SUNS  4326 Wednesday 18 November 1998


Finance: NGO coalition targets capitalist 'Constitution'



Washington, Nov 16 (IPS/Abid Aslam) -- A grassroots coalition of non-government organizations is renewing efforts to kill a global investment pact that it says would obliterate local democracy and
measures to protect jobs, the environment and the public's health.

Some 240 citizens' groups will hold an 'international day of action' Wednesday, to raise their voices against the draft Multilateral Agreement on Investment (MAI) and attempts to negotiate similar treaties and arrangements for the rights of capital - at the WTO, IMF etc. Such efforts survive, despite volatility in international financial markets and the much-publicised collapse of MAI talks in February and last month.

The pact, famously described as "a constitution for a single global economy," would require countries to enact investor-friendly laws. It has been a dream of multinational business for some years but would represent "one of the greatest acts of capitulation ever by democratic government to corporate power," according to Sierra Club trade specialist Daniel Seligman.

In the United States, MAI opponents say they will take to the phones Wednesday to lobby their elected representatives and U.S. administration officials. Similar efforts last month "shut down the
White House switchboard," prompting officials to hold meetings with campaigners, according to Margrete Strand, MAI project coordinator at the non-governmental Public Citizen Global Trade Watch.

The latest attack comes ahead of talks in Geneva next week on proposals to negotiate an investment treaty resembling the draft MAI to the World Trade Organisation (WTO). That idea has emerged in recent months, as talks stalled at the Paris-based Organisation for Economic Cooperation and Development (OECD) amid internal bickering and external pressure from citizens' groups.

Supporters of the transfer of venue, including the European Commission, say it will make the resulting treaty fairer for developing countries and more sensitive to environmental and labour
concerns but the global grassroots coalition disagrees.

"Shifting the investment issue to the WTO will place great pressure on developing countries to negotiate and eventually join an agreement that would have disastrous effects on their development
prospects," the groups say in a letter written by the Malaysia-based Third World Network and to be presented to the WTO's Working Group on Trade and Investment. "Promises to include environmental and social concerns are likely to be an eyewash to co-opt the public to accept the basic tenets of MAI."

The working group studying the relationship of trade and investment is scheduled to meet Nov. 25-26 and is to recommend whether to continue with its study or undertake full-scale negotiations.

Supporting the latter course is the European Commission, which would speak for all members of the European Union. It therefore would see itself strengthened and regional integration advanced,
Strand says.

France, which last month withdrew from the long-stalled OECD talks, favours a transfer to the WTO.

Trade analysts, however, see this as a ploy intended to appease domestic critics of the MAI. Paris, they say, has a history of publicly denouncing trade talks while continuing to participate in
them, as happened with recent dialogue on a 'Transatlantic Economic Partnership'.

The United States opposes the move, mainly because US investment firms feel they can win stronger language from the OECD than at the WTO, according to some analysts.

Officials and campaigners alike hope Paris will clarify its position in time for new OECD talks next month. But, notes Strand, "it's unclear what will happen if France really puts its foot down.
Potentially, we could see some form of investment treaty at the WTO in addition to something at the OECD" - assuming that the latter steers its talks back on track.

[Meanwhile, according to some activist NGOs, the OECD secretariat is trying to split the non-government coalition, by sponsoring consultations with a small group of NGOs, along with business and trade union groups. While some NGOs seem inclined to participate, others are opposed and view with some suspicion those advocating participation.]

[Also, in the wake of the financial crisis that began in Asia and has now become a world crisis, free trade ideologue Prof. Jagdish Bhagwati has come out in interviews, articles and letters to the
editor of major newspapers, strongly against investment issues being negotiated at the WTO, and has advocated these issues of transnational corporate investors rights, their obligations to host
countries, and issues of labour standards and environment be pursued by means other than trade treaties and institutions.

[In the latest of his publicised views, in an article in the Wall Street Journal, titled 'Yes to Free Trade, Maybe to Capital Controls', Prof. Bhagwati says "... gung-ho financial capitalism, letting capital flows rip, is far too risky - a sure-fire way of betting the company." he distinguishes between free trade in goods and free capital mobility, and points to the downside risks of capital mobility. He advocates those having capital controls to maintain them until they have "political stability, sustained prosperity and substantial macro-economic expertise", concentrating instead on internal reforms such as privatization and external reforms such as free trade. And those who have already freed capital controls, don't jump into capital controls, but stay the course and restore confidence, and when back on track learn from recent afflictions, learn to be prudent, watching short-term debt
exposure and be ready to regulate the and moderate it as necessary.]

Closed-door negotiations at the OECD moved along until early 1997, when activists obtained and published the draft treaty, exposing its contents as well as the secrecy with which the OECD's 29
members and multinational corporations were drawing up blueprints for the future of global investment. All other countries would have to fit in or fall out of financial markets' favour.

As a result, OECD officials were forced to hold consultations with some developing countries and non-governmental organisations. However, according to participants' accounts, many of these
sessions were dominated by long lectures on the treaty's potential benefits for developing countries willing to restructure their economies and legal systems.

Nevertheless, the process had been broadened and ensuing conflict over companies' and states' rights scuppered negotiations early this year.

Critics fear that investors will be able to use the treaty to bully weaker parties and poorer countries into compliance with their wishes. These would be embodied in the treaty, which would forbid
domestic laws protecting the public health or environment if these were deemed to be restricting overseas investors' freedom. Law suits filed under the North American Free Trade Agreement
(NAFTA) provide "by far the clearest indication of what we can expect," says Strand.

Two US companies have forced the Canadian government to overturn a law protecting its citizens from a potentially harmful fuel additive and rescind a ban on chemical waste exports on the grounds
that these violate NAFTA. A third US firm is suing a Mexican state over environmental zoning laws that prevent it from opening a waste disposal plant.