Le Monde diplomatique on Tue, 24 Feb 1998 11:27:08 +0100 (MET)

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<nettime> Lori Wallach: A dangerous new manifesto for global capitalism


                    LE MONDE DIPLOMATIQUE - February 1998
               A dangerous new manifesto for global capitalism
  The Multilateral Agreement on Investment (MAI) would grant imprescriptible
  rights to multinational corporations at the expense of national governments,
  which would be forced to defend their laws in court and pay compensation.
  Late in the day, the public and their representatives may be beginning to
  wake up to the dangers of the proposed treaty. Those negotiating it in the
  Organization for Economic Cooperation and Development, have kept very quiet,
  and earlier experiences of the World Trade Organization do not augur well. 
     Imagine an international commercial treaty empowering corporations
     and investors to sue governments directly for cash compensation, in
     retaliation for almost any government policy or action that
     undermines profits. This is not the plot of a science fiction novel
     of future corporate totalitarian rule. It is just one provision of
     a largely unknown international commercial treaty just about to be
     signed, called the Multilateral Agreement on Investment (MAI). The
     director-general of the World Trade Organization, Renato Ruggerio,
     has described the MAI quite honestly, saying: "We are writing the
     constitution for a single global economy."
     Few people even know that the MAI has been under negotiation since
     1995 at the Organization for Economic Cooperation and Development
     in Paris. The goal of the MAI is to apply the extreme deregulatory
     agenda of the WTO to the few vital economic sectors not already
     covered by its rules. This would include: where and under what
     terms investment in manufacturing and services could be done, trade
     in currency and other financial instruments such as stocks and
     bonds, and ownership of land and natural resources.
     While massive shifts in the global capital flows have reshaped our
     world in the past decades, investment issues have attracted far
     less public, press and policy attention than trade flows. Yet many
     multinational corporations, including major financial interests,
     have focused on investment issues. They have quietly, but
     aggressively, pursued global investment rules to suit their narrow
     interests and assure the consolidation and increase of their hold
     over governments.
     Around the world, legislators, scholars, citizens and activists
     have been largely unaware of the negotiations, much less the
     170-page text that the OECD reports is 90% complete. Indeed, it was
     only in the context of a recent citizens' victory in the United
     States against the so-called fast track trade authority (1) in
     April 1997 that Congress became aware of the MAI negotiations with
     the US State and Treasury Departments which have been going on for
     three years.
     This wall of silence is not unique to the United States. In France,
     the chairman of the National Assembly's Foreign Affairs Committee,
     Jack Lang, the person most directly involved, admitted in December
     1997 that "we do not know who is negotiating what in the name of
     whom (2)". US government officials denied the existence of an MAI
     text until an embarrassing day in late January 1997, when a
     coalition of international citizens' groups managed to get hold of
     a copy of the text. To the US State Department's chagrin, the text
     is now posted in full on the Internet (3).
     A review of the text shows that, like most international treaties,
     the MAI establishes a series of rights and responsibilities. But,
     unlike other treaties, the rights granted in the treaty go only to
     foreign investors and corporations, while the responsibilities go
     just to governments. Additionally, in contrast to all existing
     treaties, once governments enter into the MAI, they are irrevocably
     bound to its terms for 20 years. More precisely, if they do not
     express their wish to remain a party to the treaty within the first
     five years, they are committed for the remaining 15 years.
     The core chapter of the MAI is actually entitled "Investor Rights".
     These include the absolute right to establish an investment (this
     includes purchase of land, natural resources, telecommunications
     and other services, and currency) under the deregulated terms set
     forth in the treaty. Governments are charged with the obligation to
     ensure "effective enjoyment" of such investments. To guarantee
     this, the MAI contains broad provisions providing that foreign
     investors and corporations will be compensated for any actions a
     government takes that undermine their ability to profit from their
     investment. Especially when these actions have the "equivalent
     effect" of even an "indirect expropriation". What this means is
     that a "lost opportunity to profit from a planned investment would
     be a type of loss sufficient to give an investor standing".
     The "expropriation and compensation" rules are the MAI's most
     dangerous provisions. They arm every foreign investor or
     corporation with the power to challenge nearly any government
     action or policy - from taxes to take care of environmental issues
     and labour rules to consumer protection - as a potential threat to
     their profits. As governments all over the world are cutting
     welfare programmes supporting poor families, how can they
     contemplate approving a new global corporate welfare programme?
     Take the case of Ethyl Corporation. This US-based company is using
     the much more limited North American Free Trade Agreement (NAFTA)
     expropriation provisions to sue the federal government of Canada
     for US$251m. In April 1997 the Canadian government banned a
     particular gasoline additive called MMT - a suspected neurotoxin
     that damages pollution systems in automobiles. Ethyl is the world's
     only manufacturer of MMT, which is banned in some US states. The US
     Trade Representative's office refused to pursue the case, through
     the governmental dispute resolution system of NAFTA. So Ethyl filed
     its own suit against the Canadian government claiming that the very
     act of the Canadian parliament debating an MMT ban constituted an
     expropriation of the company's assets.
     Unbelievably, the case is proceeding towards a ruling. If Ethyl
     wins, the taxpayers of Canada will owe the private corporation US
     $251m. Such a mechanism within MAI would have the power to paralyse
     government action to protect the environment, conserve natural
     resources, ensure fair treatment and safe conditions for workers,
     or shape investment to suit community interests.
     Another investor right that could trigger an expropriation action
     is "protection from strife". Under this provision, governments are
     liable to investors if there is "civil disturbance" - to say
     nothing of "revolution, states of emergency or any other similar
     events". This means that governments owe an obligation to foreign
     investors to ensure there is no "strife" that could undermine their
     profitability, such as protests, boycotts and labour strikes. This
     is likely to encourage governments, under cover of MAI rules, to
     restrict social freedoms.
     Meanwhile, MAI does not include an attendant set of obligations or
     accountability for investor conduct. Governments would be
     prohibited from treating foreign investors differently from
     domestic investors. Whatever your opinion of the concept that
     foreign and domestic investors must always been treated the same,
     the MAI goes one step further. Under the MAI, it is the impact of a
     policy - not its intent or a law's textual meaning - that is
     considered. Thus, apparently neutral laws that can be shown to have
     an unintended discriminatory impact on foreign capital would be
     forbidden. This means that neutral laws, placing limits on the
     expansion of extractive industries, such as mining or forestry,
     would be vulnerable on the grounds that, in effect, they
     discriminate against foreign investors trying to gain new access to
     resources, relative to domestic investors who already have access.
     Similarly, policies benefiting small business throughout the world,
     or preferential treatment aimed at fostering development of certain
     categories of investors or investments, such as the European
     Union's programme promoting development in economically-stressed
     regions, can come under attack if a disparate impact can be shown.
     There is the same risk for land redistribution programmes in
     developing countries. Under NAFTA, on which the MAI is modelled,
     Mexico was required to change the land reform provisions of its
     national constitution. These reforms, created after the Mexican
     revolution, were eliminated to allow US and Canadian investors to
     buy up large tracts of land. In four years of NAFTA, this change
     has resulted in massive dislocation of peasant farmers as
     agribusiness companies have accumulated large plantations.
     The "national treatment" rules also cover privatisation. Thus, if
     the French government decides to sell off the water utility,
     bidders worldwide must be given the same access as French
     investors, including for instance any local,
     democratically-controlled cooperative. Ready to call Tokyo when
     your water is cut off? How about privatisation of educational
     services and health care?
     The MAI also includes a broad ban on "performance requirements."
     These are measures many countries use to shape investment to
     benefit public interests. This clause could result in many
     environmental laws and standards being challenged. In particular,
     the MAI could threaten the unique laws of many US states that are
     designed to protect natural resources, for example, the requirement
     that glass or plastic containers are made from a minimum percentage
     of recycled content and the preferential purchasing of materials
     made with recycled content.
     The treaty's ban on performance requirements could especially
     threaten national laws in developing countries that are designed to
     strengthen domestic economic growth. For example, laws requiring
     foreign investors to form partnerships with local firms. The MAI
     also would apply the principle of "Most Favoured Nation" treatment
     to investment rules, requiring equal treatment among all foreign
     investors and target countries. This would prevent governments from
     distinguishing between foreign investors or foreign investment
     targets based on countries' human rights, labour or other records.
     It would also eliminate the sorts of preferential treatment the EU
     now grants its former colonies in Africa, the Pacific and the
     Caribbean through the Lome Convention. If the MAI had been law in
     the 1980s, Nelson Mandela might still be in jail! This is because
     the MAI would require the revocation of investment boycotts or
     restrictions - like those in force against South Africa during the
     days of apartheid - except those defensible under a narrow
     "essential security" exception.
     The MAI stands to transform governance around the world by
     literally replacing many roles now performed by governments with
     direct corporate rule. Included is the enforcement of international
     treaties. The MAI would thus confer on private investors and
     corporations the same rights and legal standing as national
     governments to enforce its terms. In particular, the right to take
     governments to court, when they choose and at the tribunals of
     their choice. Including the arbitrage panel of the International
     Chamber of Commerce! Before such inherently biased arbiters,
     investors are granted the power to claim compensation because they
     have not obtained all the benefits promised under the treaty.
     How are governments to be brought before such 'courts' or made to
     pay up? The MAI text includes a provision that binds governments to
     "unconditional consent to the submission of a dispute to
     international arbitration". Only investors and corporations, not
     citizens or communities, have such private rights of action. The
     MAI also provides for state-to-state dispute resolution through
     international tribunals modelled on the WTO - with no conflict of
     interest or transparency rules, due process guarantees or other
     basic judicial safeguards.
     Government and industry supporters of MAI have resorted to broad
     generalities: "Don't worry", they argue, "there's nothing new in
     this treaty. It's just about 'rationalising' existing investment
     practices". Yet, the MAI, like a political Dracula, simply cannot
     survive sunlight. The sudden revelation of the MAI text in Canada
     ignited political turmoil greater than that of the decade-old fight
     against free trade with the US. New Zealand's parliament exploded
     into fury against the government when word leaked out. In the US,
     the MAI was attacked on the floor of Congress.
     Ironically, the constituency that should be most up in arms, the
     world's labour movements, which are represented at the heart of the
     OECD, have simply called for a "social charter" to be added to the
     treaty, rather than its underlying rules to be replaced. This
     position is dismissed by environmental, human rights and consumer
     experts - and now a growing number of US unions - who consider the
     suggestion to be like putting icing on a cake laced with
     Not that government or industry representatives have any intention
     of putting binding environmental, labour or human rights provisions
     into the MAI. Their latest tactic is to promise to accept numerous
     exceptions and reservations to the treaty - which shows precisely
     how much of our existing domestic law and policy the MAI is putting
     at risk. It is as if our governments are promising to wrap our
     valuables in paper as they add more fuel to the fire consuming our
     homes" The governments of Canada and France are now publicly
     committed to ensuring broad MAI exceptions for culture, while, in
     the United States, negotiators have their strict marching orders
     from Hollywood to use the MAI to pry open this sector.
     However, years of experience with the GATT, and now WTO, as well as
     other international commercial agreements, has shown that even the
     so-called full "carve out" exceptions often prove meaningless. Just
     ask the banana growers in the Caribbean who were savaged in a
     US-initiated WTO challenge of European banana trade policy. (The EU
     had a full reservation in the WTO for the Lome Convention which
     sets banana trade terms). Like the WTO, at the MAI there would be
     no outside appeals when such exceptions are simply disregarded.
     We should be questioning further investment deregulation and
     government disempowerment given the results of the present model of
     globalisation are proving so unacceptable. Already, any nation
     wanting to respond to public demands to address economic and social
     problems must do so in the context of worldwide financial
     instablility, speculation and massive international investment
     flows. No-one wants this situation to continue. Except for the few
     who would have an interest in seeing it escalate.
     * Lori Wallach is director of the Global Trade Watch division of
     Ralph Nader's consumer group, Public Citizen.
     (1) A special presidential power to circumvent Congress in trade
     negotiations which are then not subject to amendment, but have to
     be ratified or thrown out. President Clinton has not used this
     prerogative in negotiating an Americas' free-trade zone.
     (2) At the conference on Globalisation and Democracy: the dangers
     of the Multilateral Agreement on Investment, organised by
     Observatoire de la mondialisation (globalisation watch) at the
     Assemblee Nationale, Paris, 4 December 1997.
     (3) Thanks to the Ralph Nader-founded consumer group, Public
     Citizen: at www.citizen.org.
                                                Original text in English 


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