EU Parliament sets conditions for MAI

The European Parliament in Strasbourg has criticised the draft of the Multilateral Agreement on Investment (MAI) being negotiated by the OECD members and has set 37 conditions for its approval. Meanwhile, the negotiations themselves have revealed sharp differences among the OECD member states, and there is now some uncertainty as to the agreement's future.

by Chakravarthi Raghavan

THE European Parliament, meeting in Strasbourg, has adopted a resolution against the Multilateral Agreement on Investment (MAI) being negotiated at the OECD as it stands.

By a vote of 437 against 8, the resolution adopted by the EP in March, concedes that transparent rules for investment are needed, but has set out some 37 conditions for such an agreement.

Meanwhile, the negotiations among the OECD members, originally intended to be completed and readied for signature at the April Ministerial meeting, now faces an uncertain future.

The negotiations, which had been conducted in virtual secrecy, came under fire towards the end of last year when a number of non-governmental groups of the North and South joined hands to agitate against it.

The high-level meeting of OECD countries at Paris in February took place after this public 'debate', with several key governments entering new reservations and conditions, and the US itself backing off from the original MAI, by keeping commitments to the Federal level (thus not binding its states).

The February talks ended in a deadlock, with many issues outstanding and some sharply differing views among major OECD countries.

The negotiations are expected to be resumed in May with two or three sessions before the end of the year and, possibly, with a change in the chair of the negotiating group - with some reports that the Dutch official leading the talks is being reassigned, and an American might take over.

The OECD Ministerial meeting in April is expected to adopt a declaration or statement to keep the negotiations alive, and give the impression it is on course.

The Dutch finance official Frans Engering, who has been chairing the negotiating group, said in February after the abortive talks that the Ministerial meeting could even conclude that the MAI is not viable. He said that there were a number of 'complicated and politically sensitive issues still on the table', but cited four main areas of debate: a possible dispute settlement system; labour and environment issues, exceptions to the liberalisation process and subsidies and selective government procurement.

'Dramatic improvements'

In testimony before a subcommittee of the US House of Representatives earlier in March, Alan Larson, US Assistant Secretary of State for Economic and Business Affairs, said that it would not be possible to conclude the agreement at the April OECD meet. He also said that Washington would be unable to approve the agreement as it now has evolved and that 'dramatic improvements' would be needed.

OECD sources say the April Ministerial meeting may issue a declaration or statement giving support to continued negotiations to resolve outstanding issues.

The debate and vote in the European Parliament at Strasbourg in March were based on a report by the German Green member Wolfgang Kreissl-Doerfler.

In the resolution, the European Parliament expresses serious doubts on several points of the draft MAI and calls for better democratic control over these negotiations.

Among the 37 recommendations to the European Commission (EC) included in the resolution are calls:

  • for an assessment by the European Commission of the compatibility of the MAI agreement with international agreements and international conventions signed by the EU;

  • to OECD signatory countries to refrain from putting pressure on developing countries to join the MAI; and

  • to UNCTAD and WTO to move to have the issue referred to them.

The Parliamentary resolution and recommendations support the EU Commission's attempts to seek jurisdiction over this question as a matter falling within EU competence.

This would automatically ensure a role for the EU Parliament (which it currently lack), if the negotiations are among the OECD members.

All 'questions relating to foreign direct investment to be transferred in the near future to the field of EU competence', the resolution recommends. The MAI, the recommendation says, should comprise clear provisions banning social or environmental dumping.

The MEPs say the definition of investment in the MAI should be clarified especially in the field of patents relating to vegetable, animal and human genes.

Intellectual Property Rights (IPRs), the resolution recommends, should be excluded from the agreement as it is covered by other international agreements.

No MAI should be concluded without a specific clause 'relating to the regional economic integration organisations' (REIO), authorising the pursuit of European integration.

The countries belonging to regional groups are not to be compelled to extend to third countries the benefits of the preferential treatment reserved for members.

The stand-still and roll-back clauses of the MAI should be clarified in order to verify whether they are an obstacle to the greater harmonisation of legislation within the EU Member States.

The MAI dispute settlement measures should also balance the rights of enterprises and States.

Measures aimed at preserving and promoting cultural and linguistic diversity should be excluded from the agreement.

The European Court of Justice should also examine the agreement under Article 228 of the Rome Treaty.

The European Parliament also deplored the fact that questions linked to the tax regime of transnational corporations are not treated in the OECD's draft MAI.

The Parliament resolution welcomes the fact that the MAI will restrict the 'race for subsidies'.

Political divisions

According to NGOs tracking the MAI issue, the debate in the European Parliament brought out that some political groups - mainly Socialists and the United Left - are against the MAI in principle and call at least for negotiations to be transferred to a body in which the developing countries may participate (WTO, UNCTAD).

For the Greens, the OECD's MAI project cannot be simply corrected, it must be reviewed from top to bottom.

Other Parliamentary groups support, in principle, a multilateral agreement on investment but call for revision of some provisions, and clarification of others. Thus, several MEPs from the conservative and liberal groups defended the agreement, stressing that it would replace some 1,800 bilateral agreements, provide a regulatory framework for investment, and will have an economic impact that is as important as the agreements on GATT customs tariffs.

According to NGOs tracking the issue, the debate mainly focused on three major substantive issues:

The first was whether the agreement granted too much power to multinationals and does it threaten the right of States to legislate?

Kreissl-Doerfler, Green MEP and rapporteur, believed the MAI compromised the right of States to set new environmental standards, for example, for implementing the commitments taken in Kyoto on climate change and in Montreal on the ozone layer. He feared that the roll-back clauses (providing for the adjustment of national legislation to the agreement) and the stand-still clauses will remove all meaning from the sovereignty of States. He also challenged the arbitration structure foreseen by the MAI, which would give enterprises the possibility of attacking a State, but not the contrary.


Mrs McKienna, speaking for the EP Committee on Fisheries, expressed alarm about the effects that the agreement would have on the ability of States to reduce their catch rates in order to preserve halieutic reserves, all the more as the measures adopted at the OECD will be valid for 20 years. Several French MEPs spoke in defence of the cultural exception, but others feared the large exceptions would lead to protectionism.

A second substantive issue was the lack of democratic control over the result and negotiation of the agreement.

The MEPs call for the European Parliament to be consulted for assent, a view that the EC Vice-President and Trade Commissioner, Sir Leon Brittan, seemed to favour.

An EC Parliament jurisdiction would automatically result in the EC Commission's jurisdiction over the members, a point that Brittan has been pushing for.

Italian Communist Luciana Castellina (Chair of the Committee on External Economic Relations) and French Communist Aline Pailler drew a parallel between the lack of transparency in the negotiation of the MAI and the transatlantic market project launched in March by the EC.

'Beyond the questions of culture, environment and social rights, what appears is that the people no longer want a treaty negotiated for them in the dark,' said Mrs Pailler.

A third substantive issue that agitated MEPs was whether the agreement endangered the continuation of Community integration. For several MEPs, the MAI did threaten economic, environmental and social integration and prevented the EU from granting aid to certain specific sectors.

In addition, Elly Plooij-van Gorselm, an MEP from the Netherlands said, ' not an agreement under Community competence (Article 113 of the Treaty) and one must ensure that competition distortion between Member States is prevented should some Member States sign the agreement and others not.

The Court of Justice must therefore be consulted, said MEPs. But the Commission Vice-President, Sir Leon Brittan, opposed this. (Third World Resurgence No. 92, April 1998)

Chakravarthi Raghavan is the Chief Editor of South-North Development Monitor (SUNS) and the Third World Network's representative in Geneva.