Making profit the worlds highest
law
By JOE TAGLIERI Special to
the National Catholic Reporter
A new global treaty would virtually
eliminate governments ability to regulate banking, currency speculation
and transnational corporate activity, according to critics who claim to have
slowed its progress.
Despite the treatys potentially sweeping impact, the
negotiations have drawn little public interest in the United States.
Negotiators from the 29-member nations of the Organization for
Economic Cooperation and Development failed to complete an acceptable draft of
the Multilateral Agreement on Investment -- called MAI -- on April 27. Further
talks are scheduled for October. The Organization for Economic Cooperation and
Development was established in 1960 by the United States, Canada and Europe as
a successor organization to the Organization for European Economic Development,
which oversaw the distribution of mostly American capital to rebuild the
war-torn economies of post-World War II Europe.
Governments would lose virtually all effective
authority to buffer citizens from the worst excesses of transnational corporate
behavior, such as ecological damage, the devastation of local industries and
poor wages and working conditions.
The organizations primary function is the promotion of
open-market economics around the world.
An international coalition of grassroots political organizations
sees the Multilateral Agreement on Investment as the final stage in erecting
the legal scaffolding to support economic globalization, capping off a process
that began with past multilateral trade agreements, such as the General
Agreement on Tariffs and Trade and the North American Free Trade Agreement.
Under the new treaty, opponents contend in a joint statement
signed by 600 organizations, governments would lose virtually all effective
authority to buffer citizens from the worst excesses of transnational corporate
behavior, such as ecological damage, the devastation of local industries and
poor wages and working conditions.
With the MAI, foreign corporations and
investors get all the rights, and governments get all the obligations. Im
not exaggerating, it is singularly lopsided.
International arbitration tribunals could force governments to
fork over billions of taxpayers dollars should their governments attempt
to buck the laissez-faire tide, argues Lori Wallach, director of
Washington-based Public Citizens Global Trade Watch and a trade
lawyer.
Like any other treaty [the MAI] sets up rights and
obligations. Now in a normal treaty, rights and obligations are shared, you
take one, you have to take the other, Wallach said. But with the
MAI, foreign corporations and investors get all the rights, and governments get
all the obligations. Im not exaggerating, it is singularly
lopsided.
Proponents, however, see the proposed treaty as the
constitution for a single global economy, interlinked and nourished by
unrestrained international flow of capital, according to World Trade
Organization director general Renato Ruggerio.
In a Financial Times of London piece titled The Case
for MAI, Donald Johnston, secretary general of the Organization for
Economic Cooperation and Development, wrote, For years, international
investment has made an important contribution to economic growth. Multinational
investment is the lifeblood of global commerce.
The new treaty makes unrestricted capital
investment the federal law of any nation that signs
on.
As Johnston noted in the article, the core of the MAI is its
nondiscrimination provision, which grants transnational
corporations the same rights to do business in a given country as that
nations domestic businesses.
Though Johnston conceded this is obviously already happening, as
nations must compete to provide hospitable markets for both domestic as well as
increasingly foreign investors, the new treaty makes unrestricted capital
investment the federal law of any nation that signs on.
According to critics, the nondiscrimination provision is the most
alarming element of the Multilateral Agreement on Investment. It would give
foreign investors broad rights of redress against governments they feel have
discriminated against them by favoring domestic competitors with subsidies and
other incentives.
The MAI is a takers agreement, not an
investors agreement.
For instance, said Margrete Strand, treaty project coordinator for
Public Citizens Global Trade Watch, even local zoning laws meant to
protect the environment could be challenged for violating the treaty. In
California there are laws that protect the coastal areas by requiring new
developments near sensitive habitat areas be designed to avoid adverse impacts.
Important as these laws may be to the environment, they may reduce the value of
the land, and corporations can therefore challenge such laws under the national
treatment, expropriation or performance requirement provisions of the
MAI, she said.
Maude Barlow, chair of the Council of Canadians, a public interest
group opposed to the treaty, said The MAI is a takers agreement,
not an investors agreement. What it takes away are the powers of
democratically elected governments to protect and promote the public interest.
From the start, this deal has employed the wrong set of principles and values.
Its time for an alternative.
If the new treaty has not been able to cut through the
Clinton-Lewinsky dominated news agendas in the United States, it has become a
familiar headline in Canada. Barlows 100,000-member organization has
promoted public awareness throughout Canada and has pressured government
negotiators.
Groups around the world have followed Barlows approach, an
effort Wallach called an example of brilliant organizing. In Canada
they have more or less armed struggle over the MAI in the streets.
A book on the MAI coauthored by Barlow, that is being released in the United
States, is on the bestseller list in Canada, said Wallach. Their 60
minutes news program has done two one-hour exposés on the MAI.
Thats the level we need to bring it to.
Treaty advocate Johnston dismisses the gloomy scenario, saying the
treaty will establish a wider framework of international investment
rules providing predictable and transparent laws and regulations.
Such a hands-off policy would lead to greater investment flows, lower
risk premiums and higher returns to investors.
Ensure open markets
Johnston explained the treatys aim is to ensure open
markets and a sound legal environment based on the principle of
nondiscrimination between domestic and foreign investors. Equally important,
the MAI will provide an enforceable mechanism for settling disputes between
states and between investors and states.
At the moment, wrote Johnston, rules of
investment are set by a complex network of bilateral and regional
treaties. These treaties lack many of the disciplines contained in
the MAI, [and] their coverage is far from complete, especially among the
[Organization for Economic Cooperation and Development] countries.
Testifying before the House Subcommittee on International Economic
Policy and Trade in March, Alan P. Larson, U.S. State Department Assistant
Secretary and vice-chairman of the group of MAI negotiators, said, The
main features of the MAI are expected to include nondiscrimination
against foreign investors across the board.
Under the treaty, the United States, for instance, would have the
freedom to make any investment-related transfers, such as profits,
capital, royalties and fees, whether into or out of the country where the
investment takes place and would also have access to international
arbitration for disputes between countries or between individual
investors.
International investment is not the
lifeblood of global commerce, as Donald Johnston puts
it.
Johnston acknowledged that the present trend in most countries is
toward greater economic liberalization, But that does not mean there is
no point in global rules. The Asian crisis has brutally reminded us that we
cannot afford to assume favorable conditions will continue indefinitely.
David Andrus, University of Southern California professor of international
relations, disagrees with Johnstons positive interpretation. Andrus
claims the MAI treaty will have a negative impact on the global economy, as
liberalized investment has facilitated economic crises like the ongoing Asian
collapse and the 1995 Mexican peso crisis.
International investment is not the lifeblood of
global commerce, as Donald Johnston puts it, said Andrus.
Ninety-some percent of it is speculative portfolio investment, which
doesnt create jobs and promote real economic growth and development.
Speculative investment is not real investment, its purely gambling,
he said.
A nation that signs onto the treaty is bound to the agreement for
at least five years. Further, the treaty states the provisions of this
agreement shall continue to apply for a period of 15 years from the date of
notification of withdrawal to an investment existing at that date.
A countrys policies must also remain true to the treaty for
a minimum of 20 years.
The most recent draft text of the treaty states, A lost
opportunity to profit from a planned investment is the type of loss sufficient
to give an investor standing. Critics say taxpayers could end up
compensating a corporation for an investment that was never actually made, if
an international tribunal finds a government guilty of imposing trade barriers
or restricting investment.
Wallach of Ralph Naders Public Citizen said the framework of
legal rules established under the treaty is inherently biased toward investors.
The investor gets to decide if, where and when this treaty is going to be
enforced, she said. Investors get to pick where the suit will go --
they can set up a tribunal internationally off a roster of investment experts.
They can go into domestic courts without the regular standing requirements. Or
they can take it to the [global investment advocate] International Chamber of
Commerce in Paris for nice fair adjudication.
Treaty rules are paramount
Regardless of the forum hearing a dispute, When the ruling
comes down, it can be enforced in U.S. courts to actually get the payment out
of the government, said Wallach. Under the treaty, governments
waive all federal court protections, due process, sovereign
immunity, and subject themselves without condition to submission of
any disputes brought by an investor under [the MAIs] rules. Rules
cover municipal and state policies and courts as well, according to the
agreements draft text.
To date, the negotiations have escaped public scrutiny in the
United States largely because of scant attention from the mainstream media and
politicians. Most people have never heard of the MAI treaty. Very little has
been written in the mainstream media in the United States.
While financial publications, such as Business Week, The
Economist, and Financial Times, have reported substantially on the
treaty negotiations, discussion of the treaty has yet to become a significant
public debate in the United States and many other nations.
The American people and members of Congress
know to oppose it, so this stealth strategy to keep the MAI secret is their
best shot at getting it approved.
Critics say that if the treaty were given a lot of media attention
it would face even fiercer popular and political opposition, significantly
hindering its chance of ratification when it comes before Congress and other
nations legislatures for approval.
The negotiators and the Clinton administration are silent
about the MAI because thats their best strategy. The American people and
members of Congress know to oppose it, so this stealth strategy to keep the MAI
secret is their best shot at getting it approved, said Chantell Taylor,
MAI project coordinator for Public Citizens Global Trade Watch. The watch
group hopes to neutralize the strategy by revealing it.
A team of government agencies has been involved in the
negotiations since late 1995. The major participants from the Executive Branch
include the Office of the United States Trade Representative headed by Charlene
Barchefsky, Department of State, Treasury Department, Department of Justice and
Commerce Department.
Despite what the critics say to the contrary, [U.S.
negotiators] have been reaching out for over a year to labor and to a wide
range of environmental groups to ensure that anything that goes into the MAI
promotes best labor standards and does nothing to encourage an erosion of
environmental standards, said a State Department spokesman close to the
negotiations speaking on the condition of anonymity.
There is a lot of bad, incorrect information out there about
a secret agreement and a grand corporate conspiracy, and all this kind of
fringe talk that displays a woeful ignorance about whats actually in the
agreement. This agreement, thats alleged to be secret, is also on the
[Organization for Economic Cooperation and Developments] Web page.
Thats not very secret.
Activists first received a draft of the treaty in 1996 and
promptly posted it on the Internet. The treaty proposal is, indeed, now a part
of the MAI section of the OECDs Web site,
http://www.oecd.org/daf/investment/index.htm Information about the
agreement, both supportive and critical, can be found online at the Web sites
of critics and government negotiators.
The State Department source called the break in talks a
summer recess so negotiators could go to their home countries and
talk to labor and environment constituencies. Obviously there are a lot
of people who are concerned about the agreement, who have issues they want to
present.
The treatys Country Specific Exceptions section
indicates negotiators have qualms about specific details in the treatys
current draft that will conflict with existing policies or special
concerns.
But while head Donald Johnston told the Associated Press in April
that he is sure these small, parochial issues will be able to be worked
out, the treatys future seems uncertain given the noncommittal
nature of international politics and growing pressure on negotiators from
public interest and labor groups.
Just what will be on the table when the talks continue is
definitely open to speculation. U.S. negotiators dont want to
negotiate in the press, offering little on the record, according to a
spokeswoman for the U.S. trade representative.
National Catholic Reporter, October 9,
1998
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