MAI: Citizen groups say 'no' to its shift to WTO

As the negotiations for a Multilateral Agreement on Investment (MAI) at the OECD appear to have fallen apart, the option is being canvassed of a renewal of such negotiations at the World Trade Organisation (WTO). Citizen groups meeting in Paris have pledged to oppose any moves to shift the MAI talks to the WTO.

by Cecilia Oh

PARTICIPANTS from over 20 countries of the North and South who were gathered in Paris for the start of the International Citizens' Summit against the Multilateral Agreement on Investment (MAI) on 17-21 October, were met with good news and bad news.

The good news was that the MAI negotiations at the Organisation for Economic Cooperation and Development (OECD) appears to have fallen apart. The bad news was that the MAI or its clone may be shifted to the World Trade Organisation (WTO) for negotiations.

During the citizens' meeting, the many groups present pledged to oppose any attempts by OECD governments to shift the MAI to the WTO. In a statement signed by over 200 NGOs, they opposed any attempts to get the WYO's trade and investment working group to negotiate an investment agreement.

The citizens' summit was organised by the French Coalition against the MAI, and had been planned to coincide with the OECD meetings of October 20-21, 1998, which were to be the resumption of the negotiations on the MAI after a six-month hiatus.

The good news...

The French Government had, on 14 October, announced its decision not to pursue negotiations at the OECD. This announcement was later followed by the German Government withdrawing the candidacy of its chief negotiator for the Chair of the negotiations. These developments caused the proposed negotiations to be downgraded to 'informal consultations'. At the conclusion of the consultations, neither the negotiators nor the OECD officials would say very much about the fate of the MAI.

The withdrawal of the French government from the negotiations was precipitated by a report to the Parliament, prepared by Member of the European Parliament, Catherine LaLumiere, and Jean-Pierre Landau, the Inspector-General of Finances. The report is highly critical of the way in which the MAI negotiations have been conducted at the OECD. Some of the report's substantive criticisms of the MAI provisions are similar to those that the NGOs have made.

The report highlighted the concerns related to the definition of investment and the scope of the dispute settlement process under the existing MAI text.

Investment is given a very broad definition and covers every kind of asset, including enterprises, shares, equity, bonds and debts, intellectual property rights, contracts and concessions. The dispute-settlement system under the MAI grants investor corporations the right to sue host governments. The problems with investor-state arbitrations have been illustrated in several cases under the North American Free Trade Agreement (NAFTA), such as the Ethyl case in which the investor corporation sued the Canadian government for the banning of a gasoline additive MMT, also a harmful toxin.

Other issues raised in the report were the provisions of the MAI which would severely curtail and constrain the rights and the policy options of the host governments, such as that requiring 'complete and constant protection' for investors, which would allow investors to claim compensation in the event of strikes or demonstrations. Another would be the notion of 'measures with effect equivalent' to nationalisation or expropriation, which would prohibit host governments from expropriating or nationalising (or taking any measures having an equivalent effect) an investor's assets except for a public purpose and accompanied by prompt and adequate compensation. The lack of participation of the developing countries in the negotiations on the MAI was also noted.

...and the bad news

The LaLumiere report, however, concluded that international rules on investment are important and suggested the option of an agreement within the WTO.

The report then laid down seven conditions under which France may resume negotiations for an international investment agreement: 1) portfolio investment and financial flows should be excluded from the definition of investment; 2) the dispute resolution mechanism should only be open to states; 3) the concept of 'constant and effective protection' should be eliminated; 4) the notion of 'measures having the equivalent effect of nationalisation or expropriation' should be deleted; 5) the performance-requirement ban should be limited to those already controlled by the WTO; 6) the standstill rules that prevent governments from weakening MAI commitments should be replaced with a right to derogate where governments were willing to pay compensation under the WTO rules; and 7) effective participation of developing countries should be ensured by making the entry into force of the investment agreement dependent on the signature of a sufficient number of non-OECD countries.

These new developments at the OECD are seen by many as providing the impetus to shift the MAI negotiations to the WTO. WTO investment negotiations would provide the OECD governments with the means of salvaging the MAI.

In 1996, the European governments had attempted to push through a mandate for investment negotiations at the WTO. They were unsuccessful in the face of opposition from the developing countries. This resulted in a decision of the 1996 WTO Ministerial Meeting to establish a working group to study the relationship between trade and investment. The two-year time frame for the working group is up in December 1998. A meeting has been scheduled for 22-23 November 1998 to decide on the future of the working group.


The lack of momentum at the OECD now puts increasing pressure on governments still supporting the MAI to try and upgrade the mandate of the working group into a negotiations process.

During the citizens' summit, the non-governmental organisations (NGOs) called on all governments to reject any proposal to negotiate an investment agreement in the WTO. In a statement circulated during the summit, which was endorsed by over 200 NGOs [interested parties who wish to sign on to this statement may e-mail Third World Network at], the NGOs said:

'We are very concerned by the moves of some OECD governments, including the European Union, to move the MAI process to the WTO. The North has recently been pushing very hard in the WTO to get developing countries to agree to upgrade the recent "discussions" into negotiations for an MAI-type agreement.

'Some of the Northern countries claim this will make it fairer for developing countries and, moreover, environmental and labour concerns will be taken care of in the WTO. We reject these claims. Instead, shifting the investment issue to the WTO will place great pressure on developing countries to negotiate and eventually join an agreement that could have disastrous effects on their development prospectsÉ The strong enforcement capability of the WTO through its dispute settlement system will also mean that all countries, especially developing countries, will be forced to comply. Domestic laws and policies on a wide range of issues will have to be changed, even if these were to cause job losses, closure of local enterprises and farms, financial instability, balance of payments deficits and environmental deterioration.'

'We therefore call on all governments, OECD and non-OECD alike, to reject any proposal to negotiate an investment agreement in the WTO. The trade and investment working group in the WTO should be confined to ONLY STUDY the trade and investment relation and should not be "upgraded" into a NEGOTIATING forum for an investment AGREEMENT. The proposals by the EU and other major countries to start a "Millennium Round" or a "comprehensive future agenda" for the WTO should not be used as a devise to sneak in an investment negotiation process in the WTO.

'On principle, we are against the kind of assumptions and framework that the MAI represents. As public knowledge on the MAI increases, many more people are rejecting this approach. We call on governments, international agencies and NGOs not to accept the MAI or a similar investment approach as inevitable or a "given" but instead to choose a basically different approach in dealing with the investment issue.

'Towards this alternative approach, we call for global and national guidelines, rules and regulations to place obligations on investors and corporations so that their activities and products serve the needs of people within a framework of internationally fair, socially just and environmentally sound development.'

Susan George of the Observatory on Globalisation, France, had likened the MAI to a cancer. In describing the NGOs' opposition to the shifting of negotiations from the OECD to the WTO, Martin Khor of the Third World Network, Malaysia said: 'It is not a question of where you want your cancer to be, whether you would prefer to have it in your lungs or in your stomach, or in your brains. You just don't want cancer.' (Third World Resurgence No. 99, November 1998)

Cecilia Oh is a researcher at Third World Network.