Economist’s Column MAI galomania: The New Corporate Agenda

Economist Column Secrecy, haste and intrigue have characterised the negotiations around the Multilateral Agreement on Investment (MAI) - the latest plan of the economic globalisation fraternity for dismantling barriers to investment all over the world with an objective of achieving a more open global economy.

Secrecy, haste and intrigue have characterised the negotiations around the Multilateral Agreement on Investment (MAI) - the latest plan of the economic globalisation fraternity for dismantling barriers to investment all over the world with an objective of achieving a more open global economy.

The 1994 completion of the Uruguay Round and the creation of World Trade Organisation (WTO) was a great victory for Transnational Corporations (TNC's), which together with their governments lobbied for the removal of national barriers to the flow of goods and services. The next logical corporate challenge has been the creation of a treaty, which would provide investors with a so-called "level playing field" across the globe, ensuring the most ideal investment conditions. It would grant TNC's extensive new powers while at the same time denying governments the right to control foreign direct investment in their countries. The rules and regulations which hinder foreign investment and which would be dismantled under MAI are often those that protect workers and jobs, public services, domestic businesses, the environment and culture.

Since 1995, governments all over the world have made some 600 changes in national investment legislation, 95% of which have resulted in greater liberalisation. The MAI aims to increase and secure this trend. Actually, MAI is a child of the Organisation of Economic Cooperation and Development (OECD), and intergovernmental organisation made up of 29 of the world's richest industrialised countries, with headquarters in Paris, but is intended as much for Third World countries as for the OECD states negotiating the agreement. It will be a "freestanding" international treaty, open to accession by non-OECD countries, which means that countries can sign on a take-it-or-leave-it basis.

At their May, 1995 conference, the OECD country ministers decided to initiate negotiations on a MAI, with a goal of completing an agreement by May 1997. The WTO was invited as an observer. The process of soliciting non-EU members started soon afterwards, in the first of a series of on-going negotiations with interested countries. At least 10 non-OECD countries expressed interest in joining the MAI. Negotiations between the EU and ACP countries (African, Caribbean and Pacific) reveals that the EU is pressuring these former European colonies to accept the MAI as a part of a new revised Lome Convention.

Corporate lobby groups needless to say had direct involvement throughout the entire negotiation process. Also, as a matter of course, business interests were consulted during the preparatory phase. Collaboration existed not only with the OECD's Business and Industry Advisory Council (BIAC), but also with individual corporate lobby groups such as the International Chamber of Commerce (ICC). NO less important than their direct influencing of the OECD process is the lobbying done by industry on a national level. The US Council for International Business, for example, has "regular meetings with US negotiation immediately before and after each MAI negotiating session. Similar close cooperation between industrialists and national negotiations has taken place in many other OECD countries, including Japan, Canada & Netherlands. In most of the cases economic or trade ministry officials represent their countries in the MAI negotiation in the OECD. Astonishingly, in many countries, the MAI went largely unnoticed by other ministries - for instance those of environment, social affairs and culture - until a very late stage.

In sum, the MAI would require countries to open their economies wide to any interested investor where any complain made by TNCs about the unfavourable treatment by the host country would be judged in "unaccountable" international courts. The main elements of the agreement are as follows:

• The MAI would encompass an extremely broad range of "investments", defined in the preamble as "every kind of asset owned or controlled, directly or indirectly, by an investor." The health, education, communications, cultural, banking, construction and social sectors would all be fair game for foreign investors; in fact, the only exempted sectors would be defence & police.
• The MAI is based on the principles of national treatment and most favoured nation (MFN). This would require govts. to treat foreign investors as well or better than domestic investors, and thus would automatically favour transnational investment over that of smaller, domestic companies. Foreign investors would gain equal access to bid on any public services being privatised.
• The MAI would do away with measures designed to protest workers and communities. For example, govt. requirements for a minimum no. of level people being employed in a foreign firm, (re-) investing a min amount in the local economy the use of a certain percentage of domestic products, technology transfer and so-forth would become "illegal" under MAI.
• The MAI would increase speculative short-term investments of the type that caused the 1994 Mexican peso crisis and recent stock-market crashes in South-East Asia.
• Unlike other multilatral treaties, the MAI would include a dispute settlement mechanism to allow investors to due national and local governments for expropriation and for measures having the "equivalent effect". This grants TNCs the power to challenge all local and national legislations which come from democratic political process.
• The MAI also includes the dangerous provisions of "stand-still" and "roll-back". Stand-still prohibits signatory countries from introducing new laws or polices which contradict the MAI and "Roll-back" is the procedure by which countries will be forced to open up protected areas and removed laws considered in violation of the MAI.
• The provisions of the MAI would contradict several international agreements signed by govts. including the Climate Convention, the Basel Convention on Hazardous Waste and the Convention on Biological Diversity.
• The MAI would in effect lock the signatory countries into the agreement for a 20-year period. A country can withdraw from the MAI only after five years, and companies investing in that country are covered under treaty provisions for an additional 15 years.

After a smooth first year and much of negotiations, the MAI entered a far rockier phase in 1997. Problems have since then multiplied with the high-speed emergence of anti-MAI campaigns in one OECD country after another and due to demands by some OECD govts for an increasing no of reservations and sectoral carve-outs. For example, the US demands an exemption for subsidies and for sub-federal law which would provide states & localities with immunity from MAI.

The EU asked for positive diserimination within regional economic integration organisations (REIOs) like itself.

France & Canada requested that culture be carved out of the agreement entirely.

The second, and simultaneous spanner in the MAI's works was the explosive reaction of the international NGO community after a draft text of the MAI was leaked at the beginning of 1997. Canadian & US NGOs were quick to put the draft text on their web sites, and campaigning spread like wild fire to other parts of the world.

In March, a massive majority in the European Parliament approved a resolution full of criticisms of the MAI. The MAI is not the only ambitious attempt to deregulate national & local investment rules. Over & above the MAI, the EU, the US, Canada & Japan dream of a global investment treaty within the WTO. A first offensive to initiate negotiations on such a treaty-stimulated by the euphoria that followed the signing of GATT-took place in 1995 & 1996. The resistant Third World countries -including India & Malaysia - are still fiercely opposing to negotiations on a WTO investment treaty, having learned a lesson from the Uruguay Round of the GATT - that the initiation of negotiations generators enormous pressure for the completion of far - reaching treaties.

However, citizens campaign against the MAI is increasing in strength day by day and in country after country, and the media are at last taking notice of the treaty. The struggle against the MAI has demon started the enormous necessity and potential for grassroots globalisation on these complex, far-reaching issues. Information and strategies are being stared among an incracigly strong network of citizens, NGOs, workers, development organisations and women's movements.

There are many ways to fight the MAI and its closes in other international for a. Actions that could help to bring the MAI into the debate and act as spanners in the wheels are:

1. asking parliaments to inquire about the impacts of the MAI
2. putting pressure on govt. ministries who are not involved in the negotiations but will be impacted like environment, culture, development.
3. Warning local govts which would be hand affed by the MAI./ There is no doubt that with an increasingly clear common analysis of the dangers of corporate-led globalisation, civil society is getting prepared to defend our local economics, our democratic systems and the common good.

N.B. This article is based on the report "MAI GALOMANIA" published in February, 1998 by Corporate Eurpore observatory (CEO), a research and campaign group based in Amsterdam.