Multilaterial Agreement on Investment (MAI)

The Multilateral Agreement on Investment: An international human rights crisis

By Ward Morehouse,
Co-Director, Program on Corporations, Law and Democracy
2 December 1997

Reflections on Next Steps and a Call to Action

The OECD is a rich man's club, composed of 29 industrialized countries. Once approved by the governments of these countries, it will then be presented to the rest of the world as a fait accompli. If they want to have access to principal world capital markets, they will have no choice but to sign on. And the compulsion will be intense if the Wall Street Journal's view of the rest of the world as "money hungry" while "the global competition for capital heats up" is anywhere near the mark.

The MAI is a turgid document of several hundred pages of text and commentary organized into half a dozen major segments on such topics as Treatment of Investors and Investments, Investment Protection, and Dispute Settlement. But the overriding purpose is simple and clear: the MAI seeks to establish mobility of capital as a global, legally enforceable private property right.

In doing so, MAI takes a giant step toward constituting corporations as sovereign instruments of governance, effectively replicating at the international level the regimen of corporate rule now well established in the United States through such constitutional provisions and judicial doctrines as interstate commerce, contracts, managerial prerogative, and the business judgment rule. Indeed, it even accords corporations judicial standing similar to that of nation states in its dispute settlement and investor protection sections!

The potential impact of MAI lies in the rapidly changing global political economy. The annual revenues of the 500 largest corporations in the world are some $10 trillion, around twice the size of the gross domestic product of the United States, the biggest economy in the world today. In a single year -- 1994 -- the Global 500 revenues increased by 9 percent and its profits soared by a colossal 62 percent. But notwithstanding such huge profits, the Global 500 in that same year eliminated 262,000 jobs.

Even more striking still is the startling rate of capital accumulation among the top 200 global corporations. "The velocity of transnationalisation of capital as measured as a share of world GDP," writes Frederic Clairmont, "is stunning: from 17 percent in the mid-1960s to 24 percent in 1982 and over 32 percent in 1995."

So if the central purpose of MAI is to establish capital mobility as a global private property right, the major consequence of its adoption will be rapid acceleration in the concentration of wealth and power in the hands of giant, globe-encircling conglomerates and further erosion of democratic institutions and values worldwide. But what has happened already is bad enough and has been vividly described in a new book which was originally published in German and has recently appeared in English, The Global Trap.

Global corporations, and their agents, the national governments of the OECD member countries, are well aware of these underlying realities. Hence their attempt to negotiate such a naked undemocratic grab of power in secret before popular opposition could be organized. And the Clinton Administration is following a similar tactic within the United States by seeking "fast track" legislation that will limit Congress, if the Administration chooses to treat MAI as an agreement rather than a treaty, to voting MAI up or down without amendments. As in the case of Third World governments hungry for foreign capital, Congress will be under strong compulsion to approve MAI, since the only alternative is the "unthinkable" one of rejecting it and thus denying US-based corporations access to world capital markets.

There is ambiguity about whether or not MAI will be submitted to Congress under "fast track" authority if the Clinton Administration has that authority by the time MAI is ready for Congressional approval. Some seasoned observers of the Washington scene think that when the time comes, Clinton will succumb to the temptation to go for the much less demanding requirement of a simple majority of both houses of Congress rather than two-thirds of the Senate as stipulated by the US Constitution for all treaties. But regardless of how this question is resolved the struggle over "fast track" is in many ways a surrogate for the struggle over MAI, involving the same political forces and similar policy issues.

Indeed the underlying rationale for Clinton's "fast track" proposal and almost certainly for MAI when it is submitted to Congress -- that recent trade and investment agreements have brought unprecedented prosperity to the American people -- is contradicted by a recently released report, The Underbelly of the US Economy. According to this report, there were more than 14 million jobless people in the US in 1996, resulting in a jobless rate of 11.0 percent -- more than twice the official figure. Nor is this all the bad news for the victims of past trade agreements. Real wages of American workers are well below what they were 25 years ago and poverty levels are substantially higher than official figures from Washington indicate.

So the first step in the US is to defeat "fast track" legislation by whatever it takes: A judicial challenge to its constitutionality. A filibuster in the Senate because it strikes at the very foundation of our constitution -- the sovereignty of "we the people". Massive non-violent civil disobedience or a general strike for the same reason.

Democratic forces won the first round through grass roots lobbying when "fast track" legislation was withdrawn by the Clinton Administration in early November, 1997, once it became clear that it would not pass the House of Representatives. But the fight is not over. The Business Roundtable and its allies in Big Business have vowed to regroup their lobby initiative, ALOT (America Leads on Trade), to raise a new war chest and to kick off a "grassroots" lobbying effort of their own in early 1998.

The next step is to defeat MAI. Make no mistake about it. MAI cannot be salvaged through "side agreements" on labor and environment, a point which thus far seems to have eluded US trade union leadership and members of Congress who claim to be opposed to "fast track" legislation. It is fundamentally and irretrievably flawed. It stands in direct opposition to the democratic principles on which this country was founded, no matter how elusive their realization has been.

But the third and most important step is pro-active: To use MAI as the launching pad for a truly vigorous and searching debate on property rights and democratic values. For too long we have allowed advocates of corporate hegemony to dominate this discourse, even appropriating language which should be ours through the "wise use" movement. It is time to start a "fair use" movement which recognizes the "reliance interest" of workers and community in the creation of capital and the transcendence of public property rights of communities and preservation of the biosphere over private property rights when they are in conflict.

Why not use as a tool for consciousness raising and political mobilization the call for a common property rights amendment to the US Constitution by Winona LaDuke, one of the most articulate and forceful advocates of the rights of indigenous peoples.

The time has come to recapture the spirit of the American revolution and claim the sovereignty of "We the People" who did after all, in the compelling words of the Preamble to the Constitution, "ordain and establish this Constitution for the United States of America."

The time has also come to move beyond the US Constitution to the international human rights arena where MAI must be recognized for what it is -- a monumental assault on internationally recognized human rights, especially that most fundamental of all rights, the "right to be human."

FOOTNOTES

Tony Clarke, The Corporate Rule Treaty: A Preliminary Analysis, Ottawa: Canadian Centre for Policy Alternatives, April, 1997.

Urban C. Lehner, "Money Hungry: As the Global Competition for Capital Heats Up, the Implications for World-Wide Investors and Borrowers are Enormous." Wall Street Journal, September 18, 1997.

The draft text of MAI is available on the Multinational Monitor website: http://www.essential.org/monitor/mai/contents.html

Frederic F. Clairmont, The Rise and Fall of Economic Liberalism: The Making of the Economic Gulag, Penang: Southbound Books and Mapusa, Goa: The Other India Press, revised edition, 1996.

Frederic F. Clairmont, "Transnational Gulag: Reflections on Power Inc.," Economic and Political Weekly, March 1-8, 1997, p. 450.

Hans Peter Martin and Harald Schumann, The Global Trap: Globalization and the Assault on Prosperity and Democracy, London: Zed Books, 1997.

David Dembo and Ward Morehouse, The Underbelly of the US Economy, New York: The Apex Press, 1997.

National Journal, 21 November 1997.

Steven Greenhouse, "A.F.L.-C.I.O. Turns Energy against Pacts on Free Trade," New York Times, September 24, 1997.

On the "reliance interest," see Joseph L. Singer, "The Reliance Interest in Property", Stamford Law Review, Vol. 40, No. 3 (February 1988). On public vs. private property rights, see Robert Benson, "The Seventh Generation Act: A Model Law Allowing Law Suits for Damage to Natural Resources Needed to Sustain Future Generations," Los Angeles: International Law Center for Human, Economic and Environmental Defense (HEED), Summer, 1997.

Speech by Winona LaDuke, "The Common Property Constitutional Amendment" recorded by Alternative Radio, Boulder, Colorado, Fall 1996.

Upendra Baxi, "From Human Rights to the Right to be Human: Some Heresies," in Smitu Kothari and Harsh Sethi, eds., Rethinking Human Rights: Challenges for Theory and Action, New York and Delhi, New Horizons Press and Lokayan, 1989. See also Winin Pereira, Inhuman Rights, Mapusa, Goa, Penang, Malaysia and New York: The Other India Press, Third World Network, and The Apex Press, 1997.