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The MAI: Alive and Well at the WTO

Posted to the IUF website 24-Jun-2003

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The WTO Working Group on Trade and Investment, at its final meeting in June before the WTO Cancun Ministerial Conference in September, failed to agree on initiating negotiations for a multilateral agreement on investment (MAI) in Cancun. However the drive for an MAI, currently spearheaded by the EU, Canada and Japan (with the USA waiting in the wings while it constructs even more restrictive bilateral and regional investment agreements) refuses to die. So it has been surreptitiously added to the agenda of the trade "mini-ministerials" scheduled between now and September - and, no doubt, to a number of closed bilateral meetings aimed at increasing the pressure on developing countries.

The push for a comprehensive charter of transnational investor rights - codified in the MAI which narrowly failed at the OECD in 1998 - has proven to be one of the more durable corporate lobbying campaigns of our times. And for good reason. The MAI now stalking the WTO expresses in concentrated form the drive by transnational capital to free itself of all regulatory limitations, actual and potential. The MAI aims to create a protective armour of international law, backed by the power of economic sanctions, against current and future efforts by national governments to regulate investment in the public interest.

When the MAI was derailed at the OECD through a combination of public protests and internal divisions among OECD member states, the venue simply moved from the OECD to the WTO, where it had in fact originated. The Doha "development round" restored it to the international corporate agenda as one of the "new" issues to be included at the Cancun Ministerial.

Investment, however, is nothing new at the WTO. Current WTO regulations, including the Agreement on Trade-Related Investment Measures (TRIMS), already curtail the ability of governments to impose conditions on foreign investment through, for example, performance or domestic content requirements, technology transfer or the repatriation of profits. The TRIMS agreement is the residue of a failed effort to include a comprehensive investment agreement in the founding of the WTO. What is new is the expanded corporate agenda, stimulated by the successful rollback of previous layers of national legislation through international agreements at the WTO and at regional and bilateral level.

The ability of corporations to directly attack offending governments, through investor-to-state lawsuits, is one of the more enduring features of this corporate power grab, because it insures against possible shifts of government policy in the investors' home countries by privatizing the dispute process. Equally persistent is the push to insure against the loss of future or even potential corporate earnings - hence the expanded definition of "expropriation" common to all investor "rights" proposals.

The original MAI and the global investment proposals now being pushed at the WTO by corporate lobbyists are directly modelled on the North American Free Trade Agreement (NAFTA). NAFTA's Chapter 11 codifies the rights of transnational investors, culminating in the "right" of corporations to directly challenge the laws, regulations and practices of a signatory country if these impinge on the investor's ability to extract maximum profit. NAFTA outlaws the imposition of virtually all regulatory requirements for foreign investors by giving investors the right to demand compensation for potential future loss of earnings, in which case the injured corporation can sue as the victim of "measures tantamount to expropriation". "Regulatory" and "creeping" definitions of "expropriation" have further enhanced the corporations' legal arsenal and redefined the meaning of regulation. Policies, measures and laws which restrict, guide or limit the activities of foreign investors are henceforth considered to have "taken away" the real and imagined property of the corporations. The role of the host state is reduced to granting tax holidays to foreign capital and policing their export processing zones and maquiladoras.

The European Union is publicly pursuing a kinder, gentler MAI ("investment for development"), one which ostensibly allows governments to select the specific sectors they wish to abandon to the transnationals. European investor lobbies, however, are pushing the full NAFTA/MAI agenda, and experience in the services negotiations (GATS) has shown that once the process is set in motion, it is extremely difficult to halt the corporate momentum. Heavyweight corporate lobby groups including UNICE, the European employers' federation, the International Chamber of Commerce (ICC), and the European Services Forum (ESF) have all incorporated the key NAFTA Chapter 11 elements into their lobbying proposals. The US, which is expanding NAFTA into the Free Trade Agreement of the Americas (FTAA) and incorporating similar investor rights provisions into its bilateral investment treaties (BITs), is content to let the EU and Japan promote the project at the WTO, because existing agreements it has signed inevitably raise the barriers to democratic regulation of corporate activity which will emerge through an agreement at the WTO. Corporate Europe has also grasped this point. In a letter to EU trade commissioner Lamy of April 30, the ESF affirmed that "A WTO agreement on investment should strive to lock in the existing high standards of investment protection and possibilities for dispute settlement offered in BITs. At a minimum, it should contain provisions that recognise and safeguard existing bilateral agreements."

The ICC, which virtually wrote the OECD MAI, states that "One of the main objectives of a WTO agreement on investment should be to provide strong and effective protection for investors against nationalization, expropriation and measures tantamount to expropriation." In a neo-liberal world order where even local content requirements have become a vanishing species, and the only nationalizations on the horizon are those of failed Japanese banks or US savings and loans institutions, it is important to extract the lessons of the NAFTA experience. The real purpose of these investment regimes is not to guard against expropriation, but to radically circumscribe the ability of governments to maintain public services and to enact legislation to protect worker and consumer health and safety and the environment. By redefining regulation as expropriation, they undermine the capacity of governments to impose limitations on corporate activity. They aim to enclose the space which unions and other democratic social movements need to successfully organize and campaign for their interests and demands.

Under NAFTA Chapter 11, the US Ethyl Corporation successfully sued the Canadian government for imposing a ban on the toxic gasoline additive MMT it produced. The company argued that not only the ban but even "legislative debate itself constituted an expropriation of its assets because public criticism of MMT damaged the company's reputation." Three years later, the Canadian corporation Methanex turned the tables, arguing that a California ban on a hazardous chemical it produced was "tantamount to expropriation". UPS is suing the government of Canada for maintaining a public postal system. The US Crompton Corporation is suing the government of Canada for phasing out the pesticide Lindane, a neurotoxin which is banned in the United States.

If the ICC gets its way, banning Lindane will be illegal not only in North America but also under international law. Corporations which vaunt their commitment to "social responsibility" are effectively working to outlaw through binding international agreements the responsible regulation of business activity. NAFTA's Chapter 11 is a living lesson in why the MAI is a threat to democracy, and why it must be stopped.

There is an argument for establishing international investment rules which would respect and enhance the rights of governments to defend the public interest and to determine their own paths to development over and against the interests of transnational investors. But that is not what is currently on offer at the WTO.

The proposed MAI at the WTO would be devastating to developing countries, but it would be historically false and politically dangerous to view it as a North/South issue, as the NAFTA experience has convincingly shown. The MAI is a political weapon aimed at our rights as workers and citizens. It is a shared threat, and it is our common responsibility to unite to oppose it until it is buried once and for all.