Treaty xenophobia

By Paul Cleary, Sydney Morning Herald,
Saturday 7 March 1998

Political, business and activist groups are waking up to the realisation that Australia is negotiating a far-ranging international treaty - almost a constitution for the global economy - which they fear could undermine the country's sovereignty. PAUL CLEARY reports.

THE retrenched Cobar miners who brought their swags to the front lawn of Parliament House this week, protesting at their treatment by a multinational company, would have been shocked had they known the Government was negotiating an obscurely named treaty aimed at giving more rights to foreign investors.

The miners had been retrenched in January by the Ghanian multinational Ashanti Goldfields, devastating the town and leaving $10million unpaid in entitlements to 260 miners.

While the miners were waiting to meet the Prime Minister, the House of Representatives canvassed for the first time Australia's position on a far-reaching international treaty for foreign investors, the Multilateral Agreement on Investment (MAI) - something like a new constitution of the global economy.

Proponents say it will assist the flow of foreign capital to where it's needed most, and that the world must have a treaty on investment, just as international trade is governed by treaties.

But its critics, and there are many, say the MAI could undermine the sovereignty of nation states. Governments that have domestic laws contrary to the liberal principles of the MAI could find themselves being sued by multinationals that have new rights under the treaty.

This legal framework for the global new order has galvanised the extreme right and left of politics, and indeed the green movement, some business groups and mainstream activists. The Australian Conservation Foundation has the same concerns about the MAI as Pauline Hanson's One Nation and the League of Rights.

On Monday night when the miners were soaked by sprinklers after being told by security staff to take down their tents, the former Chief Justice of the High Court, Sir Anthony Mason, delivered a speech on the MAI that encapsulated the concerns of this motley collection of interest groups.

He warned that negotiations on Australia's signing of the far-reaching treaty had not been an open process. At the end of the day it is possible that the terms will be set in concrete, leaving Australia with very limited choices to make, the effective choices having been made by Treasury and Federal Cabinet during the course of the unpublished negotiations, he said.

The Opposition and Democrats responded with a call for a parliamentary inquiry. On Thursday, the Foreign Minister, Alexander Downer, gave a guarantee in Parliament that the MAI would be reviewed by the Joint Standing Committee on Treaties.

Downer said Australia's handling of the negotiations has been completely transparent. However, while talks have been under way since May 1995, the 124-page draft negotiating text was made public only last month.

The fact is that we are very happy to be transparent in these negotiations. As far as we are concerned, these negotiations can go before the treaties committee today or tomorrow. he said.

By this time the miners had packed up after John Howard had met them and undertaken to consider a $6million ex gratia payment, while ruling out any changes to rank workers' entitlements ahead of creditors' under Australian company law. But critics say Downer's promise of transparency is just as unsatisfying as the Prime Minister's response to the miners.

The promise was made even though Australia's negotiating stand on the MAI is yet to be made public. That is, notwithstanding the parliamentary inquiry, Canberra's position has not been published, because the Government says the treaty is yet to be finalised.

A spokesman for Downer said his comment on transparency referred to the process, which requires consultation with the States and the treaties committee.

The treaties committee has been asked to provide an interim report by May25, but will be unable to undertake the required national interest analysis of the MAI's implications without knowing Australia's final position. A ministerial meeting will be held on the MAI in Paris next month.

The office of the Assistant Treasurer, Rod Kemp, said negotiations were far from complete and the Government had yet to decide whether Australia would sign. It would not assent unless it was demonstrably in the national interest.

The Federal Treasury has listed Australia's concerns in a range of areas to protect current policies and ensure that no current policy is overridden or subsumed - which implicitly admits that the MAI can override domestic policy.

Treasury's preliminary list of desired exceptions includes foreign investment policy, telecommunications, aviation, immigration, privatisation, social services and indigenous people.

A common concern is that the enshrinement of rights for multinationals could emerge as an inherent form of special treatment, forming the basis for them to take legal action against host governments, undermining the sovereignty of individual nations.

Opponents cite the case of a US petroleum company which used an additive banned by the Canadian Parliament. Ethyl Corporation successfully sued Ottawa for $US251million ($373million) in damages under the North American Free Trade Agreement, a multilateral treaty similar to the MAI.

Some of the key concepts and rights in the MAI are: National treatment, which means that foreign investors must be treated in the same way as local companies. Critics say the enshrinement of the rights of multinationals means they have a special status. Guaranteed investment protection, which means host governments must not impair by unreasonable and/or discriminatory measures the operations of foreign businesses. A ban on requiring investors to meet performance requirements, meaning that a country cannot impose any commitment or undertaking in connection with the establishment, acquisition, expansion, management, operation, or conduct of a foreign investment. This could prevent governments from imposing any demands on foreign business, including industry development goals or environmental controls. A requirement to pay compensation to foreigners for expropriation - direct or indirect - which they allege undermines the value of their investments. Critics say this could let foreigners sue for damages to cover environmental controls or other alleged restraints on their businesses. Capital mobility. Each host government must guarantee that capital can be freely transferred into and out of its territory, enshrining a right that critics say contributed to the Mexican and Asian currency crises. Dispute resolution procedures, which give special rights to foreign investors to solve disputes through special arbitration.

The MAI is aimed at tackling the needs of capital-hungry developing countries in a globalised world, but it will be signed only by the members of the Organisation for Economic Co-operation and Development. The OECD, a Paris-based club of 29 wealthy nations, including Australia, initiated the MAI negotiations. It cites a World Bank estimate that the capital demands of Asia alone will reach $US1,500 billion over the next 10 years, and says the world needs a treaty governing the rights of foreign investors.

Negotiators say the OECD is seeking to establish the MAI as a forerunner to a global agreement signed by the 132 members of the World Trade Organisation.

The trade director of the Australian Chamber of Commerce and Industry (ACCI), Brent Davis, has been working on the MAI in association with international business chambers for 18 months, and argues that Australia has a lot to gain.

Anything we give up in Australia we gain abroad. We are a small economy; we gain similar privileges in the whole of the EU, US, and Japan, he said.

Davis likened it to backing a 60-1 horse that wins.

Anna Reynolds of the Australian Conservation Foundation said that if the agreement meant only non-discrimination against foreign companies, the green movement would not be very concerned. There's a lot more to it than that, she said, adding that the international business community has been behind the MAI all the way.

But even some business groups are wary.

Graham Chalker, the Federal affairs adviser of the Australian Business Chamber - a member of the ACCI - says that unless Australia lodges exemptions, Federal and State governments could be prohibited from having industry development policies.

And in public floats such as Qantas or Telstra, Canberra would be prohibited from limiting access to foreigners.

Australia already has one of the highest levels of foreign ownership in the world. The latest annual report of the Foreign Investment Review Board reveals that applications reached a record $59billion last financial year.

With this phenomenal level of foreign activity, Australia is likely to see more instances like Cobar.

The big gobbling up the small

THE Australian writer/actor Mac Gudgeon has been at the barricades of the contemporary cultural revolution.

Surrounded by the French actor Jeanne Moreau and directors Gabriel ( Babette's Feast) Axel, Bertrand (D'Artagnan's Daughter) Tavernier and Paolo and Vittorio Taviani (Night of the Shooting Stars), Gudgeon stood last month in the same theatre that French students took over in trying to overthrow the Government in 1968.

This time it was artists, from across Europe, Canada and Australia, plotting to pull the plug on an international treaty.

The Multilateral Agreement on Investment (MAI), they declared, would make a mockery of any nation's cultural policy.

For Australia, that means George Lucas could seek funding for his next Star Warspicture from the Film Finance Corporation, said Gudgeon, who was representing a broad alliance of local screen producers, directors, writers, actors and technicians.

It's ludicrous, he said, but it could happen.

Indeed, it is already happening under another treaty, the 1988 Closer Economic Relations treaty between New Zealand and Australia.

Despite government assurances that culture would be quarantined from the CER trade agreement, no such exemption appeared in the final written document.

Now New Zealand film and television makers have mounted a court case - dubbed Project Blue Sky - arguing that under the CER, productions made in New Zealand should count as Australian for purposes of local content requirements.

The High Court is considering the case.

If that's successful - if the High Court says, Yes, this is how it should be under the treatyM/q> - then Xena: Warrior Princess and her blond-tipped, tanned sidekick Hercules will be counted as Australian production because they're produced in New Zealand, Gudgeon said.

The Blue Sky case has enormous potential impact culturally and economically. But, said Gudgeon, it was nothing like the havoc that would be wreaked by MAI, which would allow American culture to conquer all: It's the big devouring the small.

This is not some sort of attack of paranoia on our part, because we're experiencing exactly what would happen under MAI with the Blue Sky case - this is what happens if you sign a treaty and you don't quarantine the cultural elements.