Multilaterial Agreement on Investment (MAI)

US shies away from multilateral accord

By Nancy Dunne, in Financial Times
14 February 1998

The US will not endorse a draft multilateral investment agreement it proposed itself more than two years ago because it is "unbalanced" and prejudicial to US interests, the US Trade Representative said yesterday.

Charlene Barshefsky said at a news conference that the deal being negotiated by the 29 members of the Organisation for Economic Co-operation and Development would require "very substantial work to make it something the US will sign".

High-level officials are to meet next week in Paris to determine the future of the MAI, which will lay down binding rules for policies on direct investment. The proposed pact has generated opposition worldwide among environmentalists, labour unions and other citizen groups, who say it threatens national sovereignty.

If the US does not endorse the agreement by its April 28 deadline, other countries may continue the negotiations - with or without the Americans. The US refused to sign a multilateral financial services pact - although a partial deal was reached under EU sponsorship - until a much stronger deal was agreed last year.

The opposition in the US - mostly heard among Democrats - is particularly damaging at a time when President Bill Clinton has presented an agenda designed to attract support from his party. Democratic foes helped sink his bid for new "fast-track" trade negotiating authority last year, and the White House has hoped to unite Democrats going into the 1998 congressional elections.

The MAI talks have proved much more contentious than was expected when the effort was launched in 1995. Member countries are seeking broad exemptions from the accord, which in the US view, would defeat its original purpose.

The US has been particularly upset that France and Canada have clung to their cultural exemptions for media services, and it has opposed the EU push for exemptions for countries within its regional economic integration organisation.

Meanwhile, US industry groups which pushed for the pact originally have grown disillusioned.

"It's a disappointment that we've gotten to this stage," said Nancy McLernon, deputy director of the Organisation for International Investment. "At the beginning we had really high hopes. This was supposed to be a state-of-the-art agreement among industrialised countries that were like-minded. But there has been a lot of concern that it was going down the wrong path. If you have a great agreement but carve out half the stuff in it, the agreement isn't worth much any more."

US agencies have been split over the pact. The State Department reportedly has wanted to continue negotiations. The trade office, however, has warned that it did not contain enough to attract the support needed for the deal to win Senate approval as a treaty.

US trading partners have also been disappointed. It was hoped the deal would bring a commitment by the US to end imposition of sanctions. Such a provision would never win approval in a Congress which regards trade retaliation as an important foreign policy tool.

Negotiators had reportedly reached accord on environmental and labour clauses, which would require countries not to lower standards in order to attract investment. This would do little to satisfy the pact's opponents.