Multilaterial Agreement on Investment (MAI)|
Date: Fri, 5 Dec 97 10:03:26 CST
From: Michael Eisenscher <email@example.com>
Subject: MAI a Boon to Big Business
Treaty would give big business more influence
By R.C. Longworth, the Chicago Tribune
4 December 1997
For the last two years, negotiators from the U.S.
and the other wealthy nations have been meeting in a basement
room in Paris, writing the next chapter in the rule book of the global
Virtually unknown to the public, the negotiators' work
is likely to become America's next great globalization battle by the
time it goes to the Senate for ratification.
Working in obscurity, the negotiators are framing a
treaty intended to liberalize investment by multinational corporations
around the globe. If completed by next April as scheduled, the treaty could
do for investment what years of world trade talks did to speed
the growth of commerce.
Foreign investment already is huge--$8.3 trillion
around the globe and growing by at least $350 billion a year.
Considering the money involved, any treaty that speeds
up this flow would be immensely important--especially to the U.S.,
which invests more abroad and gets more foreign investment than any
Its proponents and its opponents say an accord will
make investment faster and safer, mostly by forcing nations to treat
foreign corporations as favorably as their own. The goal is a code that
would protect the rights of corporations and other investors and make it
easier for them to move money and manufacturing from one country to
Opponents criticize the prospective pact as "a bill of
rights for multinational corporations" and warn that any accord
will override local laws protecting the environment and minorities, and
will keep national governments from shaping their own economies.
The treaty will be called the Multilateral Agreement on
Investment, or MAI. Coming after the successful General Agreement on
Tariffs and Trade (GATT) talks and the formation of the World Trade
Organization, it means that the major nations "are writing the
constitution of a single global economy," according to WTO Secretary
General Renato Ruggerio.
The investment agreement is being negotiated by the U.S. and the other
28 wealthy nations belonging to the Paris-based Organization for
Economic Cooperation and Development.
These nations assume that many, if not all, developing
nations will join it later, because much of the Third World relies on
foreign investment for economic development and this investment goes where it
"These are the most comprehensive and complex negotiations on
investment that have ever taken place," said William Witherell, the head
of the MAI secretariat at the OECD, where the talks are being held.
But the talks have received virtually no public attention or political
debate. Only in Canada, where it has become a political issue, has it
attracted any attention.
This obscurity seems deliberate.
Clinton administration officials will talk about the negotiations if asked,
but have done nothing to promote public interest.
Government sources say the administration, bruised by battles over the
North American Free Trade Agreement, fast-track and
other trade issues, is not anxious to stir up more debate about the
Any Multilateral Agreement on Investment treaty will include these
- "National treatment," which means governments must treat all
investors--foreign or local--the same. A country that wanted to give its
own companies a break, for example, on access to government
contracts could not do so. Nor could it limit what foreigners could own,
nor forbid their access to federal irrigation water or to government-
sponsored research and development programs.
- Most-favored-nation treatment. Any favorable treatment given to
investors from one foreign country has to be given to all foreign
- No performance requirements. Countries couldn't insist that foreign
investors export a certain percentage of their output or hire only local
managers or use only local suppliers.
- No uncompensated expropriation. If a country seizes a foreign
company's property, it must compensate it promptly and in full.
- No limit on capital movements. A foreign investor could ship its
profits home, without having to reinvest them locally, and could move
its stock and money from country to country without impediments.
- Dispute settlement. All disputes would bypass national courts and go
before special tribunals. More controversial, not only could nations sue
nations but corporations could sue nations. A foreign investor upset by,
say, an environmental law in an American state could take the case
directly to the tribunal, avoiding U.S. courts.
Investment already ranks with trade as one of the engines of the global
economy, and it is growing even faster than trade. In recent years, as
the global economy has grown by 3 percent to 4 percent a year, trade
has grown by 6 to 8 percent and foreign investment has grown by more
than 10 percent.
"The multinational corporations are really happy with the developments
in the world of the past 20 years," said Scott Nova, director of the
Preamble Center, a small Washington think tank opposed to the
accord. "They want MAI to lock these developments into place."
The U.S. government originally wanted the new investment rules to be
negotiated within the World Trade Organization. But Third World
nations, fearing the power of the big corporations, refused, so the
negotiations were moved to the OECD.
Since mid-1995, negotiators from the 29 nations have been meeting for
one week a month in Room Two, a basement conference room at the
OECD headquarters in Paris' elegant 16th District.
The negotiators hope to have a treaty ready for the annual OECD
ministerial meeting in May. It would then have to be ratified by the
Senate--no foregone conclusion, considering that President Clinton
withdrew his request for fast-track authority for trade talks in the face
of certain defeat in the House of Representatives.
For the most part, U.S. corporations already face minimal problems in
investing in Europe, Japan and the other OECD nations. The accord
would lock in these good relations.
The real prize would be similar liberal rules governing investment in
China, India, Southeast Asia and other developing areas. MAI,
although negotiated within the rich nations' club at OECD, would be
open to any other nation. Given the intense competition among them for
Western investment, most Third World countries would be under great
pressure to join.
Opponents of the treaty say it could block any government attempt to
help local businesses, could undercut local environmental laws or could
overrule set-aside policies aimed at giving preference to minority
businesses. Its backers pooh-pooh these fears.
U.S. officials say any environmental law will be permitted, so long as it
treats all investors the same. In addition, they say, any MAI treaty will
be loaded with exceptions, as the 29 nations make existing laws exempt
from the treaty's rules.
Thus, they say, any existing set-aside law giving preference to a
minority-owned firm will be "grandfathered."
Opponents remain suspicious.
"If MAI is subject to a give-and-take negotiation with other countries,
then we obviously want them to change some of their laws to benefit us,
and it stands to reason that we're going to have to change some of our
own laws," Nova said. "We can ask for any exemptions that we want,
but unless other nations agree, it's no go."
Other opponents have noted that, while existing laws will be protected,
the treaty could prevent states or cities from passing future laws that
benefit local businesses, including those owned by minorities or women.
China gets more foreign investment than any other nation except the
U.S. But its insistence that almost all foreign investors export their
output, instead of selling it locally in competition with Chinese
companies, means Beijing probably won't fit into MAI soon.
About 1,600 bilateral investment treaties exist between the nations of
the world, but most of these provide for fair treatment for foreign
investors after they have invested.
This treaty would be different. It would set rules on the investment itself,
giving foreigners more right to invest and reducing the power of
governments to guide their own economies or favor local businesses.
Two major barriers to agreement are cultural activities and the U.S.
Led by France and Canada, several countries want to exempt
culture--movies, TV, video, books, magazines and the like--from MAI,
to protect them from American media giants and to shelter their national
culture. The U.S. opposes this exemption.
Helms-Burton lets U.S. claimants sue non-American investors who
bought Cuban property that had been confiscated by the Castro
government. In this way, the law tries to control investment not only
within the U.S. but abroad, and is hotly opposed by Canada and the