To the House of Commons Sub-committee on International Trade, Trade Disputes, and Investment Regarding the Multilateral Agreement on Investment

Submission by the Canadian Labour Congress, 6 November 1997

Executive Summary
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The CLC believes that the proposed Multilateral Agreement on Investment is based on a wrong premise. We indeed live in a world in which capital is highly mobile. The problem is not barriers to mobility, but rather the fact that capital has too much freedom to move and too great an ability to escape responsibilities to society. We believe that there should be international regulation of investment issues, but our starting point would be a very different one.

That said, we recognize that a process of negotiations has begun. Therefore, our brief raises grounds of concern regarding the MAI, and makes recommendations concerning the position that should be taken by the Canadian government on some key issues.

The Multilateral Agreement on Investment (MAI) marks another important stage in the progressive dismantling of the power of democratic governments to regulate the market in the interests of citizens, workers and communities. It takes us even farther down the course of extreme market liberalization set by the FTA and NAFTA.

In an astonishing and still undefined range of policy areas, the MAI would strike down policy levers which have been and remain of great importance to Canadians. It would give transnational corporations important new powers with which to challenge government policies.

Our experience with the FTA and NAFTA has taught us that agreements which are designed to secure and promote the interests of mobile capital do not promote the interests of workers and communities. Wages, working conditions and social standards have been subject to continual downward pressures.

The MAI is explicitly designed to promote still greater mobility of capital. Yet the evidence shows that there have been large net capital outflows from Canada in recent years, and disinvestment in many sectors and communities.

We reject the central assumption of the MAI - that what is good for mobile international capital is necessarily good for workers and communities.

We are greatly disturbed that the MAI negotiations have taken place until now in the absence of broad, democratic scrutiny, and in the absence of a meaningful public debate here in Canada over the implications of a very far-ranging agreement. The CLC sent a letter to all MPs requesting public hearings and we are pleased that this Committee has been established. However, a few days of Committee hearings here in Ottawa are simply not enough. The issues raised deserve serious examination and the Committee must set conditions on what the Canadian government should accept.

We are also concerned that the MAI negotiations are taking place almost exclusively among the advanced industrial countries which are capital exporters, and largely exclude developing countries which generally still seek to regulate foreign direct investment in the interests of national economic development.

The CLC appreciates that we live in an increasingly integrated international economy. We believe that international regulation of international investment would be a good idea. Indeed we have strongly supported positive action at the international level, such as a Tobin Tax to curb out of control international financial speculation.

The CLC, with the international labour movement, has pushed for international agreements which would establish a common floor of core workers' rights between countries, and secure a basis for strong environmental standards.

Unfortunately, the MAI is designed almost exclusively to tear down so-called "barriers" to the international mobility of capital, and is not concerned with building an international framework which would balance corporate and investor rights with appropriate obligations. In short, the MAI as it is currently conceived is fundamentally flawed and unbalanced.

Our brief raises concerns about the very broad definition of investment in the MAI, the still unknown implications of the agreement in many areas, the binding nature of the agreement if it were to be concluded, and the fact that the power of investors and corporations to directly challenge government policies would be greatly increased.

Our brief also speaks in detail to a number of specific concerns. The MAI challenges our ability as a country to maintain not for profit public and social services, particularly services delivered by the not for profit sector in areas of mixed public/private delivery.

The MAI threatens government measures to support Canadian culture.

The MAI undermines policies which are needed to ensure that foreign direc= t investment increases employment and economic activity here in Canada, and policies which help build our economy and create jobs by supporting Canadian based enterprises.

All of theses concerns must be addressed. We are unconvinced that proposed reservations will satisfy these concerns. Even reservations which are not negotiated away before an agreement is finalized will most likely freeze existing regulations, and will be subject to removal over time.

The brief also speaks to the need to incorporate strong enforceable provisions regarding labour rights and standards as well as environmental standards in any international investment agreement.

The CLC urges the committee to oppose a fundamentally flawed and unbalanced agreement, to thoroughly investigate the implications of the draft MAI for Canadians, to reject draft provisions in specific areas of concern, and to propose positive provisions.

I Introduction

The CLC requested that Parliamentary hearings be held into the MAI to allow Canadians to present their views and concerns before any agreement is concluded. We welcome the opportunity that has been provided to us. We also wish to acknowledge that the government has briefed CLC staff on two occasions, and has responded in a positive way to concerns which we, and others, have raised. The government has tabled some important reservations to the draft agreement, has indicated its opposition to some draft provisions which cause particularly great concern, and has indicated its support for labour standards provisions in the agreement.

All that said, the government is clearly committed to the conclusion of an agreement which we cannot support.

There are four major grounds for our opposition to the MAI.

1) The MAI establishes unnecessary and inappropriate barriers to achieving key social and economic objectives by ruling out various actions on the part of governments.

In an astonishing and still undefined range of policy areas, the MAI would strike down policy levers which have been and remain of great importance to Canadians. We are particularly concerned about the implications of the MAI for the future of not-for-profit and public services, for needed government measures to support Canadian culture, for policies which are needed to ensure that foreign direct investment increases employment and economic activity here in Canada, and for policies which help build our economy and create jobs by supporting Canadian based enterprises. These specific concerns are detailed below.

2) The MAI provides rights to investors and transnational corporations without providing appropriate counterbalances that would allow other parts of society to protect themselves against the decisions and actions of investors.

Even if the MAI includes the labour and environmental clauses that have been proposed, it will still have the effect of freeing highly mobile capital from national legal constraints. There may be some positive economic potential regarding this liberalization. But experience shows that it is too easy for "liberated" capital to pit governments and people against each other. The result of these efforts by capital is to undermine living standards and to destabilize communities at the national and local levels.

The position of the Trade Union Advisory Committee to the OECD (TUAC) on labour standards which we support is outlined below.

3) The MAI makes no positive contribution to the real concerns of working people in Canada: jobs, stagnating living standards, increasing inequality, and insecurity.

Participation in the MAI negotiations is premised on the view that Canadians would benefit from still greater inflows and outflows of investment capital. But the explosion of national and international investment flows in recent years demonstrates that existing "barriers" are not significant, and that there are costs as well as benefits from the perspective of workers and communities. The case for still greater openness, going even beyond NAFTA, is both dubious and unproven.

The table annexed to this brief demonstrates that in recent years there has been significantly more Canadian investment outside Canada than there has been foreign investment in Canada. The total net outflow of capital from Canada (foreign direct investment and investment in portfolio equity combined) was $10.9 billion in 1995 and $11.2 billion in 1996, equivalent to 14% of total business investment in the Canadian economy in each of those years. The situation is even worse than these figures suggest in that more than half of all foreign-direct investment in Canada in the past two years represented retained earnings of existing foreign-owned corporations, not new investment. By contrast, almost all Canadian foreign-direct investment represents new investments or acquisitions in other countries.

Some Canadian foreign-direct investment outside the country may support job creation in Canada to a limited extent, but foreign-direct investment and portfolio equity outflows in excess of inflows mean that Canadian capital is not being put to work creating jobs and raising living standards here at home. Put bluntly, it is clear why Canadian businesses, which are making large investments outside the country, support an MAI. It is much less clear why Canadian workers and communities should support an agreement which would, in all likelihood, accelerate capital outflows.

4) The MAI negotiations are taking place almost exclusively among the advanced industrial countries which are capital exporters, and largely exclude developing countries which generally still seek to regulate foreign-direct investment in the interests of national economic development.

The MAI is designed to establish new rights for transnational corporations vis-=E0-vis governments without reference to the needs of workers and citizens, particularly in the developing countries. Canadians should not support an agreement which is basically designed to do an "end run" around developing countries.

The MAI is being negotiated to remedy the supposed weaknesses of the World Trade Organization (WTO) agreement with respect to investment issues. The US and, more recently, other major industrial countries have, on behalf of "their" transnationals, long pushed for GATT/WTO rules to limit the ability of governments receiving foreign investment to impose performance requirements, such as achieving a certain level of domestic content or export sales. They have also pushed for an opening of closed or regulated national markets to foreign investment.

Some of these objectives have been achieved through the "structural reform" programs imposed on heavily indebted developing countries by the IMF and the World Bank.

The WTO does limit states' rights to regulate foreign investment in areas directly related to trade. However, in the view of transnational corporations and many governments, this leaves ample scope for restricting access to foreign investors and negotiation of a wide series of performance requirements. By contrast, many developing countries argue that successful development - as in South East Asia - has involved significant government regulation of foreign investment, and that these tools of policy must be retained. Opposition to a major investment round in the WTO is the reason why the MAI is now being negotiated among the major industrial countries.

For all of these reasons, the CLC is opposed to the conclusion of an MAI as it is presently conceived.

II Process and Outcome

It is imperative that the committee clearly identify the implications and ramifications of a complex legal document. While we and other organisations have done some preliminary analysis, we make no pretence that we have grasped the full implications of this agreement. At the same time, we know that once agreed to, its provisions would remain in force for twenty years, and that it would establish procedures which would make government policies subject to appeal by investors and corporations.

The basic intent of the MAI is to prohibit all "discrimination" against foreign investors through the key principle of national treatment, and to make government decisions to regulate or control foreign investment subject to appeals by foreign governments and foreign investors and companies. The key principle of National Treatment is the philosophical and legal touchstone of the MAI:

"Each Contracting Party shall accord to investors of another Contracting Party and to their investments treatment no less favourable than the treatment it accords (in like circumstances) to its own investors and their investments with respect to the establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment, and sale or disposition of investments."

The Most Favoured Nation (MFN) principle is also stated - meaning that all Contracting Parties shall be treated equally.

The following aspects of the MAI arouse general, far-reaching concern:

* The MAI is a "top down" agreement - everything is included unless explicitly excluded. This contrasts with the WTO which is a "bottom up" agreement. The nature of the agreement means that the guiding principle of "non discrimination" will apply and be binding except where there is express limitation.

This means that all government measures which "discriminate" against foreign corporations should be seen as vulnerable to challenge under the MAI.

* The key question of the application of the MAI to provincial governments is not yet resolved. The federal government has indicated that it wants the provinces to be covered in a "good" agreement, and that appropriate reservations for provincial policies would then be filed. But the implications of the agreement for a huge range of policies at the provincial level are largely unknown.

* Investment is defined very widely to cover every stage of the investment cycle - pre investment, operation and management, and repatriation of profits and dividends. An investment includes rights under contract, intellectual property rights, claims to money and performance, real estate, and government concessions and licences, including rights of access to natural resources and the right to contract to governments. Coverage of investment in its pre-establishment phase is far reaching, going beyond existing agreements such as NAFTA. This means that government policies and changes in policy could be challenged long before there has been any direct impact on a foreign investor or corporation. The government has indicated (letter to the CLC) that it shares the concern regarding the very broad definition of investment, but there has been no clear statement regarding the Canadian position on precisely which areas should be covered.

* Bracketed language would prohibit and make open to challenge "unreasonable" and "discriminatory" measures against foreign investors. This potentially threatens even regulations, policy changes, etc., which may not have an overt discriminatory intent - but simply reduce profitability, reduce the market, etc. Would restrictions on tobacco advertising, for example, be deemed to be "unreasonable" by a panel?

* A key intent of the MAI is to provide investors with a direct mechanism for seeking redress and compensation for violations of the agreement by governments. This element of the MAI builds on NAFTA, which opened up the normal state-to-state dispute resolution process to investors and corporations. The dispute settlement procedure will likely be available even before an investment is made, i.e. a company which wants to establish in Canada but is not allowed access will be allowed to challenge that decision. An investor can bring forward a dispute if there is an alleged breach "which causes loss or damage to the investor." Decisions can be made by domestic courts or by an international tribunal which can declare that a party was not complying with the agreement and can award pecuniary compensation or restitution.

The CLC recommends that the Committee pay close attention to the dispute resolution process under the MAI. Experience with international trade agreements suggests that the dispute resolution processes are sometimes ill suited to balancing trade issues with social and environmental concerns. Among the things that should be present in the dispute resolution process are: an open hearing process; recognition of interested parties other than governments and businesses; and, adjudication panels that are not limited to experts on trade and investment.

III Specific Concerns

The government has responded to many specific concerns by indicating that it is prepared to respond by seeking changes in the text, and by filing reservations. However, reservations are subject to negotiation, and a "wish list" at this point is far from a guarantee that a satisfactory final text will be concluded. Further, many reservations will likely be subject to "standstill" and "rollback". It is, therefore, imperative that this committee clearly spell out the grounds on which the MAI should be rejected by the government.

A. THE MAI AND GOVERNMENT POLICIES TO MAINTAIN AND CREATE CANADIAN JOBS

The CLC has a number of concerns regarding the potential impact of the MAI on current and possible future policies which regulate foreign investment so as to create and sustain Canadian jobs. The key concerns relate to our ability to review foreign investments to ensure that there are net employment and other benefits for Canadians, the ability of Canadian governments to extend financial support to Canadian-based business which create jobs, and our ability to regulate access to natural resources.

1. Negotiating Canadian Benefits From Foreign Investment Through Performance Requirements

New foreign direct investments and acquisitions may benefit Canadians or they may lead to a loss of jobs, productive capacity, and future productive potential in a particular sector. It is imperative that the federal government retain the right to review foreign-direct investment to ensure that it benefits Canadians, and to impose conditions where this is appropriate.

The MAI provides that, in connection with the establishment, acquisition, expansion, management, and operation of an investment, an investor (from a contracting or non contracting party) shall not be required to - export a given level or percentage of goods and services; achieve a given level of domestic content; relate levels of exports to imports; transfer technology or locate its headquarters in the country. The addition of services to prohibited performance requirements is an addition to NAFTA and WTO limits and the addition of technology transfer is an addition to WTO limits. Still bracketed clauses would further prohibit: achieving a given level of production, investment, sales, employment or research and development in its territory, hiring a given level of nationals, and achieving a minimum level of equity participation. The intent of the bracketed text is to move limits on performance requirements beyond trade-related areas, and to address all "distortions" created by government regulation of foreign investment. This goes beyond the principle of national treatment.

NAFTA maintained Canada's right to review foreign investments of more than $150 million (and all investments in the cultural sector), with such reviews not being subject to appeal by a potential investor or a foreign government, and allows Canada to turn down a foreign investment or takeover if there is no net benefit to Canada. The agreement also allows Canada to require a foreign investor to locate production, carry out R&D, to employ workers, and to construct or expand facilities in Canada. Canada has much broader rights in this area under the WTO.

Reservations to the MAI filed by Canada would retain some existing rights, but appear to weaken our ability to negotiate and enforce performance requirements for at least investors from non NAFTA countries, and with respect to the negotiation of Canadian equity participation.

Clearly, requiring that jobs be maintained or created in Canada in cases of foreign establishment or takeover is potentially challenged by the MAI. While noting that the government has filed MAI reservations to preserve some rights retained under NAFTA, we urge the Committee to recommend that the MAI should not dilute in any way the current provisions of the Investment Canada Act and should ensure that Canadian governments retain the right to negotiate employment and other benefits from foreign-direct investment.

2. Subsidies

The MAI would prohibit all "discrimination" in favour of Canadians and Canadian-based enterprises if governments extend subsidies for job creation, training, research and development, regional development, and so on. Some countries are pushing for the MAI to prohibit a requirement that companies receiving subsidies create or maintain jobs in return for government support.

Even NAFTA excluded subsidies from the principle of national treatment and preserved our right to make corporations maintain jobs, production and investment in research and development and training in return for government support.

The MAI would extend the principle of national treatment to government subsidies, i.e. governments could not "discriminate" against foreign-owned enterprises in providing financial support. We oppose this provision (though we note that it may well be appropriate to extend subsidies to foreign-owned enterprises in many commercial sectors). It appears that the extension of national treatment to subsidies has been accepted by the Canadian government, subject to a general exclusion for cultural industries. As noted below, it is also vital that governments should also retain the right to "discriminate" in the area of public and social services.

Some countries have pushed for stringent limits on subsidies in the MAI. It is, however, our understanding that the MAI will likely not prohibit non-trade-related performance requirements (construction or continued operation of facilities, training, employment, research and development in return for government support). The committee must ensure that this is the position taken by the Canadian government.

3. Canadian Jobs from Canadian Resources

The issue of access to resources is key for Canadians. Over many years, governments have regulated to ensure that Canadian enterprises have preferential access to some resources, and to ensure that more jobs are created in Canada through local content requirements and through further processing as opposed to the export of raw resources.

The principle of national treatment, combined with the inclusion of government regulations, licences, and concessions in the definition of investment under the MAI, means that transnational corporations could challenge as "discriminatory" any preferential access by Canadians to fishery, forest, energy, and other resources.

One area of concern is foreign access to the fishery and to Canadian commercial fishing licences. We note that a reservation has been filed, as under NAFTA, which may cover this issue in part.

NAFTA reserved petroleum and natural gas on federal lands for Canadian-owned companies, and reserved Canada's ability to require benefit plans (employment, domestic content) for developments on such lands. Hibernia and Nova Scotia offshore development benefits plans were specifically reserved. Again, reservations have been filed to respond to concern that the ability to negotiate benefit plans may be undercut, but their adequacy must be examined by the committee.

Most resource issues are under the jurisdiction of the provinces, whose inclusion in the MAI is still undetermined. Potentially, the MAI could challenge such key policies as timber resource processing requirements in BC, and controls on foreign ownership of land.

B. THE MAI AND PUBLIC AND SOCIAL SERVICES

The MAI has no general exclusion for public and social services, opening up the very real possibility that transnational corporations could claim that public delivery of a service, such as health care and government subsidies to not-for-profit providers, are "discriminatory" practices. These concerns are greatest when public services are not delivered directly by governments, but rather through the mix of public, private, and not-for-profit institutions which characterises much of the Canadian health and social services sector.

While the federal government has indicated that a country-specific reservation for social services delivered for a public purpose identical to that to be found in NAFTA will be made to the MAI, the NAFTA provision is itself weak and inadequate.

The MAI adds to these concerns in that it provides that governments cannot "discriminate" if subsidies are given, meaning that foreign corporations could claim the same treatment given to not-for-profit organizations. Further, the MAI has a very broad definition of investment which includes government concessions and licences. Government procurement may yet be part of the MAI. The defects of NAFTA and the additions of the MAI in combination pose a clear threat to the maintenance of not-for-profit public and social services.

Under NAFTA, there is a broad reservation for social services:

"Canada (the U.S., Mexico) reserves the right to adopt or maintain any measure with respect to the provision of public law enforcement and correctional services, and the following services to the extent that they are social services established or maintained for a public purpose: income security or insurance, social security or insurance, social welfare, public education, public training, health, and child care." The Government of Canada has filed a comparable reservation in the MAI.

Both in the debate over NAFTA and subsequently, fears have been expressed that NAFTA could lead to the undermining of Canada's system of public and mixed public/private delivery of health and social services. The context for that concern is the far greater extent of public and not-for-profit delivery of services - notably health care - in Canada compared to the U.S., and the fact that U.S. corporations delivering health and other social services have expressed interest in obtaining greater access to the Canadian market.

Canadian health services - physician and hospital care - are typically delivered by independent doctors and by non governmental (but not-for-profit) hospitals, with the costs being covered by public health insurance (largely funded through general taxes). In short, the system is publicly financed (by the federal and provincial governments) and regulated (by provincial governments), but is not delivered directly by governments. Many significant areas (dental care, drugs outside hospitals= ) are largely delivered outside the framework of publicly funded Medicare, and many elements of the health care delivery system are contracted out to private firms (e.g., diagnostic testing, some hospital operations). Large U.S. health care corporations such as insurance companies and health care management organizations have occasionally expressed interest in entering the market, but have been generally excluded to this point and are confined to selling supplementary health insurance and selling some specialized and non Medicare services to physicians, patients, and hospitals.

The pattern of mixed public/private delivery extends to social services such as elder care, child care, and home care. Often, government and public agencies contract for services from both commercial providers and not-for-profit agencies, and/or subsidize not-for-profit operations which compete with commercial providers.

The Government of Canada long maintained that the general exclusion in NAFTA (which covers future as well as current measures) was sufficient to protect Medicare and social services from challenge by U.S. corporations and investors who are either excluded from the Canadian market or are denied subsidies and support on the same basis as Canadian not-for-profit or commercial providers of services. The issue has not been tested by NAFTA dispute settlement panels. However, it did arise in the context of the required listing of non conforming provincial government measures.

Canadian provinces and U.S. states were given a grace period to reserve all existing non conforming measures under Annex I through a process of detailed enumeration and listing, a process that was ultimately intended to lead to the application of NAFTA investment disciplines to lower levels of government and to further negotiations to roll back non conforming measures. In the event, in April 1996, the NAFTA countries agreed to protect indefinitely from challenge all existing sub federal investment measures, meaning all non conforming measures in place as of January 1, 1994. This general reservation under Annex I does not cover future provincial initiatives in the social services area.

This outcome arose largely because of growing Canadian concerns regarding the lack of adequacy of the general Annex II exclusion for social services, expressed particularly forcefully by the Government of British Columbia and by public interest groups and unions. While the federal government initially argued that the general exclusion in Annex II made it unnecessary to list non conforming provincial measures in the social services and health area, critics argued that the general exclusion was vague, that it was interpreted differently by the U.S. government, and that it was vulnerable to challenge. Ultimately, the blanket exclusion of non-conforming provincial measures in Annex I reflected at least limited federal government acceptance of the case of the critics.

In the process of advising states on the listing of sub national reservations, the U.S. Trade Representative expressed the view that the general exemption covered only services delivered directly by governments, and not services characterized by a mixture of public, private, and not-for-profit delivery. It was stated in a letter to the State of Oregon that a reservation could not cover government services "if supplied by a private firm, on a profit or not-for-profit basis." An extended legal opinion prepared by Dr. Bryan Schwartz of the University of Manitoba for the Canadian Union of Public Employees and the Canadian Health Coalition argued that the social services exclusion is ambiguous and rife with grey areas. In a context of government withdrawal from direct funding of at least some services, deregulation, and partial privatization, he argued that it is far from clear what a NAFTA dispute panel would find to be "a social service delivered for a public purpose." While Schwartz thought the U.S. Trade Representative's view would likely be found extreme, he argued that the "for a public purpose" provision would be undercut by significant privatization, extra billing for services, and private delivery. He further argued that extending subsidies only to not-for-profit providers does not provide a shield from challenge. The key conclusions reached were that the vagueness of the general exclusion creates hazards, and that funding cuts and deregulation potentially undermine an exclusion on the basis of public purposes.

The reservation in NAFTA, which has also been made in the draft MAI, is not a good model because it is too vague and fails to take adequate account of the complexity of systems of delivery of public and social services.

The fact that the MAI extends the principle of national treatment to subsidies and has left the area of government procurement of services unresolved creates significant additional grounds for concern that it could be a lever for privatization and commercialization of public and not-for-profit services.

We strongly urge the committee to make a thorough study of this issue. In our view, the MAI should contain a crystal clear general exclusion for public and social services.

C. THE MAI AND CULTURE

The fundamental principle of national treatment in the MAI and the inclusion of subsidies would rule out as "discriminatory" most existing forms of government support for Canadian culture, including Canadian content provisions and support for Canadian-based cultural industries and artists. While the Canadian government has said that a general reservation will be negotiated, it is far from clear that this will be either possible or adequate.

The Committee should insist that culture be excluded from the agreement.

D. THE MAI AND PUBLIC ENTERPRISES

While the MAI does allow for public enterprises, bracketed text provides that "monopolies" should not be allowed to cross-subsidize so as to artificially support services which compete with other providers, and should act "solely in accordance with commercial considerations" in purchase or sale of monopoly good or service. This language would provide foreign companies greater leverage in trying to break into areas of the market which have traditionally been served by public enterprises.

The principles of National Treatment and Most Favoured Nation would explicitly apply to privatization and subsequent transactions involving privatized assets (i.e. share sales could not be restricted to nationals. Bracketed language would either prohibit special share holding arrangements such as "golden shares" or privatization via a sale to employees - or, alternatively, would explicitly allow governments to ensure some continuing control of privatized assets. This is still an actively contested issue.

NAFTA (Annex I) reserved the right of Canadian governments to prohibit or limit foreign purchases of shares when a public enterprise is privatized, and to require that the boards of directors and senior management of privatized companies be Canadian citizens. Limits on foreign ownership of Air Canada and Petro-Canada shares (25%) and other privatized Crown corporations were grandfathered. It appears that similar reservations have been filed for the MAI, though this would still limit options in the case of privatization.

The MAI should ensure that governments can determine the future ownership structure of privatized enterprises, and retain the right to bring such enterprises back under regulation or public ownership should circumstances change.

IV Labour and Environmental Rights and Standards

As noted above, the major thrust of the MAI is to prohibit or limit government regulation of foreign investment. The agreement as a whole is not intended to provide a basis for setting and enforcing standards in a world in which capital is highly mobile.

That said, the need for a "positive" dimension has been recognised to a very limited degree in the draft MAI. There is broad agreement that the preamble should speak to positive goals with respect to labour and environmental issues; that a clause should provide that health, safety, environment, and labour standards not be lowered in order to attract an investment, and that the OECD Guidelines for Multinational Enterprises should be associated with the MAI. However, there is no unanimity on these issues, and there is disagreement on whether a commitment not to lower standards should be enforceable or should simply lead to "consultations."

The position of the Trade Union Advisory Committee to the OECD and the CLC with respect to labour issues is as follows.

The preamble to the MAI - which is of some limited legal importance in terms of providing an interpretative context - should commit governments to protecting, enhancing, and enforcing basic workers' rights as defined in the core conventions of the International Labour Organization. Basic worker's rights include the right to free collective bargaining, freedom of association and non discrimination in employment. Such a declaration would commit governments to respecting a basic floor of internationally agreed labour rights.

It should be stressed that a commitment to respect workers' rights does not in any sense mean that wages or standards would or should be equalized between countries. Rather, countries should commit themselves to allowing free trade unions to exist and to collectively bargain with employers in order to negotiate wages and working conditions.

The preamble should also speak to the importance of the existing OECD Guidelines for Multinational Enterprises - a long-standing set of positive provisions relating to both the responsibilities of multinational corporations to respect labour rights and environmental standards, and compliance with government policies in areas such as taxation. The OECD Guidelines are a not legally binding but they are internationally agreed upon and periodically revised "code of conduct" for transnational corporations. As such, they have moral weight. Existing OECD procedures allow for complaints to be made to national governments regarding adherence to the standards, under the overall guidance of an OECD Committee which has regular input from employers and trade unions.

The text of the MAI should commit member countries to set up National Contact Points to implement the Guidelines. The role of such contact points is to promote the Guidelines and to receive and investigate complaints that the Guidelines may not have been observed. The incorporation of the Guidelines within the MAI would give them more prominence and more attention, and would very modestly bring some balance to a very unbalanced agreement. (It should be noted that a Canadian Contact Point does currently exist.)

The text of the MAI should also incorporate a clause which would prohibit governments from lowering domestic labour and environmental standards or violating internationally agreed, core labour rights in order to attract a foreign investment. This clause should cover health and safety and environmental standards, as well as domestic labour standards and core labour rights. It should provide that such standards should not be waived or derogated from in order to attract a foreign investment. The clause should be binding and subject to dispute settlement.

We urge the committee to recommend that the government of Canada support strong and binding language with respect to labour rights and standards and environmental standards.

V Conclusion

This brief has outlined the CLC's general and specific grounds of concern regarding the MAI. We believe that there is no need for this agreement, and that any future international agreement on investment issues should be much more balanced, and should be negotiated in a different forum.

The MAI would have very major, and still largely unknown, implications for future government policies. The agreement provides significant new rights for foreign investors and transnational corporations, including the right to directly challenge government policies before binding international tribunals. It is imperative that this committee commission research and solicit wide input to determine the impact of this agreement before any final text is concluded, and before it is too late to make substantial changes to the text.

It is also imperative that this committee clearly set out recommendations as to the negotiating position of the Canadian government. We urge the committee to press for preservation of current policies which are needed to support job creation, a clear exclusion for public and social services, and for strong environmental and labour rights and standards provisions.

This document is respectfully submitted on behalf of the Canadian Labour Congress:

Robert White, President.

Dick Martin, Secretary-Treasurer.

Nancy Riche, Executive Vice-President.

Jean-Claude Parrot, Executive Vice-President.

AJ:jc/nh:opeiu225 G:\USERS\SEPOLICY\AJ\BRIEFS\MAI98-4.WPD

Annex 1

FOREIGN INVESTMENT FLOWS ($ Billion)

TOTAL FOREIGN DIRECT INVESTMENT STOCK
AS A SHARE OF G.D.P.

Bob Olsen
Toronto
bobolsen@arcos.org