By Aziz Choudry
Since 1995, OECD governments have been negotiating a Multilateral Agreement on Investment (MAI). Following the leak of a draft copy in January, people worldwide are appalled at the vastly expanded freedoms for investors being proposed, and the speed and secrecy of negotiations.
The MAI is a binding international agreement which would remove nearly all restrictions on foreign investment. Critics call it a charter of rights and freedoms for transnational corporations and a "quantum expansion of corporate power" beyond NAFTA and GATT. But OECD governments remain tight-lipped about the MAI and their negotiating positions, let alone the implications for ordinary citizens.
Once concluded among the 29 OECD nations — the rich countries' club — other countries will be invited to sign, and the role of maintaining and enforcing the agreement is expected to be transferred to the World Trade Organisation. Subtle coercion, the fear of being "left out" and the likelihood that accession to the MAI will become a condition of receiving loans from international financial institutions are likely to pressure developing nations into signing.
MAI's stated goal is "to ensure a high minimum standard of treatment for foreign investors and their investments". There is nothing to prevent foreign investors and investments being treated better than local investors.
Most countries involved in the negotiations agree that the MAI should apply to all levels of government, and as currently drafted it does. State and local governments would be automatically bound once the federal government has signed.
Once signed, the MAI would lock present and future governments in to commitments for 20 years. It is a "top down" agreement; everything is covered unless it is expressly reserved.
Governments must lodge a list of specific reservations setting out areas where its policies do not conform to MAI requirements. These are subject to "standstill and roll back" provisions; no new restrictions can be added by future governments and current reservations are expected to be eliminated over time. This means locking in an open investment regime which cannot be changed even if voters at federal, state or local level vote for some controls on foreign investment. With this in mind, it is ironic to note the Howard government's recent shift in policy, announcing a freeze in motor vehicle tariff cuts, while at the same time it engages in MAI negotiations in Paris.
As drafted, the agreement could prevent governments from limiting what foreign investors can own (whether strategic assets or rural land) or from imposing performance requirements (such as a set amount of local content, the hiring of local managers or staff, or sharing technological know-how). It would facilitate easier access for investors to be able to move assets — financial instruments or production facilities — across borders, regardless of social and environmental considerations. It would guarantee the free transfer of all payments relating to an investment in and out of a country.
Privatised public assets have been a major target of foreign (often transnational) investors in New Zealand and elsewhere. As drafted, the MAI contains several definitions of privatisation. Some apply only to assets and enterprises. Others apply to all government functions, including contracting out of policy and service delivery. A government is not required to privatise, but the agreement applies to any asset it sells. Australia has suggested a US$50-100 million limit below which privatisation transactions would be exempted from MAI obligations.
Investors can challenge and even sue governments if they believe they have been disadvantaged in actual or planned investments. For example, they could challenge environmental protection laws or laws which support local businesses and develop economically deprived areas. Investors could seek to enforce the MAI in local courts and could sue a government before an international tribunal with the power to make legally binding rulings. Governments can also enforce the agreement against other signatory governments.
The original completion date for negotiations was May. However, due to some points of disagreement between contracting parties, formal acceptance of the MAI has been delayed, possibly until next May. OECD officials say that 90% of the text has been completed, but the MAI's exact provisions are not yet known.
The absence of any regulatory framework within the MAI is frightening. It does nothing to protect workers, indigenous peoples, consumers, small businesses or the environment. While investors demand "stable, transparent economic policies", ordinary people are excluded from having any say.
While conferring extensive rights on investors, it imposes no corresponding responsibilities. Nor would governments be able to adopt investment boycotts against companies (of the kind used against companies active in apartheid South Africa) because of their activities in another signatory country.
Meanwhile, criticism is growing of the lack of parliamentary scrutiny and public participation in negotiating such international agreements. A Senate report has proposed that Australia's parliament be consulted before any treaty is ratified. A similar proposal is before New Zealand's Standing Orders Committee for consideration. And in April, an MP in the British Colombia parliament moved a motion calling on the Canadian government to withdraw from further MAI negotiations pending full public consultation.
At stake is the fundamental right of people to determine our own futures: the right to set limits on the level and type of investment in the interest of social and environmental outcomes.
Governments are becoming increasingly subordinated to the role of filing clerks for transnational capital as investors demand the inalienable right to decide for themselves when, where and how to set up, expand or close their operations in a host country, backed up by legally enforceable rules. We urgently need a full, open and democratic debate about the implications of the MAI.
[Aziz Choudry is spokesperson for Aotearoa/New Zealand fair trade coalition GATT Watchdog. For more information on the MAI, contact GATT Watchdog at PO Box 1905, Christchurch, Aotearoa/New Zealand. E-mail: