Red Pepper archive

The Multilateral Treaty on Investment

  • The deal's off

    - The Multilateral Agreement on Investment, which global companies hoped would give them free rein to ignore environmental and local interests, has been defeated by a coalition of organisations across the world. Ronnie Hall of Friends of the Earth reports

  • People and Planet First

    - Forming a coalition against the MAI was a great achievement. The challenge now is to formulate rules that protect everyone, says Jessica Woodroffe
  • Act now

    - What can be done

    The deal's off

    Although officials are loath to admit it, the Multilateral Agreement on Investments (MAI) is dead, and citizens around the world should be relieved - for the moment at least. However, we need to remain vigilant and to expect MAI-type policies to be promoted by transnational companies at every opportunity and in every possible forum.

    The MAI was dubbed a Charter for Corporations as it became apparent that it was designed to wrench open new markets, ride roughshod over host countries attempting to protect their economies and environments and give transnational companies legal standing in international courts (allowing them to sue national govenments). It also looked as if the MAI might become a 'gold seal' of approval for all foreign investment, creating intense pressure for weaker and resource-rich developing countries to sign up.

    The MAI also threatened to undermine international environmental law and initiatives designed to promote local economies and culture. It was negotiated in almost total secrecy. Could much more be wrong?

    A powerful world-wide anti-MAI coalition established itself with remarkable rapidity. Environmentalists, developmentalists, human rights campaigners, consumers' organisations, trades unions, churches, women's groups and local authorities all worked together (the Internet was crucial) to drive just one message home: that the MAI was unreformable and must be ditched. This strength of feeling and common purpose took the MAI's negotiators by surprise.

    There were, of course, differences of opinion amongst the negotiators, particularly over which domestic sectors each might exempt from the MAI. What was unusual was France's decision to listen to its citizens' concerns and to act on them. The French government commissioned the independent and damning Lalumi¶re report and acted on its conclusions by withdrawing from negotiations on the grounds of lost sovereignty. In the wake of that decision, other countries , including the UK, have indicated that they consider the talks to be over.

    Nevertheless, all involved, including the French, want to transfer talks to the World Trade Organisation (WTO). Given the prominent backing of powerful countries it is likely that MAI-type proposals will indeed be discussed in the WTO at the WTO's Working Group on Trade and Investment (reluctantly agreed by developing countries in 1996 in order to clinch the seven-year Uruguay Round trade deal).

    Rumours about what will emerge from these discussions range from the launch of new MAI-type negotiations to a two-year moratorium on further talks. Most likely is a six-month breathing space, which would allow talks to start up just at the same time as, and probably in conjunction with, a new millennium round of trade negotiations (which could be particularly difficult for developing countries seeking concessions in other sectors). Friends of the Earth is opposed to investment talks continuing in the WTO under any circumstances - it may be a more inclusive forum, but it's not known for supporting developing countries' concerns or for its commitment to labour or the environment.

    The US, still the most gung ho of them all, is also pursuing MAI-type liberalisation in the Free Trade Area of the Americas (FTAA), to the dismay of NGOs. The IMF recently tried to force similar liberalisation measures on its members by changing its Articles of Association (although this seems to have stalled for the moment). A rumour also persists that the European Union will insist on the inclusion of MAI-type clauses in a renegotiated Lome trade pact with previously dependent territories in Africa, the Caribbean and the Pacific (ACP countries).

    NGOs will be watching these and other forums, whilst working together to develop alternative economic systems and agreements that would protect the environment and promote stable, sustainable economies.


    People and Planet First

    Forming a coalition against the MAI was a great achievement. The challenge now is to formulate rules that protect everyone, says Jessica Woodroffe

    In announcing the withdrawal of the UK government's support for the Multilateral Agreement on Investment (MAI), Trade Minister Brian Wilson said: 'I think this is the opportunity to start with a blank piece of paper, to define our objectives afresh, and then seek to pursue them on an open and consensual basis.' His paper will need to be very big and very blank. It is not just an international agreement which needs redefining but a whole economic model.

    As governments prepare to revive the MAI within the World Trade Organisation, groups which have opposed it are working on alternatives. In such discussions we are not simply talking about an alternative to a badly-designed agreement. It is much easier to form a coalition against something than to agree on alternatives. But here are some basic elements that can probably be agreed:

    • That the aim is to promote the welfare of people and the planet.
    • That the free market fails to do this and international regulations on corporations are necessary.
    • That agreements which affect us all globally should be the subject of a global democratic process.

    Corporate activity and economic growth has become a goal in itself. Alternatives must start with the assumption that economic activity is the servant of the people, not vice versa. So, in looking specifically at foreign investment, most alternatives start with the premise that international agreements should bring corporate activity under the rule of law so that it meets communities' needs and priorities.

    Here we hit the first hurdle. Societies should define their needs and priorities themselves, yet such a messy and lengthy scenario could let corporations off the hook, making strong international enforcement difficult. For many, the UN Declaration of Human Rights has provided a way forward. In attempting to halt the worst offences of multinationals, many proposed alternatives have focused on the protection of basic rights.

    Opposition movements have called for a balancing of corporations' rights with those of individuals. Some proposals are modest, suggesting that protection of certain rights can take place within the existing framework. Labour and environmental clauses were proposed by trade unions and others.

    Most of the proposed alternatives to the MAI have taken it much further - calling for the protection of basic rights as a fundamental principle, and the UN Declaration has provided a powerful starting point in representing, as far as possible, the views of all countries on which rights should be protected.

    Both the Polaris Institute and World Development Movement (WDM) extrapolate from UN declarations and statements the rights which should be protected under corporate activity. The core International Labour Organisation (ILO) conventions, including the right to form trade unions, are particularly relevant. A set of internationally agreed basic principles are ready and waiting but it has been difficult to find effective ways of implementing them.

    Rooted firmly in existing agreements, the Citizens Public Trust Treaty calls on member states of the UN to act on those obligations which have already been agreed within the UN. They also call on member states to demand compensation from and, ultimately, revoke the licences of, corporations which violate basic human rights. The treaty is far reaching in scope but does not provide clear mechanisms for enforcement.

    It remains the duty of governments to protect the rights of their citizens but this is evidently not enough. It is increasingly difficult where the wealth of the major transnationals greatly exceeds that of many countries and where their operations transcend national boundaries. Most existing international agreements depend on governments to enforce rules on companies.

    Attempts to include 'social clauses', as in the WTO, have led to accusations of neo-protectionism. Moreover they are a blunt instrument - punishing a whole country for the misdemeanours of a single company, rather than tackling the company itself.

    Instead, WDM is proposing that we should develop a mechanism where companies themselves are responsible for meeting basic standards (based on core rights) and can be directly sanctioned if they transgress. The challenge is to develop a mechanism for doing this which does not undermine the role of nation states. One possible way forward is for governments to delegate to an international commission the ability to monitor the activities of corporations registered in their jurisdiction or operating on their soil.

    What emerges as a strong point of consensus among the various alternatives is that discussion of investment regulation is needed, and should not take place in either the OECD or the WTO. In a joint statement initiated by Third World Network, NGOs have made clear their opposition to discussion in the World Trade Organisation because it has not proved to be a democratic forum and because its mandate of liberalisation ensures that any agreement will be similar to the proposed MAI. It is significant, too, that most of the alternatives do recognise corporations' rights, for example the right to compensation if assets are expropriated. In the current situation, however, it is not the rights of corporations which need protecting.

    The focus on basic rights tends to be defensive: preventing corporations from doing harm. Few of the alternative proposals have grappled with the need to go further, to ensure that corporate activity makes a positive contribution. Not many countries can realistically survive without foreign investment. Even Cuba now actively encourages overseas investment in its tourist industry. The key is to ensure that foreign investment contributes to sustainable, equitable development.

    The Polaris Institute refers to the UN Charter on the Economic Rights and Duties of States (1974) which 'recognised among other things, the political sovereignty of nation states to protect the public interest by regulating foreign investment'. It granted member nations the authority to supervise the operations of transnational corporations in order to ensure that foreign investment served their economic, social and environmental priorities. This recognition, almost a quarter of a century ago, that corporations have some social obligations has since been lost. The choice is not human rights versus economic priorities, as many 'alternatives' suggest but about forms of economics.

    We need growth which provides jobs for those who need them and pays poor producers a decent price for their produce. It is growth which ensures that women as well as men receive income. It is also growth which provides sufficient income, through taxation, for the government to provide those social services which it can provide better than the market.

    None of this happens automatically. It requires governments to lay down certain rules or 'performance requirements' for corporations, to have economic strategies and to ensure that foreign investment fits within these frameworks. To this end, a more pragmatic assessment of the relative strengths of markets and states is long overdue.

    International investment agreements need to strengthen governments' ability to stand up to corporations. The real problem with the MAI was that it systematically dismantled the ability of governments to protect and promote the public interest in relation to corporations. Similarly, the continued repayment of Third World debts creates a need for foreign exchange which puts governments at the mercy of foreign investors, while IMF-designed structural adjustment programmes keep Third World countries in a liberalised straitjacket.

    There are other ways too of strengthening the hand of governments. Improved terms of trade for commodity exports would help. Of course there is no guarantee that governments will do the right thing. But it will be a tragedy if local social movements succeed in democratising their governments, only to find them constrained by international agreements.

    One major objection to the MAI was the secret negotiations which took place within the OECD rich men's club', which excludes third world governments. The United Nations has been proposed as an alternative, but it has to work with governments and depends on them to represent their citizens. Within states, citizens could clearly be more involved by feeding into the national process.

    There is a more difficult question as to whether and how groups from 'civil society' or social movements should be involved in international negotiations. This poses a dilemma. Clearly states are an imperfect way of mediating between and representing the various views in civil society. But bypassing them could mean a kind of anarchy where those with the loudest voices are heard - big business is, after all, a component of civil society too. Pressure group politics is no guarantee of democratic outcomes, as is evident in the USA. We could try to distinguish between 'civil society' and popular or democratic social movements, but again this could be a dangerous route - who is to play God?

    Consumers, investors and workers have all threatened corporate profit in different ways, with varying degrees of success. But they are no substitute for action by governments. We must ensure Brian Wilson's blank sheet of paper is full of good ideas before too long.

    Jessica Woodroffe is the World Development Movement's Head of Campaigns.

    Act now

    Write to Brian Wilson MP, Minister of Trade at the DTI, 1 Victoria Street, London SW1H OET supporting his call for a fresh agenda for international investment agreements, which take account of social and environmental concerns. Send a copy to Peter Mandelson, Trade and Industry Secretary at the same address. Get your union to join the MAI Coalition to contribute to strategies for counterpower to the multinationals.

    Background briefings on the MAI and an alternative framework are available from the World Development Movement, 25 Beehive Place, London SW9 7QR, 0171 737 6215, email campaigns@ Friends of the Earth, International Forum on Globalisation, and Third World Network are holding a working conference in December: 26 -28 Underwood St, London N1 7JQ, 0171 490 1555. Organisations can join the MAI coalition: call 0171 733 0481.