MAI not dead yet

by Chakravarthi Raghavan

GENEVA: The impasse at the Paris-based OECD, over efforts of
transnational capital to write rules binding governments to
provide foreigners rights to investment anywhere, may not be
the end of the story, non-governmental organizations
campaigning on the issue agree.

While the high-level meeting of the 29 OECD members ended on
17 February night, with delegates deferring a decision on the
viability of a pact, the negotiating group was holding its
meetings following the high-level talks.

After the press briefing on 17 February by Mr. Rans
Engering, the Dutch finance official leading the talks, the US
held its own briefing to announce that it would not be signing
or initialling any agreement in April. He even envisaged the
possibility of OECD countries abandoning the effort.

According to NGOs following the process in Paris, there was
no progress in evolving a language to deal with the US position
under the Helms-Burton law, whereby the US threatens sanctions
against countries investing in Cuba, Libya, Iran and so on, and
which France and others refused to accept.

On environment, the Europeans appear to be pushing for an
exception on the lines of Art. XX of the GATT, whereas the US
wants non-binding language - as in the NAFTA side agreement.

On the issue of "expropriation" - defined as such that a
foreign investor can not only bring suits against a government
on a wide range of regulatory issues and measures (of Federal,
state and local authorities), the US Justice Department and the
Environment Protection Agency appears to be ranged against the
provision, while the US State Department and US Trade
Representative favour it as a way of protecting the interests
of US TNCs in other countries.

And the differences between the US and France over the
culture issue has also not been resolved, with France insisting
on something more than the limited exception under GATT/WTO.

Parallel efforts at WTO and UNCTAD

The NGOs believe that even if the OECD talks founder, there
will be efforts to achieve the same through the World Trade
Organization and parallel efforts at UNCTAD's Investment
Division. The NGOs are preparing to take on the two
organizations, if necessary.

The European Commission from the outset has preferred
negotiations at the WTO - mainly because the Commission has no
locus standi in the OECD talks (which are among member-states),
whereas in any WTO talks, the Commission would be representing
and negotiating for the EU members, and hence, in any outcome
will gain leverage over the members.

Before the latest outcome in Paris, UNCTAD's Investment
Division which has been promoting the idea of a multilateral
framework on investment, and has been holding symposia and
seminars (funded by the EC and some European governments),
appears to have scheduled an Asian regional symposium in India,
hosted by the Indian government, on International Investment
Arrangements and their Implications for Developing Countries.

Meanwhile, the WTO issued a press release on 17 February, in
effect distancing itself from the OECD-MAI efforts, and the NGO
campaign against it, characterizing the NGOs campaigning
against the issue as "special interest groups", and insisting
that the WTO head, Mr.Renato Ruggiero had been erroneously
quoted on the MAI as "writing the constitution for a global

The WTO also said that the only time Ruggiero had made any
reference to the constitution of a global economy was at his
Chatham House speech in January when he had quoted the US trade
specialist, John Jackson, as describing the multilateral
trading system as a "constitution for the world economy."

However, in a speech to the UNCTAD's Trade and Development
Board in October 1996 (when the WTO Secretariat was actively
promoting investment discussions at the WTO, in the run-up to
Singapore), Mr.Ruggiero had underlined that the multilateral
trading order had undergone a profound systemic change from
1947 when it was negotiating tariffs and certain non-tariff

Ruggiero had told the UNCTAD meeting: "Today, the WTO rules
also encompass standards, services, intellectual property,
trade related investment and a host of other economic
activities that would not have been conceivable even a decade
ago.... in moving from shallow to deeper integration and from
a narrow to far broader participation we have done much
more than add a new rule here or a new member there. We have
transformed the nature of the system itself. We have created
a global trade architecture which is greater than the sum
of its parts - a seamless web of interlocking interests and
responsibilities, interdependent and indivisi-ble..."

Mr. Ruggiero then added: "We are no longer writing the rules
of interaction among separate national economies. We are
writing the constitution of a single global economy...."

Ruggiero's remarks were thus without reference to Jackson,
and in the context of the WTO writing rules on services,
investment, intellectual property and so on - the issues
covered by an MAI.

And the attempt of the WTO to tar the public-interest NGOs
campaigning on the investment issue as "special interest
groups" is not without irony - since the WTO is seen by the
NGOs as a body promoting the special interests of big
transnational exporters.

Both the WTO and the UNCTAD Investment Division have been
promoting the idea of multilateral rules on investment, and
both hitched their wagons to the Paris process.

A major argument used has been that the OECD countries would
negotiate an agreement of their own among themselves, and then
bring it to the WTO and force developing countries to sign on,
and hence, it is better for developing countries to negotiate
at the WTO, so that their interests can be represented.

This was the argument used before the Singapore Ministerial
meeting of the WTO in December 1996, and which resulted in the
establishment of a study process at the WTO, with some back-to-
back meetings at UNCTAD on the same issue.

The United States in the run-up to the launch of the Uruguay
Round in 1986 had brought up the "services" issue, and on the
basis that services had to be produced and delivered on the
spot (and cannot be transported across borders like "goods"),
had sought to make "trade in services" to mean the right to
invest, produce and deliver services in another country.

But in the complex negotiations that ensued, the delivery of
services was recognized as to involve four modes, of which
commercial presence, ranging all the way from a commercial
office to equity investment, joint ventures and so on, was only
one mode of delivery.

Services negotiations

And in the services negotiations itself, commitments were
based on the "positive listing" of concessions offered by
countries, and involving also the issue of "national treatment"
and limitations to it.

At that point in 1994, the US negotiators came to the view
that in any investment negotiations at the WTO, developing
countries would not be willing to go as far as the US wanted.

The US therefore turned its sights to forging an accord at
the OECD, and repeatedly announced that it was aiming for a
"high-quality" agreement, with signatories agreeing to open up
every part of their economic sectors to foreign investors, and
being able only to list some sectors as exceptions where there
would be a phasing-in of liberalization.

The negotiations were being conducted in some secrecy,
though more transparently than any negotiations at the 132-
member WTO - since at every stage, all the 29 OECD participants
had drafts and proposals before them and negotiated within the
full group.

However, some NGOs managed to get hold of a draft accord,
and posted it on the internet, whereupon some of the member-
governments were forced to make it public themselves - though
the various exceptions sought by each of the governments have
not been made public so far.

The campaign brought the issue to public attention, and
showed that many parts of the various OECD governments were not
aware of the agreement being negotiated on their behalf: the
issue was being handled in some cases by trade ministries, in
others by finance ministries, and in some others by their
foreign offices.

If the OECD process stymies, efforts to bring it up via the
WTO may in fact strengthen the opposition of governments
against such multilateral rules, with a dispute settlement
process enabling trade retaliation. But even more, it would
unite the various public-interest NGOs of the North and the
South, who have already formed a broad coalition against the
WTO over the "globalization" issue. -(Third World Economics
No.179/180, 16 Feb-15 March 1998)

Chakravarthi Raghavan is the Chief Editor of SUNS.