cj#779> Guardian Weekly (David Rowan) on MAI


Richard Moore

~=-=-=-=-=-=-=-=~=-=-=-=-forwarded under fair use-=-=~=-=-=-=-=-=-=-=-=~

The Guardian Weekly Volume 158 Issue 8 for week ending February 22
1998, Page 14.

     ** All material copyright 1998 Guardian Publications Ltd **

Finance / Meet the new world government

        Multinationals will be able to take governments to court under
        a new agreement to be finalised this week. What happened to
        democracy, asks David Rowan

YOU may not have heard of a new international accord called the
Multilateral Agreement on Investment. There's no reason why you
should have: the MAI has been debated over the past three years in
extraordinary secrecy, and none of the parties to it has been keen to
publicise the process.

But if you have ever reflected on the growing power of the trans-
national corporations, and feared that at some stage national
governments might be forced to bow to their chief executives'
demands, you ought to inform yourself that the moment has arrived: we
are about to cede to international investors some of our more
fundamental democratic rights.

Representatives from the world's 29 richest countries gathered in
Paris last weekend to put the final touches to an agreement that will
give multinationals power to sue national governments for any profits
lost through laws which discriminate against them. It will put at
risk international UN treaties on climate change and over-fishing,
and will threaten workplace and environmental legislation we have
elected politicians to enact. More crucially, it will acknowledge for
the first time that corporate capital now has more authority and
freedom to act than mere national and local governments.

The MAI is a comprehensive accord being finalised by the Organisation
for Economic Co-operation and Development (OECD) designed to give
international investors a "level playing field". It amounts to a new
set of investment rules that would grant corporations the right to
buy, sell and move their operations wherever they wish around the
world, without government regulation. This new investor freedom, the
OECD says, will give a new impetus to growth, employment and higher
living standards.

The agreement, being prepared for signature by OECD ministers in
April, is a logical extension of existing international trade
treaties such as the General Agreement on Tariffs and Trade (Gatt)
and the North American Free Trade Agreement (Nafta). But more than
those, it seeks to create a world where capital can move entirely
free of restriction. As Renato Ruggerio, director-general of the
World Trade Organisation, put it: "We are writing the constitution of
a single global economy."

The trouble, according to the increasing numbers of groups
campaigning against the accord, is that this constitution's bill of
rights extends only as far as the investors. It was initiated by
business organisations -- 477 of the Fortune Global 500 companies are
based in OECD countries -- in order to make international investment
easier. More than 85 per cent of the world's foreign direct
investment (known as FDI) flows out from OECD nations, increasingly
to developing countries. And the amount is rising rapidly (see panel,
below): as business grows more global, FDI is growing faster than
trade flows.Currently, investors are concerned that they cannot
compete on equal terms with nationals of a host country. So the MAI
was designed according to three key principles: non-discrimination
(foreign investors cannot be treated worse than domestic companies);
no entry restrictions (signatories cannot refuse any form of foreign
investment, including the purchase of privatised companies,!

 in any sector apart from defence); and an absence of special
conditions (such as to ensure local employment or control currency
speculation). "Investment" is defined broadly, to extend to
intellectual property, real estate and shares. Once a country signs,
it cannot withdraw for five years and will be bound by the agreement
for 15 years.In the case of any breach, a multinational can take the
offending national or local government to an international tribunal.
There it can sue for past and potential future damages.

Non-governmental organisations -- and so far more than 600 from 67
countries have united to oppose it -- warn that the MAI will make
your vote irrelevant. They talk of "supercitizens", corporations
freed from the normal citizens' obligations to the environment or to

They point to an early concrete example of the anti-democratic legal
actions likely to result. Last April, the Canadian government banned
a petrol additive called MMT, which Canada considers to be a
dangerous toxin. The additive's sole manufacturer in Canada is Ethyl
Corporation, which responded by filing a $251 million lawsuit against
the government to cover losses resulting from the "expropriation" of
its MMT production plant and its "good reputation". The case, brought
under clauses in Nafta, is still in progress, but even now it is not
an isolated one. Two Mexican local authorities are also being sued
under Nafta clauses by United States companies prevented from
establishing toxic-waste dumps in their jurisdictions.

Signatories to the MAI will also face such actions, held in special
international courts, should corporate lawyers identify breaches.
"The MAI creates a precedent that elevates the rights of companies
over the democratic rights of citizens," according to the World
Development Movement. The group is warning that UK local authorities,
for instance, would be prevented from campaigning against South
African wine, as many did during the anti-apartheid boycotts of the
1980s. The South African vintners would simply sue for compensation.
Those local battles to stop McDonald's opening a branch -- such as is
currently happening in Bermuda -- would stand no chance.

 And what of a national government that decided to prevent an
international press baron from pricing his newspapers below cost?
Rupert Murdoch's lawyers may well claim that such a strategy sought
to discriminate against the multinational News Corporation.

 Even the OECD's own guide to the MAI admits that, "as with all
binding international agreements, this will moderate the exercise of
national authority to some degree".

Then there are the environmental implications. MAI would, according
to Friends of the Earth, let companies oppose the Kyoto agreement,
under which industrial countries gave developing countries "climate-
friendly" technology in return for pollution rights: for such rights
would be an anti-competitive subsidy. Similarly, the MAI could
challenge the UN Convention on Biological Diversity, designed to
protect developing countries' genetic resources, as foreign
multinationals demand equal access to such resources.

The greatest concern comes from those who represent developing
countries. They will be invited to sign the agreement when completed,
but without having influenced its content. And they will find it hard
to resist signing if they want the investment that many consider
vital: of the $112 billion invested in developing countries in 1995,
more than 80 per cent ended up in just 12 countries. The 48 least
developed (with 10 per cent of world population) attracted just 0.5
per cent of global investment. Yet being "in" will open them up as
unlimited new markets for cigarette companies, infant-formula
marketers, and those seeking to exploit forests and minerals.

There are, however, indications that the growing opposition to the
MAI may be strong enough to postpone its signing. NGOs have made the
issue a priority: according to Nick Mabey, economic policy officer
for World Wildlife Fund, "this is bigger now than global warming.
Type in 'MAI' on the Web, and you'll get more than 1,000 sites --
virtually none in favour, apart from the OECD sites."

There are also increasing concerns among the signatories themselves.
The US, in particular, has sought many exemptions to protect federal
and state governments. Organised labour, too, is concerned that the
agreement will override workers' rights. French film-makers and
musicians protested this week amid fears that France and the European
Union would have to offer the same creative subsidies to Hollywood
under the deal.

Herman van Karnebeek, deputy chairman of the Dutch chemicals group
Akzo Nobel, who heads the OECD business and industry advisory
committee, said last month: "We now hear of disturbing signs that
many of the elements we were hoping for may not be possible. What
then, is in the MAI for us?"

The NGOs believe they can now exploit the growing divisions. "There's
a lot of tension in every European government between the environment
and development people and the trade people," says Mabey. He believes
concerned citizens should lobby their governments to urge a delay in
negotiations. "The decision to rush it through was taken in 1995, but
most of those [Tory] ministers are not around now, so there's no
political faith to be lost in delaying."

Many nations have laws which will run into direct conflict with the
MAI's requirements. As drafted, the agreement will override the
following states' laws:

Requires foreign investors taking a substantial stake in an existing
Australian business worth AU$5 million, or establishing a new one
worth A$10 million, to submit to a screening based upon a "national
interest" test.

Forbids foreign investment in "highly polluting industries".

Some states restrict non-residents' use of public land for grazing
and for mineral, oil and gas extraction.

Bars foreign ownership of development-banking institutions and credit

Requires a "benefits plan" to encourage the employment of Canadians,
and offer opportunities for Canadian contractors, before approving
foreign investment in the oil and gas sectors.

Limits the number of foreign employees in companies with more than 10
workers to 10 per cent, with a 20 per cent payroll limit for foreign

Bars foreign investment in the processing or disposal of toxic or
radio-active waste not produced in Colombia.

New Zealand
Requires approval for foreign direct investment that results in
control of "significant" assets, such as businesses worth more than
NZ$10 million.

Bars the repatriation of capital until one year after a foreign
investment is made.


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