History of the Multilaterial Agreement on Investment (MAI)

NAFTA on crack

By Gabriel Roth,
in the San Francisco Bay Guardian
15 October 1997

If you thought NAFTA was bad, wait till you meet MAI.

BAY AREA environmental, labor, and community activists are at the forefront of the struggle to block a new corporate-backed international treaty that would take some of the most dangerous provisions of the North American Free Trade Agreement and apply them worldwide.

There's been virtually no media coverage of the proposed Multilateral Agreement on Investments (MAI) in the United States. But it would transform the way much of the world does business. Among other things, MAI would

• virtually eliminate restrictions on international investments;
• prevent governments from instituting policies aimed at strengthening local economies;
• allow multinational corporations to sue governments for impeding those corporations' "right" to make a profit at the expense of communities and the environment; and
• force governments to respond to economic pressures by abolishing worker protections, public-safety regulations, and measures protecting the environment.

The Clinton administration is leading secret negotiations on the agreement within the Organization for Economic Cooperation and Development (OECD), which includes 29 of the world's richest countries. Negotiations, which began in May 1995, take place in Paris every six weeks.

The treaty would prevent governments from distinguishing in any way between investors from different countries, and would sharply limit "performance requirements" -- government demands that corporations meet certain conditions, such as labor protections and environmental regulations, to do business or qualify for government tax breaks, targeted loans, or other such preferences.

Under MAI, local, regional, and federal governments could no longer make low-interest loans to local businesses, cut taxes for businesses that hire members of local communities, or give minority-owned or environmentally conscious companies preference in the awarding of public-works contracts. In short, any government intervention to strengthen the local economy would be forbidden.

"The idea behind MAI is that local is a dirty word, and that countries should not be allowed to ... forge an economic development strategy that is peculiar to the needs of the local population," Scott Nova, of the Washington, D.C.-based Preamble Center for Public Policy, told the Bay Guardian.

Advocates of MAI say the treaty will stimulate economic growth. Steven Canner, vice president of the United States Council for International Business, which advises the OECD, told the Bay Guardian that MAI will "help to grow the international economic pie [and] create greater efficiency in the flow of international capital."

But critics charge that the agreement's benefits will flow almost exclusively into the pockets of multinational corporations. "It's not small businesses that are going to be making international investments," Nova said. And he fears the treaty would create "a competition between countries to attract capital that increasingly becomes based on a country's capacity to keep wages low and regulations lax."

When asked how MAI's drafters hope to prevent such an outcome, Wes Scholz, who as director of the U.S. State Department's Office of Investment Affairs is among those negotiating the agreement, cited proposals on the table to include in the treaty references to labor rights and the environment. But none of the proposals he cited would be in any way binding; they would merely encourage countries and investors to behave responsibly with regard to public safety, labor, and the environment.

"The State Department has said to us, 'We can't possibly get binding language on the environment and labor; no other countries would go for that,' " Chantall Taylor of the Washington, D.C.-based Public Citizen's Global Trade Watch told the Bay Guardian. "Then we find out from our coalition partners abroad that their countries are willing to go with binding language and it's the U.S. that is opposed."

Indeed, William Witherell, the OECD's director of financial, fiscal, and enterprise affairs, has suggested that "competitive deregulation" of the kind Nova describes might be part of OECD's goals. In a Nov. 12, 1996, speech he warned, "Borders will not protect national economies nor their markets.... Should governments fail to reform obsolete regulations ... they will likely become second-rank actors, even in their own markets."

The MAI negotiations were kept under wraps until a draft of the treaty was leaked to French activists in November 1996. When those activists placed the text on the Internet, environmentalists, labor advocates, and citizens-rights groups around the world began calling for greater openness on the part of negotiators and more public discussion of the proposed agreement.

Such openness is particularly important, some critics argue, in light of the treaty's potential to undermine national sovereignty. MAI would "subvert our ability as a so-called free people to be self-governing," Henry Holmes of the San Francisco-based Sustainable Alternatives to the Global Economy told the Bay Guardian. "We've already had challenges [under existing treaties] by foreign multinationals that have prompted the U.S. Congress and President Clinton to change and weaken laws that people here in this country have determined are in the public interest," Holmes said (see "Hall of Injustice," 5/14/97).

MAI would allow corporations and private investors to sue governments for what they perceive as unfair restrictions on investments. Other than a single, narrow provision of NAFTA, this would be the first time in international law that corporations would have the right to file suit. Disputes would be resolved in international tribunals, and decisions made in such cases could not be appealed.

While MAI would impose an unprecedented set of restrictions on governments, it would impose no restrictions whatsoever on investors. "It's going in the direction of empowering and freeing corporations while limiting the scope of government's regulatory ability and reducing the bargaining power of workers," Thea Lee, assistant director of public policy at the AFL-CIO, told the Bay Guardian.

Thanks to pressure from activists around the world, the OECD has agreed to meet with nongovernmental organizations in late October. Activists hope the meeting will prompt negotiators to incorporate binding labor and environmental protections in the treaty, but few hold out much faith. "They set an agenda that lets them talk for six hours and us for one," Taylor said. "Who knows how much our input can have an effect considering [the treaty is] nearly 90 percent complete."

The business lobby has steadfastly opposed any restrictions on investors. "This is a negotiation about international investment, about opening markets and removing restrictions to the flow of international capital," said the USCIB's Canner. "It's not appropriate to negotiate on matters that are not germane to the heart of the agreement."

The OECD hopes negotiations will be over in time for a finished treaty to be presented to member nations at the organization's May 1998 meeting. After ratification, OECD representatives would present the treaty to their governments for approval. Activists in OECD member countries are working to inform the public about the treaty's possible consequences, hoping that pressure from citizens will force lawmakers to take public concerns into account. "The American public doesn't like these agreements and doesn't believe they are written with the interests of everyday citizens in mind," Nova said. "The more public debate there was [on NAFTA and GATT], the less popular the agreements became."

Victor Menotti, program director at the San Francisco-based International Forum on Globalization, is hopeful that this strategy will stop MAI's progress. "It's going to be citizen pressure from all over the world that does it," he told the Bay Guardian.