintners would simply sue for compensation. Those local battles to stop McDonald's opening a branch - such as is now being given some official backing in Bermuda - would stand no chance.
And what of a national government that decided to prevent an international press baron from pricing his newspapers below cost? Mr Murdoch's lawyers may well claim that such a strategy sought to discriminate against the multinational News Corporation. A government cheque may eventually have to be forthcoming.
Even the OECD's own guide to the MAI admits that, 'as with all binding international agreements, this will moderate the exercise of national authority to some degree'. It then offers this not entirely reassuring concession: 'Governments will remain free to regulate in most fields provided the non-discrimination rule is respected.'
Then there are the environmental implications. MAI would, according to Friends of the Earth, let companies oppose the Kyoto agreement, under which industrial countries gave developing countries 'climate friendly' technology in return for pollution rights: for such rights would be an anti-competitive subsidy. Similarly, the MAI could challenge the UN Convention on Biological Diversity, designed to protect developing countries' genetic resources, as foreign multinationals demand equal access to such resources.
The greatest concern comes from those who represent developing countries. They will be invited to sign the agreement when completed, but without having influenced its content. And they will find it hard to resist signing if they want the investment that many consider vital: of the Dollars 112 billion invested in developing countries in 1995, more than 80 per cent ended up in just 12 countries. The 48 least developed (with 10 per cent of world population) attracted just 0.5 per cent of global investment. Yet being 'in' will open them up as unlimited new markets for cigarette companies, infant-formula marketers, and those seeking to exploit forests and minerals.
There are, however, indications that the growing opposition to the MAI may still be in time to postpone its signing. NGOs have made the issue a priority: according to Nick Mabey, economic policy officer for WWF, 'this is bigger now than global warming. Type in 'MAI' on the Web, and you'll get more than 1,000 sites - virtually none in favour, apart from the OECD sites.'
There are also increasing concerns among the signatories themselves. The US, in particular, has sought many exemptions to protect federal and state governments. Organised labour, too, is concerned that the agreement will override workers' rights. As a result, the final text is facing heated debate. Further, French filmmakers and musicians plan a protest on Monday amid fears that France and the EU would have to offer the same creative subsidies to Hollywood under the deal.
Herman van Karnebeek, deputy chairman of the Dutch chemicals group Akzo Nobel, who heads the OECD business and industry advisory committee, said last month: 'We now hear of disturbing signs that many of the elements we were hoping for may not be possible. What, then, we are beginning to ask ourselves, is in the MAI for us?'
The NGOs believe they can now exploit the growing divisions. 'There's a lot of tension in every European government between the environment and development people and the trade people,' says Nick Mabey of WWF. He believes concerned citizens should lobby MPs and ministers to urge a delay in negotiations. 'The decision to rush it through was taken in 1995, but most of those ministers are not around now, so there's no political faith to be lost in delaying,' he says. 'And faced with the problems of a hostile Congress, even the Americans are smiling on the idea of a delay. . .'
[PANEL]
Ultra vires
Many nations have laws which will run into direct conflict with the MAI's requirements. As drafted, the agreement will override the following states' laws:
Australia
Requires foreign investors taking a substantial stake in an existing Australian business worth A$5 million, or establishing a new one worth A$10 million, to submit to a screening based upon a 'national interest' test.
Taiwan
Forbids foreign investment in 'highly polluting industries'.
US
Some states restrict non-residents' use of public land for grazing and for mineral, oil and gas extraction.
Mexico
Bars foreign ownership of development-banking institutions and credit unions.
Canada
Requires a 'benefits plan' to encourage the employment of Canadians, and offer opportunities for Canadian contractors, before approving foreign investment in the oil and gas sectors.
Venezuela
Limits the number of foreign employees in companies with more than 10 workers to 10 per cent, with a 20 per cent payroll limit for foreign employees.
Colombia
Bars foreign investment in the processing or disposal of toxic or radioactive waste not produced in Colombia.
New Zealand
Requires aproval for foreign direct invesment that results in control of 'significant' assets, such as businesses worth more than NZD 10 million.
Chile
Bars the repatriation of capital until one year after a foreign investment is made.
David Rowan is editor of the Analysis page;
(The Guardian, February 13 1998)
<< Home