'Time for champagne,' opponent says as nations reveal deadline will be missed
Friday, March 27, 1998 By Madelaine Drohan
PARIS -- Negotiators for the Multilateral Agreement on Investment said yesterday they will not make their April 27 deadline -- a clear sign that the controversial effort to formalize international rules for investing is on its deathbed.
Joanna Shelton, deputy secretary-general of the Organization for Economic Co-operation and Development, tried to put the best face on it. "We're not likely to meet the April deadline," she said at a news conference, adding that ministers from the 29 member countries, including Canada, may set a new one next month.
But representatives from some of those countries were saying privately that the negotiations face so many obstacles it might be better if governments just stuck to the current investment rules.
"Some people are already talking about just getting a standstill on what already exists -- a freeze," one representative said.
A text of the deal negotiated so far was released yesterday, revealing disagreement at the most basic level. Negotiators apparently cannot even agree on a definition for investment or investor. There was consensus on the suggestion that these definitions should be clarified, but none on what those clarifications should be.
The MAI was supposed to replace the 1,600 bilateral investment treaties between OECD members with one overarching deal that would lay out consistent investment practices and provide remedies to investors who felt they had been unfairly treated or discriminated against.
It has generated much opposition, linked to a growing backlash against globalization, which created a bad image for the talks almost since the start.
News of the MAI's difficulties brought cheers from environmental organizations and cultural groups that opposed a deal they said would allow corporations to run roughshod over national laws designed to protect culture and the environment.
"Time for champagne," said Sabina Voogd, spokeswoman for Greenpeace International in Amsterdam. "There are so many flaws in it, there's no point even trying to patch it up."
But there was growing disappointment among corporations that are pushing for a set of rules for international investment similar to those that govern international trade.
"The world needs an MAI," said Lionel Walsh, spokesman for the Paris-based International Chamber of Commerce. "A great deal of work has been done and it would be a pity if the whole thing has to start again from ground zero."
Maude Barlow, chairwoman of the Council of Canadians, a group opposed to free trade, said she is pleased the talks have faltered, but expects to see global corporations and governments revive the notion of a charter of rights for corporations.
"There's just a huge backlash against it, so there's no question they're in trouble," Ms. Barlow said. "However, I don't underestimate their desire to have something eventually, and my worry is that we'll all declare victory and they'll concede that this MAI is dead and then they'll go quietly away and it will surface in some other guise."
She said a proposed free-trade agreement for the Americas, which will be discussed at a summit meeting in Chile next month, could contain investment provisions similar to those proposed under the MAI.
Ms. Barlow said Canadian groups will work with like-minded organizations in other countries to propose an alternative investment agreement that would enshrine the rights of citizens rather than corporations.
There was controversy even before the MAI talks began in 1995 because of the battle between the OECD, which consists primarily of the world's major industrialized countries, and the 132-member World Trade Organization over which should conduct the groundbreaking negotiations on investment.
The OECD won, but has had to fight since then against accusations its members are an unrepresentative group of rich countries trying to impose their investment rules on the developing world.
The Canadian position, similar to that of the International Chamber of Commerce, is that any deal struck at the OECD would have to be expanded to include other countries. "The need is for security of investment in those countries," Mr. Walsh said.
But the negotiations have not ground to a standstill just because of outside opposition, from excluded countries, environmental groups and cultural organizations, although that is substantial. Divisions between the 29 OECD members on a number of key issues helped throw sand in the negotiating gears, particularly the battle over the U.S. Helms-Burton law.
Trade Minister Sergio Marchi threatened that Canada would leave the investment talks if the United States did not change the law, designed to punish companies doing business in Cuba on properties expropriated from U.S. citizens after Fidel Castro took power. He called Helms-Burton "a deal breaker." The 15 members of the European Union feel as strongly about Washington seeking to extend the Helms-Burton law to other countries. While negotiations on that issue have been taking place, no deal has been reached.
For its part, the EU wants to preserve preferential treatment among its member countries, arguing that they should be treated like states or provinces. But the United States counters that it does not want EU members to have more preferential treatment than outsiders in the EU market of 372 million people. The two have been unable to agree on this.
Canada and France also weighed in with long lists of exemptions for their cultural industries, something the United States opposed as disguised protectionism. Pierre Tchernia, head of a French group of actors and movie makers opposed to the MAI, said they refuse to have their works looked at as investments. "We are not manufacturers of farm machinery."
Multilateral Agreement on Investment
Was intended to set global rules for investing and give investors clear remedies if the rules were broken.
Would protect investors against discrimination or expropriation of their investments, make it easier to invest in foreign countries and set up ways to resolve disputes. Was promoted as a way to increase international trade.
Was criticized as threatening worker protections and environmental laws because investment could flow easily to countries with the weakest laws.
What is it?
The Multilateral Agreement on Investment was supposed to do for investment what the Uruguay Round of the General Agreement on Tariffs and Trade did for goods and services -- establish global rules for investing and provide clear remedies for investors when those rules are broken.
Why is it needed?
Currently, the $350-billion (U.S.) in annual foreign direct investment largely coming from countries in the Organization for Economic Co-operation and Development is governed by 1,600 bilateral investment treaties between the 29 member countries. The MAI was designed to replace those 1,600 deals with one agreement.
Why the OECD?
Negotiations were launched in May of 1995 after the OECD won a fight with the World Trade Organization to act as host of the talks. The idea of OECD members was to avoid the battles between have and have-not countries in the 132-member WTO that made the Uruguay Round negotiations a seven-year marathon. But this led to accusations that the rich countries were trying to impose their rules on the developing world.
Who's in the OECD?
Australia, Austria, Belgium, Britain, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Spain, South Korea, Sweden, Switzerland, Turkey and the United States.
What was to be achieved?
The MAI was to have three key elements: investment protection, investment liberalization and binding dispute settlement. In other words, it would protect investors against discrimination or expropriation, would reduce barriers to investment by foreigners and would provide a method of resolving disputes when they occurred. Countries could have exemptions on limited grounds, such as national security, culture or the environment.
What do critics say?
Opponents, such as labour, cultural and environmental groups, have feared that corporations could use the MAI as a battering ram to erode national laws designed to protect workers, the environment and culture. Workers feared that if it was easier to invest elsewhere, companies would move jobs abroad.
What do supporters say?
Proponents say it would open the door to new investment, create jobs and increase exports while still allowing governments to regulate on the environment, labour and culture -- that is, as long as they did not discriminate against foreign investors.