Charlie Arden-Clarke (WWF Int.) and Peter Wahl (WEED) attended this meeting and these notes are compiled on their responsibility.
QUOTE: New Zealand, Mexico, Korea and to a lesser extent Australia are still resisting environment and labour text fiercely. Increased domestic pressure on all of these, particularly New Zealand, would help. Australia did not appear to have anyone attending the consultations.
Introduction
This report of these consultations contains summaries of both the formal consultations and information collected from various sources (official and non-official) on the margins of the meeting. The consultations are reported in a way that comments are attributed only to officials (=O, OECD secretariat, or named country delegation), or unidentified representatives of either TUAC (=T) or BIAC (=B). Information collected at the margins of the meetings is not attributed at all but by far the majority came from officials.
In addition to providing us with specific information about the current state of the MAI negotiations, the day of observation underlined that there is bigger picture to our dealings with the OECD. As a result of what has happened in the MAI and in other intergovernmental bodies on economics and sustainable development issues, and the report of the OECD High-level Advisory Panel on Environment ("Guiding the Transition to Sustainable Development: a critical role for the OECD"), the OECD appears poised to increase the sustainable development element of its policy analysis and formulation. The extent to which it does this, and the quality of the results, will depend to a considerable extent on the level of NGO involvement, which is increasingly being sought by the OECD.
However, at the present stage of the MAI negotiations there remains a majority
favouring the so-called "three anchor approach", i.e.:
1) reference to standards in the preamble, mentioning OECD Guidelines on
MNEs, and referring to the ILO,
2) including a clause on not lowering standards (labour, environment and
health) into the agreement, referring only to domestic standards not core
(labour) standards, with apparently a slight majority in favour of binding
status;
3) annexing the OECD Guidelines on MNEs which is meant to lead to the
establishment of contact points for implementation in signatory countries,
as a "hard" result.
The OECD will not accept a moratorium on the negotiations as requested in October NGO statement. However, they are ready to meet the NGOs again, if the NGOs ask for it.
There are other OECD processes on the near horizon that will also be important to the NGO community, in particular the formal year long review of the Guidelines on MNEs, by the CIME Working Group. NGO input was solicited for this by both officials and TUAC representatives. That review will be conducted whether the MAI misses the April deadline or not. In addition there is the Environment Ministerial in early April, at which the creation of a formal advisory council for environmental NGOs, possibly along the lines of BIAC and TUAC, is likely to be advanced, depending on the outcome of another ongoing consultation.
We should not forget this bigger picture, nor the issue of longer term relations with the OECD on a range of policies that will affect all our constituencies, when we deal with the OECD. The first six months of this year look likely to be a critical time for both sustainable development policies in the OECD, and the evolution of OECD-NGO relations.
The remainder of this report is broken down into three sections: the TUAC consultation, the BIAC consultation, and information collected on the margins. Note that the section on information collected on the margins contains important information for NGOs' timetabling and strategy development purposes. The agendas of the two consultations and the list of BIAC representatives are annexed.
The two rapporteurs intend to follow these notes up individually and separately from this report with some thoughts of their own on strategy. In any case we should have an e-mail strategy discussion which seeks some collective conclusions before the end of next week, 30th January.
The TUAC consultation
TUAC chose to restrict their consultation to only the first point of the agenda they chose for the meeting, namely the treatment of labour and environment in the MAI.
T - this is another agreement entrenching corporate rights, with major implications for social rights and community development. The environmental issue is important too, and there is need to maintain dialogue with NGOs on the MAI. Underlined that the MAI would not get support during ratification unless it safeguards the basic rights of working people.
O - describes elements of agreement, why it ended up in the OECD (rejected in other multilateral fora), and asserted that there was no possibility of a postponement of the deadline beyond April 1998. Status of the negotiations - many square brackets left (though deadline still feasible), labour and environment constantly on the agenda, only 3 more meetings after this one, but may need to "clean-up" text after April.
T - MNE guidelines have to be annexed, and be "morally and practically" binding to make this agreement acceptable. Notes that is difficult to make them legally binding. Few OECD countries disagree with (ILO) core labour standards, so need them as binding element, together with the no lowering of domestic standards provision. Also need a mechanism to secure adequate enforcement of domestic standards. Balance between rights and responsibilities for business is prerequisite for ratification of the agreement.
Canada - want high quality investment agreement, believes this MAI does not undermine governments' right to regulate. Are prepared to go beyond NAFTA language on labour, and have been looking at the notion of an "obligation to enforce". Not clear how one could enforce a no lowering of standards obligation - we are struggling with this. Core labour standards difficult to make binding as they are not in everyone's domestic legislation, including ours, nor in our ILO Treaty commitments.
EC - we share the same fundamental objectives as NGOs - equity and more jobs. Have to strike balances between sovereignty and international rules on the one hand, and high quality MAI rules and broadest possible (country) adherence to them on the other. We want developing countries to be able to live with this agreement. We are inclined to write in binding commitments on labour and environment. We are happy that we can conclude an MAI that does not undermine our EC environment policies and objectives.
UK - wants high quality investment agreement, but one which is good for society at large (many delegates reiterated this wish in various forms). UK prefers domestic labour standards instead of core, and wants binding commitment to no lowering of domestic ones. We need to review and update MNE guidelines, especially in areas of labour and environment, and we need to look at the issue of worldwide coverage (or just OECD) of guidelines.
Austria - as main aim of agreement is to increase worldwide investment flows - it would be counter-productive to include provisions which reduce investment flows. MAI has to be socially and environmentally sustainable but these provisions have to be compatible with the philosophy of the MAI. The 3 anchor approach (preambular reference, no lowering of standards and annexation of guidelines), plus specific reservations is what we prefer. Reference to core labour standards would give us a problem, due to idiosyncrasies of national law, so just link to ILO through preambular reference. Want binding no lowering of domestic standards provision.
Norway - want to deal with labour and environment separately in the text.
New Zealand - want high standards investment agreement, is the MAI the right place to address the environment? We are committed to all the ILO core labour standards but cannot ratify conventions due to idiosyncrasies in domestic law.
Finland - following meetings with Finnish labour movement and parliamentarians we believe respecting core labour standards is necessary for ratification.
Luxembourg - wants binding provision on no lowering of standard, non-binding on core labour standards.
Czech Republic - MAI is good for growth and to prevent discrimination against smaller countries. Want strong reference to no lowering of standards, but only preambular reference to ILO (and its standards). Have no strong opinion on how to incorporate the MNE guidelines as we have no experience of them.
US - we have to deal with labour and environment issues if this agreement is to pass Congress. We are still reviewing the no lowering of standards text, and would welcome further suggestions for language on this. Made no mention of the new (non-binding) language on environment that they submitted during this session.
T - need to combine no lowering of standards with an obligation to enforce them. On core labour standards what we want is simply that countries will not derogate from the standards expressed in the ILO Conventions. Jurisprudence not well developed, but we can work this out. Meeting these standards helps countries find their appropriate level of development. Non-binding preambular language will be ineffective in this respect - there are clear examples of non- OECD countries waiving ILO standards in export-processing zones. We are not against liberalization, just want secure protection for workers in a weak position. Need to bind TNCs to core labour standards and MNE Guidelines. Core principles have to be in the body of the treaty itself, and need to be put in now from the beginning as it will be harder once MAI is established.
Germany and EC - question extent to which these labour and environment objectives can be pursued through the MAI. Legal issues are complex (echoed by NZ and Japan).
Canada - we hear what the trade unions are saying - you want us to take a major step forward on the incorporation of social issues in this agreement.
Japan - making core labour standards binding will raise difficulties as our parliament will scrutinise our own legislation to make sure that we have complied legislatively with all ILO Conventions. This will create new rules for labour - do not try to do this through the MAI.
Czech - the main objective of this agreement is non- discrimination in investor treatment. Should not comment on the general level of labour standards. There are other places (international fora) to do this with more proficiency and expertise.
O - summing up. Had a frank discussion. It is clear that MAI has gone further than any other economic agreement on labour and environment to date. Nowhere else would you find such an understanding for your issues, but in return we expect your support for this agreement out there in the big, wild world. The world will be a better place for your constituency with what is already in the agreement.
T - that all depends on what is in the final agreement.
End
The BIAC consultation
B - we speak on behalf of all the 40 delegates on this side of the table, and the following organisations support my overview statement - the EU-US Business Council, Bankers Federation of the EU, ICC, the International Organisation of Employers, UNICE and WBCSD.
We want the MAI to raise standards for non-discrimination, investor protection and dispute settlement. We are now hearing that we will not get many important things, so we begin to ask ourselves what is in the MAI for us. Main points:
1) the specific reservations in the MAI have to be negotiated down - what message does this otherwise send to non-OECD countries,
2) the general exception for taxation is extremely regrettable - we need at least a strong anti-abuse provision subject to dispute settlement (DS).
3) on environment we supported the three anchor approach, and said we would approve NAFTA 11.14 language, but now more specific environmental language will make it difficult for some countries to join. The MAI should not set standards in this area - this would undermine the viability of investments in some countries.
Maintaining strong investor-state DS and the issue of how the MNE guidelines are incorporated are also important to us.
Business support at the national level will depend on the whole package. Does the new language really all add value? We want to be sure that you, the OECD, still want a high quality investment agreement. End of overview.
B - specific issues, short statements from individuals.
Exceptions - their number and reach should be kept to an absolute minimum, but the list is growing. Exceptions should be listed under the agreement with maximum specificity to reduce risk and uncertainty. US business will not tolerate the sectoral exceptions sought by the EU and Canada. The exemption sought by the EU for regional economic integration organisations (REIO) should also be specific. Remember, this agreement needs business support to pass US Congress.
Taxation - is part of the regulatory framework of countries, providing incentives and disincentives to business, so there is no reason to leave it out of the MAI. Taxation provisions should cover among others repatriation, performance requirements, expropriation, transparency. An anti- circumvention clause is also necessary.
Environment - no mandate for including this (or labour) at the start of the
negotiation. Governments seem to have changed their mind on this. We can,
however, accept the following non-binding language:
preambular reference to environment and labour; no lowering of standards
clause; and
NAFTA 11.14 clause on environment (identical language). "Shall" instead of
"should" could be a poison pill for the MAI.
There should be no mention of specific sectors (like toxics), and we reject the environmental impact assessment language altogether. If the MAI complicates investment it will be opposed.
Labour - we can allow preambular reference to ILO, as per the WTO Singapore Ministerial declaration. The concept of no lowering standards is unclear - changes to make legislation more flexible could be construed as lowering standards. There is also the non-enforcement question which can only be examined by the ILO. This provision could turn business against the MAI.
MNE guidelines - a more frivolous issue. We are happy that negotiators appreciate that the guidelines are not binding, and we hope that they understand that they should not be used to interpret the agreement or in dispute settlement. Even so, annexation is not the right approach. While we want to participate in the CIME review of the guidelines, there should be no review in the negotiating group. The 1976 Guidelines are a fundamental agreement between business and government, based on mutual trust - do not jeopardise it.
Expropriation - we continue to believe that broad coverage is necessary to give business greatest possible confidence that they are not risking investments. Therefore, creeping expropriations have to be included. So we are surprised that the current text is now being questioned, as is the matter of whether it applies to "normal regulatory practices". You can't write an MAI that will prevent people from using the arbitration (DS) provisions. If governments are sincere about this they must accept that they can win or lose DS.
Investor-state DS - we are worried by developments on this provision. There is no evidence of frivolous cases - it is an essential element of any high quality agreement, and any attempt to remove it raises serious questions about the value of the MAI.
Non-derogation - as later treaties override earlier ones (cf Vienna Convention), it is legally possible that the MAI may be so watered down that as to create poorer treatment of investors than under existing Bilateral Investment Treaties (BITs). So we want a non-derogation clause as an insurance policy to protect what we have under BITs. We regret having to ask for this.
Financial services - the MFN requirement in the WTO GATS agreement may be a built-in disincentive to OECD Members to sign the MAI as they will have to automatically apply this to non-OECD members. This could also create a disincentive for non-members to join, as they will receive the same treatment through the GATS MFN.
Public debt - should be included and treated the same as private debt. Public debt is usually the safest kind of debt - if the MAI excludes it, it might become less safe. Please avoid this possibility.
O - all is still under discussion. The substance of your comments is not surprising, your tone is. We are receiving criticism from all sides, including NGOs and TUAC, who raise many of the same issues but in the opposite sense. There are grave misunderstandings from the business side. This process has to end by April - in any case cannot stand more of this criticism from all sides.
Germany - surprised and hurt by suggestion that we have a waning interest in liberalisation. We are still trying to improve the climate for investment. Nevertheless be realistic on country-specific reservations - you cannot negotiate them all away. You will still get a multilateral, binding framework, with high quality protection. And we are aiming for standstill and rollback - after entry into force we will continue to work on remaining restrictions. We are more worried about general exceptions.
B - retract that statement - what we meant to say was not too many exceptions. We understand the need for compromise.
O - we will try to keep reservations limited and balanced, though some are inevitable. There has to be some flexibility around standstill, and we may add a rollback principle. Remember this is only the first step - like GATT 1947. We are entering a process of historical dimensions.
Canada - delighted to see big BIAC delegation, to get balance with NGO and labour views. Nobody has mentioned "extra- territoriality" (ie Helms-Burton, implied but not said). Do you have a view on how this should be dealt with? If we do not tackle this issue, the MAI fails an important test.
Japan - welcome opportunity for dialogue with business. On taxation - there was lots of national level consultation on this one. In the end it is not possible to create a network out of the Bilateral Taxation Treaties. You have to use these (individually), backed up by consultation with authorities, and a notion of national treatment.
France - agrees that there should have been more coverage of tax. We really need your support to get a high quality agreement. But there is still a need for exceptions and reservations as there are other considerations beyond the purely economic - eg national security and culture. We are also interested in how to treat extra-territorial measures. Finally, on public debt, we have to have an exception for this. The procedures of the Paris and London (debt-relief) Clubs could be broken by the MAI, yet these procedures enable some highly-indebted countries to start off again, for their good and yours too.
UK - our enthusiasm has not waned, still aiming for high quality agreement. Echoes France on extra-territoriality and public debt. We are working to ensure that the MAI does not cut across Paris and London Clubs. The non-derogation issue is still under discussion. On expropriation we need to balance governments' prerogatives with sound rules on investor protection. In the last few months the NGO community and other relevant government departments have raised serious concerns about this provision that we cannot ignore. On the REIO clause - it is tightly drawn, and has been further limited sectorally since October. It does not override expropriation or transparency rules and can still go to DS.
Switzerland - shares BIAC's concerns on some issues, eg taxation, expropriation, comprehensive coverage of investor- state. But are you really questioning the value of this agreement? Do not take the short-term view - the MAI is supposed to be the nucleus of a global economic constitution. The fundamental right of doing business must be balanced by other rights - it is a matter of balance. Also we are not negotiating the MAI just for TNCs. They are not the only actors in this ever more integrating world. We think also of smaller companies, who have to defend their interests too. The MNE guidelines are valuable - I applaud the vision of those who created them 20 years ago. If we did not have them now, we would have to invent them immediately. On investor- state DS - this should apply to pre-establishment measures too. Despite rumours the text of investor state remains as before.
Austria - impressed by BIAC turnout. On the guidelines, you should not worry too much here. On expropriation, due to recent events some clarification is needed here. It is ultimately up to arbitrators to decide on what is unjust expropriation. Concerned about the tone of BIAC's remarks, questioning the value of the MAI. You must understand that the final agreement has to contain the fine legal print. But it is still a win-win situation for all participants. We have the "top-down" approach for the first time ever, which requires more exceptions, and we have investor-state DS for the first time ever in a multilateral agreement. These alone should be enough to convince you that the MAI has added value. Do not say that its value is diminished by labour and environment. Concentrate on what is good for business and leave us to include something on labour and environment.
Mexico - ask yourselves what are the subjects that will make it impossible for non-OECD countries to accede, or which standards will be raised to the same effect.
US - trade, investment and environment are linked, this is now well recognised including at Rio, in WTO, NAFTA etc. We believe trade liberalisation and environment are compatible if that liberalisation takes place in the context of appropriate environmental policies. However good the MAI might be (from an investment point of view) it might still not get past Congress. Agree we should not dictate environmental standards here - but we have to address the linkages.
O - on GATS and MFN. We are trying to find sensible ways to link top-down MAI with bottom-up GATS, with regard only to investments in the MAI. We have the concept, need only to elaborate.
B - we are pleased by your positive response to our comments. Be careful with explanatory notes on expropriation - you could end up drafting new international law. On non-derogation - would like to leave it as a technical point. While we hope it is not necessary, would like to see it in.
On extra-territoriality, we are only interested in controlling it where a regulation requires a person in another state to break that state's laws. We are not interested in mere policy differences. Tax-deductible bribes are a problem. We also need to protect investors from states retaliating against them for the actions of their home state. Need to consider how.
If we have criticism it is only to try to enhance investment protection. We do appreciate your efforts and think you are doing a good job
O - it was useful to get some pressure from you. We need you to blow in our sails or the MAI will never reach the shore. Need your support in newspapers and electronic media, where you are barely present by comparison with the NGOs. Talk to your governments in the capitals too, if you want to influence the Paris negotiations.
End
Information gathered on the fringes of the consultations
Negotiating timetable - the agreement cannot be completed by April, even for initialling. Work will be left to do after a political declaration on the agreement at the April Ministerial, which it is hoped will announce an overall package. Key issues including extra-territoriality (Helms- Burton) and labour and environment will be left out of this declaration to be settled ("tidied up") between then and the end of the summer. It is hoped to initial the agreement in late summer then organise a dedicated Ministerial for its signature in November. Opinions seem to differ how much substantive negotiation will remain to be done, but it sounds like much more than tidying up.
Development and consumer issues - there is little evidence of progress on these issues. On development all there has been is the Japanese paper on a differentiated accession process for non-OECD countries. Ministries of Development Cooperation are generally still not engaged, even those of the Nordics. During the day of the consultations the OECD was visited by a high-level delegation from the Baltic states, indicating their desire to be founding members of the MAI. These states did also submit their desired list or reservations to the agreement - a level of preparation and sophistication which seemed to surprise some negotiators.
Any non-OECD countries intending to join the MAI would be likely to get better conditions by joining late rather than early. The later you join, the longer will be the consolidated list of reservations, and the more it easy it will be for an acceding to country to get the reservations it wants.
On consumer issues we were referred to the competition chapter in the MNE guidelines, which it was acknowledged is "seriously" out of date, and which will be updated in the review of these guidelines. The only other relevant element in the agreement is the article on monopolies, which has a bracketed article allowing elimination of monopolies and an unbracketed article saying designation of monopolies must be non-discriminatory. Nothing has been added since October and this seems unlikely to change.
Environment and labour - the High-Level meeting on 16-17th February will decide if there is going to be an MAI, and if they try to reach this target that meeting will also set the parameters (upper and lower limits) for the language on environment and labour. Those interested in these issues must lobby hard in their capitals over the next two and half weeks (ie ahead of the national coordination meetings which will start about a week ahead of the High-Level meeting. This is a major political issue, particularly in the US, where government departments are split on it. Lobbying in Washington is particularly important at this time. A suggestion for NGOs - everybody should ask in their capitals: "will there be a written assessment of the MAI's effect on our national environmental policies, and if not how will we know if you have done it or what those effects are? Where is the transparency in the process?"
On the legal substance, it seems that separating environment and labour texts is losing ground as an option. Most negotiators think GATT Art. XX approach to the environmental exception does not sit well in the MAI and prefer the NAFTA 11.14 approach. The non-discrimination requirement is likely to be qualified with the "in like circumstances" proviso.
New Zealand, Mexico, Korea and to a lesser extent Australia are still resisting environment and labour text fiercely. Increased domestic pressure on all of these, particularly New Zealand, would help. Australia did not appear to have anyone attending the consultations.
Standstill and rollback - while these are still considered by some to be central elements of the agreement, it is clear that they can only make a beginning on these issues this year. These issues also appear susceptible to NGO lobbying, and the question of exceptions to these two provisions has dominated the last two negotiating sessions, along with labour and environment.
CIME review of MNE guidelines - to be initiated in June this year. Major foci of the review will be their implementation, environment and core labour standards. (Note that one of the elements under discussion for incorporation of the guidelines in the MAI is a binding requirement that MAI signatories establish a contact point for operation of the guidelines - no such requirement exists, even in the guidelines themselves). NGOs were advised to start indicating now how important they consider these guidelines and begin preparation of formal inputs to the process for later this year (note BIAC's defensive position on this review). Switzerland has a key role in this group as they have the chair of CIME and hence the review process.