Date: Wed, 18 Feb 1998 12:17:51 +1100 (EST)
From: Matthew Townsend <email@example.com>
Subject: URGENTISH: Draft article for "The Australian" on MAI for criticism
Why we should be concerned about the Multilateral Agreement on Investment
By Matthew Townsend,
18 February 1998
The following is scheduled for publication in
the business section of The Australian tomorrow, 19th February, 1998.
It's similar in parts to The Age article, but there are additions that I am keen
for feedback on. If you can spot any errors or have any suggestions to make,
can you please email me asap so I can ring through the changes.
Many thanks again Mainotters.
Matthew Townsend, Equity Chambers, Melbourne.
While debate about Australia's symbolic sovereignty
has been occupying the headlines, debate over
Australia's actual sovereignty has been taking
place in the boardrooms of Paris.
The discussion centres around a treaty known
as the Multilateral Agreement on Investment (MAI)
being developed by the 29 nations of the Organisation
for Cooperation and Economic Development (OECD).
The Director General of the World Trade Organisation,
Renato Ruggerio, says that the OECD is doing
nothing less than "writing the constitution
of a single global economy."
The confidential negotiations have been underway since May 1995.
Attempts are being made to complete the negotiations by April.
Presently, under the MAI, signatory nations such
as Australia agree to:
1. Open all economic sectors, including real estate,
broadcasting, and natural resources to foreign ownership;
2. Treat foreign investors no less favourably than
domestic firms; and
3. Remove requirements that investors behave in a
certain way in exchange for market access, among other things.
Proponents of the treaty claim it will provide needed
protection for international investors, open new
markets and improve the efficiency of the global economy.
For example, the Assistant Treasurer Rod Kemp argues
"the MAI would provide investors with greater certainty
as to the 'rules of the game' when investing in foreign countries.
"Investment helps to stimulate the economy, bringing benefits
from the creation of jobs, higher incomes and new technology."
Opponents, however, say the agreement will accelerate
an industrial and environmental "race to the bottom"
as countries compete for increasingly mobile capital.
For example, an initiative which links fishing licences
or quotas to local job creation could be banned
under the MAI, as could a moratorium on the issuing
of tuna fishing licences to overseas companies.
Importantly, nations are permitted to make 'reservations'
to the agreement and the Australian Government
intends to use this procedure to exclude certain
laws from the treaty's operation.
Examples are believed to include those Acts that
protect majority Australian ownership of QANTAS,
Telstra and certain media.
However, parties will not be entitled to add
non-conforming measures once the agreement
has been signed and reservations should be
rolled back over time.
Backing out of the MAI will take time. The treaty
cannot be revoked for five years after
implementation and investments commenced under
the MAI would remain protected for a further fifteen years.
Australia's judicial system is also being bypassed.
Corporations challenging Australian laws under the
MAI would go before an international panel of industry
experts, not judges, who would interpret the treaty
and issue binding rulings. The parties have the right
to declare evidence confidential.
This mechanism is similar to that used under the
North American Free Trade Agreement (NAFTA)
in which corporations are permitted to sue
governments for the "expropriation" of property.
For example, Canada recently banned a
manganese-based petroleum additive MMT arguing
that it posed a health and environmental risk.
However, its manufacturer, Ethyl Corporation,
countered that because it was the only company manufacturing
and exporting MMT into Canada, the government
effectively expropriated the firm's business
without payment. It is now seeking $US251m in
compensation under the NAFTA rules.
Under such a system, even changes to town planning
controls could generate claims of expropriation.
A Canadian trade lawyer, Barry Appleton argues that
under the MAI if someone changes the zoning
in your neighbourhood "That would affect your ability
to sell your property for more money. If you're a Canadian
and the government does that, you can get nothing.
But if you're a foreign investor, you could be compensated."
Needless to say, concern is growing amongst
provincial legislators in Canada. Saskatchewan Premier Roy Romanow
has said "what is developing on the MAI is a set
of rules that will put Canada into a straight jacket...
We do not sign international agreements that
lower our standards ... and we will not exploit the poor."
Romanow is referring to the fact that the biggest
loser from the MAI will be the developing world.
Although the agreement is being drafted by the
members of the OECD, the intention is to extend
the MAI to developing nations.
As the United States Council of Business acknowledged
"[g]iven the current competition for capital,
accession to MAI, particularly for developing
countries, will serve as a 'seal of approval'."
Signing the agreement may become a
precondition to International Monetary Fund assistance
or for overseas aid.
Developing nations now fear the MAI will
become the new face of colonialism.
Perhaps the most concerning aspect of the treaty,
however, is the silence surrounding its negotiation.
Arguably, the Australian Government should distribute
the latest draft of the MAI and set out which
reservations it is seeking.
Better still, it should attempt to move the
negotiations to the UN where all nations can be
involved and where the principles agreed to at the
UN Conference on Environment and Development
can be integrated into the treaty.
Ultimately Senator Kemp may be correct that the MAI
will help grease the wheels of investment and
create wealth for some.
But whether it assists in the equitable and
sustainable distribution of the world's resources
is another matter entirely.
Matthew Townsend is a Melbourne barrister
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