In popular mythology, economic globalization is a natural phenomenon, like continental drift: impossible to resist or control. In reality, globalization is being shaped and advanced by carefully planned legal and institutional changes embodied in a series of international agreements. Pacts like the General Agreement on Tariffs and Trade (GATT) and the North American Free Trade Agreement (NAFTA) promote the unregulated flow of money and goods across borders and strip elected governments of their regulatory authority, shifting power to unaccountable institutions like the World Trade Organization (WTO).
Virtually unreported, the latest and potentially most dangerous of these agreements is now under negotiation at the Organization for Economic Cooperation and Development (OECD). The purpose of the Multilateral Agreement on Investment (MAI), as the proposed pact is known, is to grant transnational investors the unrestricted "right" to buy, sell, and move businesses and other assets wherever they want, whenever they want. To achieve this goal, the MAI would ban a wide range of regulatory laws now in force around the globe and preempt future efforts to hold transnational corporations and investors accountable to the public. The agreement's backers (the United States and the European Union) intend to seek assent from the 29 industrial countries that comprise the OECD and then push the new accord on the developing world.
Negotiations are already at an advanced stage. Yet few Americans have even heard of the agreement. Trade officials are treating MAI information like nuclear secrets; the mainstream media is oblivious. Whether the MAI is adopted, and if so, just how far its deregulatory tentacles will extend, depends on whether opponents can force the proposal from its present obscurity into the light of public debate.
As proposed, the MAI would force countries to treat foreign investors as favorably as domestic companies; laws violating this principle would be prohibited. Under these conditions, transnational corporations would find it easier and more profitable to move investments, including production facilities, to low-wage countries. At the same time, these countries would be denied the tools necessary to wrest benefits from such investment--like laws mandating the employment of local managers. Efforts to promote local development by earmarking subsidies for home-grown businesses and limiting foreign ownership of local resources would also be barred. If adopted, the MAI will mean foreclosure of Third World development strategies, increased job flight from industrial nations, and new pressures on countries, rich and poor, to compete for increasingly mobile investment capital by lowering environmental and labor standards. A key MAI provision could also threaten corporate accountability laws championed by progressives in the US. The MAI takes aim at statutes in any nation that link subsidies, tax breaks, and other public benefits, to corporate behavior. This ban could be used to challenge a host of local, state, and federal measures, including laws requiring subsidized firms to meet job-creation goals, community reinvestment rules that require banks to invest in underserved areas, and the "living wage" laws that are the focus of activist campaigns across the country.
Perhaps most disturbing, the MAI would preempt strategies for restricting corporate flight to low-wage areas--a major cause of job loss and income stagnation in the industrialized world. On top of the damage done by plant closings and layoffs, corporations use the threat of flight to undermine the bargaining power of unions and scare policymakers away from the tough regulation and strong public investment necessary to raise living standards. Though remote from today's policy agenda, rules limiting the capacity of corporations to flee are essential to restoring the ability of government and labor to deal with corporations on a level playing field. The MAI would bar such rules in any country that is a party to the agreement.
In its scope and enforcement mechanisms, the MAI represents a dangerous leap over past international agreements. It grants any corporation with a regulatory gripe the right to sue a city, state, or national government before an international tribunal--with a binding outcome. Governments would enjoy no reciprocal right to sue corporations on the public's behalf. And the MAI ignores most of the exceptions in previous agreements allowing governments leeway in critical areas like public health and resource conservation. The full extent of the drafters' ambitions is reflected in WTO Director General Renato Ruggerio's recent characterization of the MAI negotiations: "We are writing the constitution of a single global economy...."
If the MAI is a "constitution," its bill of rights is for investors only. The agreement contains no standards to protect workers or consumers or to shield small businesses from anticompetitive practices by transnationals. The Clinton Administration backs the MAI for the same reason it supported NAFTA: the view that increased international commerce is inherently beneficial and that whatever's good for corporations is good for the nation. Negotiators originally planned to have completed the agreement by May, to present it to OECD countries for approval as a treaty; it has now been delayed at least until fall.
Organizations like Citizens' Trade Campaign, Global Trade Watch, and the AFL-CIO have made major strides educating Congress and the public on trade and investment issues. If unions, consumer groups, environmentalists, state and local officials, and small businesses build on this work and make their voices heard, it is not too late to modify or even derail the agreement.
The outcome is critical not just because of the destructive provisions of the MAI itself, but because it is the next battleground in an intensifying campaign to institutionalize corporate dominance. While pundits rhapsodize about the triumph of unrestrained capitalism, corporate leaders know that social democratic politics may yet make a comeback. And they aspire to tie the hands of future policymakers by using their present political clout to inscribe deregulation indelibly in international law. Frances Fukuyama may be satisfied that the current winning streak of market ideology heralds the "end of history." The corporations, however, want to put it in writing.
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