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Multilateral Misgivings - Globalization - Global Policy Forum Multilateral Misgivings
By Fred P. Gale
Alternatives
September 22, 1997Quiet, behind-the-scenes negotiations on the global rights of corporate investors are gradually being drawn into the glare of public debate. By the time delegates reach the November gathering of the Asia-Pacific Economic Cooperation (APEC), negotiators of the Multilateral Agreement on Investment (MAI) may face significant challenges from an unlikely combination of Third World leaders and advocates of social justice, environment and cultural protection. APEC takes place this year in Vancouver, where promoters and critics of globalization are expected to debate the speed, direction and character of MAI. While the conference is intended to focus mainly on removing trade barriers among APEC members, the liberalization of international investment relations will likely also be on delegates' minds.
Despite the misgivings of many Third World governments, wealthy nations - including Canada, the US and other members of the Organization for Economic Cooperation and Development (OECD) - are championing rules to ensure unrestricted foreign direct investment as the key to maintaining high rates of economic growth and "development". The proposed rules are to be set out in the MAI, which has been under negotiation behind the closed doors of OECD's Paris headquarters since May 1995. A leaked copy of a recent draft reveals that rapid progress has been made.(1)
Advocates of trade liberalization, including Canada's trade and investment policy elite, see the proposed agreement as a means of encouraging economic growth with benefits trickling down to everyone. Critics say it will give even more power to corporations and cut the capacity of governments and communities to protect their culture, resources and environment, or to advance the interests of labour, women, children and first nations. The MAI promises to streamline existing arrangements by eliminating the need to negotiate bilateral investment treaties. It aims to level the playing field by ensuring that states and regions with many multinational corporations (the United States, Japan and the European Union) are governed by the same rules as states with fewer such corporations (Canada, Australia and New Zealand). Boosters of the MAI argue that the agreement is a logical sequel to the successful Uruguay Round trade talks that established the World Trade Organization. Liberalizing multilateral investment rules will create greater economic efficiencies, they maintain, by ensuring that corporate investment decisions are not distorted by government protectionism and discrimination.
Critics, in contrast, see the agreement as a threat to many interests that governments have had a responsibility to serve and protect. Tony Clarke of the Polaris Institute argues that the MAI is tantamount to a "corporate rule treaty." In a paper for the Canadian Centre for Policy Alternatives, Clarke describes the MAI as a "bill of rights and freedoms for transnational corporations" designed "to establish a whole new set of global rules for investment that will grant transnational corporations the unrestricted 'right' and 'freedom' to buy, sell, and move their operations when and wherever they want around the world unfettered by government intervention or regulation."(2) Canadian activists fear that federal, provincial and municipal governments will no longer be able to determine local content regulations, set job creation targets, require research and development expenditures, or impose investment criteria for foreign multinationals. They also believe the MAI will give foreign investors, particularly from the US, another tool for gaining access to and control over Canada's cultural industries.
Canada's trade ministry is downplaying the MAI's importance(3) and some provincial leaders, including BC premier Glen Clark, believe that only the federal government will be bound by the agreement.(4) But the leaked draft says the agreement will apply "in the land, territory, internal waters, and the territorial sea of a contracting party"(5) and includes no specific exclusion of provinces, municipalities or other subnational levels of government. Furthermore, the proposed agreement adopts an all-encompassing definition of investment that covers every conceivable asset owned or controlled by a foreign investor. The list includes enterprises, shares, stocks, bonds, debentures, rights under contracts, intellectual property rights, and rights pursuant to law or contract such as concessions, licences, authorizations and permits.(6)
Critics worry that this broad definition of assets will further entrench the rights of foreign multinational corporations to exploit Canada's natural resources. The MAI's dispute resolution provisions do little to dispel this fear. The agreement would grant investors formal rights to sue governments over alleged breaches. For example, the MAI could bolster the claims of such companies as the US-based Ethyl Corporation, which is suing the federal government under NAFTA for banning the use of the gasoline additive MMT. Ethyl is seeking $ 251 million in compensation for losses on its investment.(7) There are similar concerns that foreign multinationals in Canada's forest products industry could be empowered to sue for damages resulting from raised stumpage fees or cancelled forest licences that allegedly deprived them of some of their assets.
The MAI is intended to be far-reaching in time as well as scope. Under the agreement, countries may only withdraw "after five years from the date on which this agreement has entered into force."(8) Even after withdrawal, however, the country would remain bound by the MAI for another 15 years for any investments made while the agreement was in force. Renato Ruggiero, executive director of the World Trade Organization, has claimed that MAI negotiators are "writing the constitution of a single global economy."(9) However, the negotiators of the OECD agreement represent only the trade interests of major developed nations. Third World countries have not been included. And because of the secrecy of the deliberations there has been no opportunity for scrutiny or participation by environmentalists, labour, women, first nations, and other groups.
This lack of participation may come to haunt the negotiators of the new "constitution". Reviewers of the draft MAI have noted that the document generally lacks provisions to safeguard ecosystems, uphold workers' rights, enhance community stability, or distinguish between beneficial and harmful forms of investment. As a result, a popular backlash is brewing in the signatory countries.(10) Delegates to the APEC Summit can expect to be challenged by environmentalists, economic nationalists, workers, women and community activists who feel their interests have been sacrificed to those of multinational corporations. The anti-MAI coalition might find some allies in the Third World. Malaysian prime minister Mahathir bin Mohammad, for example, has openly attacked the West's globalization strategy, arguing that it leaves Third World states "totally exposed and unable to protect themselves."(11) While Mahathir is certainly no environmentalist, he might lend support to an anti-MAI campaign. There have been stranger bedfellows in global politics.
Notes
1 DAFFE/MAI, Multilateral Agreement on Investment: Consolidated Texts and Commentary (Paris: Directorate for Financial, Fiscal and Enterprise Affairs, OECD, 9 January 1997). For background on the MAI, see the OECD, "Report by the Committee on International Investment and Multinational Enterprises and the Committee on Capital Movements and Invisible Transaction," Towards Multilateral Investment Rules (Paris: OECD, 1996), pp. 9-17; and William Witherell, "The OECD Multilateral Agreement on Investment," Transnational Corporations, 4:2 (August 1995).
2 Tony Clarke, The Corporate Rule Treaty: A Preliminary Analysis of the Multilateral Agreement on Investment (MAI) Which Seeks to Consolidate Global Corporate Rule (Ottawa, Ontario: Canadian Centre for Policy Alternatives, April 1997), p. 1.
3 John Schofield, "Trading Insults: Critics Assail a Proposed Treaty on Investment," Macleans (April 28, 1997).
4 Tom Barrett, "Proposed Global Investment Treaty Viewed as Threat to BC," Vancouver Sun (April 9, 1997).
5 MAI [note 1], p.10.
6 Ibid., p.7.
7 Michelle Sforza and Mark Vallianatos, "Ethyl Corporation v. Government of Canada: Chemical Firm Uses Trade Pact to Contest Environmental Law," Friends of the Earth-US (May 2, 1997).
8 MAI [note 1], p. 71.
9 Quoted in Schofield, "Trading Insults" [note 3].
10 Naomi Klein, "Global Failures in Need of Local Solutions," Toronto Star (April 21, 1997).
11 Quoted in Martin Khor, "Growing Consensus on Ills of Globalization" (Penang, Malaysia: The Third World Network, undated) www.idrc.org.sg/souths/twn/.
Fred Gale is a research associate with the Eco-Research Chair of Environmental Law and Policy, University of Victoria, British Columbia.
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