The following introduction was delivered at a forum on the Multilateral Agreement on Investment, held by the Centre for Citizenship and Human Rights, Deakin University, Geelong, April 29, 1998. The keynote speakers were Gavan O’Connor MP, (ALP); Stuart Macarthur MP (Lib); and Ted Murphy (National Tertiary Education Union).

Function of the MAI

The Multilateral Agreement on Investment is being negotiated under the auspices of the Organization of Economic Cooperation and Development (OECD). The purpose of the MAI is to:

1. Remove restrictions on foreign investment

2. Protect those investments against loss of value

3. Enforce protection through financial compensation (Kelsey 1998).

Background

The MAI is the logical extension of liberalising measures which were adopted with the GATT - the General Agreement on Tariffs and Trade. The GATT was set up in 1948 to reduce industrial tariffs amongst industrialised nations (Murphy 1998). Until 1986, GATT jurisdiction was limited to the rules of trade in manufactured goods (Murphy 1998). However, during the Uruguay GATT rounds significant concessions were obtained for TNCs in the area of goods, services and intellectual property monopolies (Das 1996). The Uruguay rounds also set up the World Trade Organisation in January of 1995, in order to administer GATT. At this point the European Commission began to lobby for starting a process for multilateral negotiations on investment through the World Trade Organisation (Das 1996). Developing and less developed countries objected to such a treaty being negotiated through the World Trade Organisation, therefore, it was brought into the OECD with the intention of drafting a 'high quality agreement' (Kelsey 1998).

Negotiations on the treaty commenced during May of 1995 in Paris. A deadline for finalising the treaty was set for May of 1997. However it was not completed so a further deadline was set for May of 1998. Negotiations look like they will continue to be stalled as, ironically, the European Union has voted against accepting the MAI in its current form, with only 8 votes in support of the current draft, and 437 against.

Content and Debate

Under the conditions of the treaty governments are prevented from discriminating against foreign investors, they cannot demand any performance requirements, and must give full market compensation in the event of 'expropriation' of either assets or lost opportunities for creating profit. Those groups who are drafting the MAI believe that the treaty will provide:

* the conditions for "fair, transparent and predictable investment" which will "benefit the world trading system";

* effective dispute settlement mechanisms;

* and the efficient use of economic resources, the creation of job opportunities and improved living standards (cf. Khor 1998).

 

If the treaty is signed, governments cannot opt out for five years, and they must honour existing investors for a further 15 years. It is possible to opt out of individual parts of the agreement which are tabled as 'reservations'. However, it is expected that these reservations will be successively 'rolled back'. Due to 'stand still' requirements, new reservations cannot be added after the treaty is signed (Kelsey 1998).

The controversy which surrounds the MAI hinges upon whether it is possible to act as if the economic arena is autonomous, encapsulated and independent from the political, social and environmental realms (cf. Geddes 1995). Working on this presumption neo-liberal economists are attempting to set the conditions in which the 'market' can operate according to the 'laws' of "...balanced exchange, rationality, independence, free competition, scarcity and constant 'economic growth'..." (Geddes 1995, 62). Because these economists are acting on the presumption that the economic realm is self-contained, they deny that the treaty will compromise the ability of governments to enforce existing legislation.

Opponents of the treaty, including international movements of indigenous peoples', citizens organisations, environmentalists and unions, believe that the MAI will exacerbate existing inequalities, as free market competition will drive down environmental and labour standards in a "race to the bottom". Opponents believe that they have been deliberately excluded from the negotiating table, while only the multinational interests which are driving the negotiations will benefit. They argue that "Governments must ensure that they do not have to pay for the right to set environmental, labour, health and safety standards, even if compliance with such regulations imposes significant financial obligations on investors" (Apex 1998).

These groups are demanding either the complete abandonment of the MAI, or binding conditions of labour, human rights or environmental standards to be written into the core text of the treaty.

POSTSCRIPT JUNE 1998

The recent Interim Report on the Multialteral Agreement on Investment, compiled by the Joint Standing Committee on Treaties (May 1998) has strongly criticised the Australian Treasury for its role in the negotiations of the MAI, noting that consultations have taken place primarily with peak bodies, the lack of information and effective consultations with all levels of government below the federal level, the fact that the draft text of the treaty was only made available to the public and representatives on the internet in March of 1998, and the paucity of information found in the Treasury's own submission which was only 11 pages long. They also expressed serious concern about the refusal of the Industry, Science and Tourism portfolio to lodge a submission (JSCT 1998). The Joint Standing Committee on Treaties has decided to continue its public inquiry into the MAI including further public hearings around Australia over the next few months. Submissions can be lodged to the Secretary of the JSCT, Parliament House, Canberra ACT 2600.

 

References

Apex Press. 1998. 'MAI: Multilateral Agreement on Investment - Democracy for Sale' in Economics Working Group internet site, http://www.greenecon.org/MAI/

Das, B. L. 1996. 'A Critical Analysis of the Proposed Investment Treaty in WTO' in Third World Network internet site, http://www.twnside.org.sg/

Geddes, B. 1995. 'Economy, environment, ideology and marginalisation' in Anthropology: Voices from the Margins. (eds.) J. Perry and J. Hughes, Deakin University Press: Geelong, Victoria, Australia.

Joint Standing Committee on Treaties 1998. Multilateral Agreement on Investment: Interim Report, 14th Report. May.

Kelsey, J. 1998. Public Lecture on the MAI. Melbourne and Region Trades Hall Council. February.

Khor, M. 1998. 'A Commentary on the Draft Text of the Multilateral Agreement on Investment (MAI)' in internet site, http://www.chasque.apc.org/ngonet/trade/mai/martin.html

Murphy, M. 1998. 'Denying Blame and Identifying the Major Culprits of Global Destruction' in Naari Studies in Gender, Culture and Society East; West. R. Sharma ed. Satguru, in association with Open Wisdom Publications: Delhi.