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WHAT IS THE MAI?
The MAI is a treaty on foreign investment which is being negotiated under the auspices of the OECD (Organisation for Economic Cooperation and Development). Completion of the agreement was initially scheduled for April 1997 but has been postponed to April 1998. Governments have been very secretive about the negotiations and there is very little awareness about the MAI and its implications, not only amongst the public, but also amongst politicians and local government officials.
The MAI aims to liberalise international investment by preventing governments from discriminating against foreign investors. Initially, the potential social and environmental consequences of the MAI were totally ignored. Despite lobbying from NGOs, they c ontinue to receive insufficient attention from the negotiatiors (mainly officials from trade and economics ministries) who appear to be pursuing the liberalisation of investment as a means in itself, rather than a means to an end. Effectively, the MAI wou ld hinder the ability of governments to combat the worst consequences of economic globalisation. The MAI affords many rights, but few obligations to foreign investors. They would be given legal standing to sue governments (national, regional or local) thr ough an international dispute panel if they felt the MAI was violated. There would be no limit to the sums of compensation demanded.However, governments, NGOs and citizens would be given no rights to sue foreign companies.
The MAI is supported by much of business and industry, and is particularly favoured by large multinational companies, who are keen to expand their economic grip on the world. Multinational supporters of the MAI include a number of companies [1] whose record on environmental and social issues is somewhat tainted, such as:
Companies like these are already more economically powerful than many nation states. There is no need to afford them sweeping new rights.
OPEN DOORS FOR CORPORATE PLUNDER
Despite much rhetoric from many multinational companies on their commitment to sustainable development, they are opposed to most types of government regulation, as this may stand in the way of the unfettered growth of their operations worldwide.
Thus, the corporate lobby is totally opposed to the inclusion of environmental and labour standards in the treaty, as proposed by some governments (including the UK). The International Chamber of Commerce (ICC), of which most large corporations are a member, recently described such proposed standards as 'excess baggage' [2]. There have been suggestions from some governments that the 1976 OECD guidelines for multinational enterprises should be appended to the MAI. However, experience over recent years has shown how ineffective such voluntary guidelines are in reality.
Meanwhile, corporate promises on job creation may prove largely illusionary, as millions of jobs continue to be shed under the banner of globalisation. For example, between 1993 and 1995, the global turnover of the top-100 multinational companies increase d by more than 25 percent, yet they simultaneously cut their global workforce by 4%, amounting to over 225,000 lost jobs [3].
ENVIRONMETAL IMPLICATIONS
The environmental implications of the MAI are not straightforward and the actual damage caused would very much depend on circumstances and the behaviour of investors. The main problems would occur if investors behaved in a sleazy and unethical way.
The MAI would restrict the possibility to apply performance requirements on the operation of investors. Environmental standards may be excluded from this but the restriction of other requirements could have environmental implications. For example, requiri ng a preference for locally-made goods and services would be beneficial in terms of transport related emissions, but would not be allowed under the MAI.
Under the MAI, no discrimination is allowed between national and foreign investors. However, certain local environmental regulations could be construed as 'discriminatory', thus opening up possibilities for litigation against local authorities. The broad definition of expropriation in the MAI draft could allow a challenge of environmental regulations on the grounds that they diminish the commercial value of a property. Such a case is currently being brought under NAFTA, which has similar rules. The US bas ed multinational Ethyl Corporation is demanding $251 million from the Canadian government after it decided to ban a toxic chemical manufactured by Ethyl [4].
The MAI also potentially conflicts with a number of Multilateral Environmental Agreements [5], for example:
There is an urgent need of a comprehensive assessment of the environmental implications of the MAI.
WHAT WILL THE MAI DO TO AUSTRALIA?
The Australia has one of the most liberalised investment regimes in the world, and regional development organisations already afford preferential treatment to foreign investors. Hence, the MAI may not result in much change from the current situation.
However, the dispute panel set up under the MAI could open up the possibility for rogue investors to sue the Australian government and local authorities for applying a variety of laws (e.g. planning regulations).
Also, the MAI would lock the Australia into a specific development path for many years to come (at least 15 years under the MAI's withdrawal provisions). It may interfere with the new powers local government has been promised on social and economic development i ssues [6].
The current crisis in South-East Asia shows how vulnerable Australia jobs can be when relying on foreign investment. The unfettered growth of foreign investment may not be the best future for the Australia. Yet, under the MAI it would be impossible to give special support to local small- and medium sized entreprises.
The MAI also makes a mockery of the government's commitment to sustainable development and supposed concern for putting the environment at the heart of policy making. There has been little dialogue between government departments on the MAI and its environ mental implications. The negotiations are led by officials from the Department of Trade and Industry and the Treasury who have different priorities.
The MAI will kill-off a large portion of Australia's small business sector as multinationals use the "level playing field", tax benefits and threats of action through the international courts to good, profit-driven effect.
SO WHAT DO WE WANT?
Opposition to the MAI has grown world-wide at a fast rate. Around 600 environmental, development, labour, consumer, church and women's organisations from over 70 countries [7] have joined the call for:
Suspension of the MAI negotiations and completion an independent and comprehensive assessment of the social, environmental and development impact of the MAI with full public participation.
Negotiation of a treaty which ensures investment furthers the aims of sustainable development, including:
Foreign Direct Investment can be a good thing but it needs to be regulated carefully. We do not want investment for investments sake. Its purpose has to be to be the advancement of sustainable development.
_________________________________________________________________ Notes [1] Representatives of these companies attended at lobby meeting at the OECD in Paris in January 1998. _________________________________________________________________ [2] Joint BIAC/ICC letter to the Financial Times, 15.01.98 _________________________________________________________________ [3] UNCTAD World Investment Report 1997 _________________________________________________________________ [4] Friends of the Earth US, Reasons to be concerned about the MAI, 1997. _________________________________________________________________ [5] WWF Critique of OECD Secretariat note DAFFE/MAI 998/1, January 1998. _________________________________________________________________ [6] MAI and local economic development and poverty in the Australia, a study by Oxfam Australia, 1998. _________________________________________________________________ [7] Joint NGO statement, available from Friends of the Earth. _________________________________________________________________
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Multilateral Agreement on Investment