History of the Multilaterial Agreement on Investments (MAI)|
Date: Mon, 28 Apr 1997 12:22:44 -0700
Sender: Forum on Labor in the Global Economy <LABOR-L@YORKU.CA>
From: D Shniad <shniad@SFU.CA>
Subject: More on MAI
Critics say a proposed treaty could give too much power to
multinationals, whose revenues can exceed those of some nations.
Fears of the Supranational
By Paula L. Green, in Journal of Commerce,
Wednesday, April 23, 1997
Corporate economic tentacles will creep a bit further around the globe
with an investment treaty now before the Organization for Economic
Cooperation and Development in Paris.
Critics already upset with the growing influence of multinationals are afraid
that the Multilateral Agreement on Investments -- a full-blown international
treaty facing approval by each signatory's parliament -- will simply hand
corporations more power if it is signed. Officials from the 29 OECD
countries are meeting this week in Paris to talk about the pact -- aimed at
providing a level playing field for international investors by mandating
national treatment. That means foreign investors will have the same breaks
as domestic companies, even in such traditionally sensitive sectors as
mining, fisheries and agriculture.
"I think it's overwhelmingly negative and gives corporations more power,"
said Mark Weisbort, research director at the Preamble Center for Public
Policy, a Washington think tank. "It takes economic decision- making from
elected officials and parliaments and gives it to unaccountable, unelected,
supranational institutions." After nearly two years of negotiations, the pact
is set for completion within the next year. Several developing nations,
including Argentina, Brazil, Chile, Singapore and Taiwan are reportedly
interested in signing.
Critics say the agreement goes beyond the investment treaty approved as
part of the General Agreement on Tariffs and Trade, known as Trims, or
Trade-Related Investment Measures. It could even hurt developing
countries' ability to control the activity of foreign investors and their impact
on land, water and air use, they add.
"We're concerned about its deregulation aspects on the environment . . . and
there's no balance in it. Corporate rights are not balanced with corporate
responsibility," said Charles Arden-Clarke, a senior policy analyst at the
Worldwide Fund for Nature in Gland, Switzerland.
But Robert Z. Lawrence, a professor at the Kennedy School of Government
at Harvard University, believes the globalization of corporations has
provided substantial social benefits and given countries more options.
"The idea that bigger and bigger companies is a bad idea is false. Countries
have grown tremendously by attracting foreign investment," Mr. Lawrence
said. "And as global markets become more competitive, it tilts the balance
in favor of the country." Corporate critics have long charged that
multinationals take advantage of globalization to get around national tax,
environmental and operating rules. The proliferation of trade pacts and a
worldwide economic shift toward more open markets from Moscow to
Mozambique has also given multinationals more leverage against the nation
At the Institute for Policy Studies, which last year released a study called
"The Top 200: The Rise of Global Corporate Power," analysts view the
OECD pact as a mechanism to give corporations more power.
"It's a scary development . . . it lifts control on corporations without giving
any more power to the people," said Sarah Anderson, a fellow at the
Washington-based institute who worked on the study. "Trade barriers have
been lifted with trade pacts and this lifts investment barriers. It takes away
regulations that have been developed over the decades to protect
governments and citizens."
The institute study, completed last fall, shows that 51 of the 100 largest
economies in the world are corporations. The study uses 1995 statistics to
compare a company's annual sales with a nation's gross domestic product.
The output of General Motors Corp. is bigger than Denmark's economy, for
example. And the annual sales of Wal-Mart Inc. exceed the gross domestic
products of 158 nations, including Israel, Poland or Greece.
Media blitz misleading
Ms. Anderson says multinationals are already creating worldwide webs of
production, consumption and finance while bringing economic benefits to
only a third of the planet's 5.6 billion people. And the corporate media blitz
about the benefits of globalization are misleading, she claims.
Corporations, for example, always tout the number of jobs they are able to
provide as trade barriers fall and investment regulations ease. This
liberalization has allowed them to tap into new markets from Mexico to
Yet the largest 200 corporations only provide 18.8 million jobs -- less than
three-quarters of 1% of the world's work force of 2.6 billion, Ms. Anderson
"These big companies can afford to invest in technology and robots that
replace workers," Ms. Anderson said. "With Nafta, a lot of the small
Mexican companies have been wiped out by large companies."
Nafta is the North American Free Trade Agreement signed by Mexico, the
United States and Canada.
Analysts also point to a shift in the mind-set of many developing countries.
Twenty years ago, foreign investors were often viewed with suspicion.
Now, many Third World countries from China to Bolivia are competing
fiercely for multilateral investment. This places more power in the board
room, some fear.
But Mr. Lawrence sees the shift toward competition for foreign dollars as
positive. In the days of closed markets and state-owned monopolies,
countries and their consumers had far fewer choices and often were the
victims of their domestic companies.
"If you only have one company making aircraft, who has the power?
Boeing or China?" he asked. "But if you have Boeing and Airbus, you can
play off one against the other. China has the power."
Meanwhile, the spread and speed of cross-border dealings is leaving a
widening gap between the economic and political arenas. From his vantage
in the ivory tower of the Brookings Institution in Washington, analyst
Wolfgang H. Reinicke sees a world in which government policy-makers
can't keep pace.
"There's integration on the economic side, but multiple political arenas.
That's creating a sense of fragmentation," Mr. Reinicke said.
As bureaucrats struggle to oversee the changes in the global financial and
investment markets, multinationals face a messy web of clashing
regulations on everything from taxes to labor to legal topics.
For James Mogle, a partner at Coopers and Lybrand LLP in Washington,
that messy web of laws means seven-day work weeks and headaches as he
tries to keep government tax collectors out of his clients' hair. Corporations
doing business in dozens of nations face a tax nightmare.
"With the amount of crossborder trade skyrocketing, it's become a major
issue," said Mr. Mogul, refering to the sticky topic of transfer pricing.
Transfer pricing is the price a company puts on goods and services it sells
to sister operations in other countries. The issue has always been sensitive
as governments have long regarded prices charged by a parent company to a
subsidiary, or the reverse, as a way to shift profits to countries with lower
Now, many tax officials are getting tougher on requiring companies to
document their transfer pricing policies and prove they are consistent with
the rates charged for similar services or goods by unrelated firms.
The whole process has only gotten more complicated with globalization as
multinationals import components from one country, assemble them in
another and then ship them to yet a third. And the fact that many
developing nations are still sorting out their tax laws and laying down rules
to deal with the influx of new investment makes it even tougher for
"It's easy to adopt rules. It's difficult to apply them," said Mr. Mogle, who is
an attorney and accountant. "And all the governments are trying to raise