Feb 19, 1998

FINANCE: DECISION ON FUTURE OF "CAPITALISTS' CHARTER" DEFERRED

 

Paris, Feb 17 (IPS/Angeline Oyog) -- Representatives from 29 industrialised nations agreed Tuesday to defer a final decision on the viability of a global investors' rights pact until a ministerial level meeting in April.  

The Multilateral Agreement on Investment (MAI), under negotiation by the 29-member Organisation for Economic Cooperation and Development (OECD) in Paris since May 1995, has drawn criticism from both supporters and critics of free movement of foreign capital. 

Ministers were originally scheduled to be gathering in two months time to sign the pact, an event already delayed a year. But the furore surrounding several of its draft clauses and the decision of the U.S. to withdraw support for the pact as it stands has left its future in disarray.  

Frans Engering, chairman of the MAI negotiation group, admitted to gathered media Tuesday evening that the ministers meeting in April may decide to scrap the much maligned pact.  

"If we are unable to make progress, it is quite possible that the ministers will say further negotiations are not worthwhile," he said.

He refused to comment on the U.S. withdrawal of support on the grounds that the MAI draft as it now stands is too weak to endorse.  

An estimated $8.3 trillion in foreign direct investment (FDI) is currently in place around the world, and annual FDI flows from OECD member countries alone totalled $259 billion in 1996.  

The MAI pact was supposed to protect these trillions by making sure governments treat foreign and domestic investors equally.  

The pact would have covered FDI, portfolio and other investments, short-term flows, and other property rights of foreigners, including intellectual property rights.

But supporters of the pact say the current draft is too weak and subject to too many national exemptions that water it down, while critics say the proposed MAI would free up international corporations while stripping rights from ordinary citizens.  

And on Friday the U.S. said it would not sign the treaty as it now stood and did not anticipate that it could be revised sufficiently to suit its needs by April 28, when it was supposed to be signed by OECD ministers at their annual meeting. 

Engering said there were still a number of "complicated and politically sensitive issues still on the table," but cited four main areas of debate: a possible dispute settlement system; labour and environment issues, exceptions to the liberalisation process and subsidies and selective government procurement.  

This week's talks have however confirmed that any MAI would not be allowed to "breach southern government policy" and will take into account exceptions based on issues of national security, and respect "political sensitivities and priorities". 

Many thought this could be the coup de grace for the floundering pact. The OECD says the MAI was originally intended to provide a comprehensive and coherent framework -- or "rules of the game" --for investments.

But civil society and environmental groups have condemned it.  

"The MAI is a threat to democracy and the environment." said Kevin Dunion, chairman of the lobby group Friends of the Earth International, as the meeting got underway. "It will elevate foreign corporations to rule makers and reduce the power of government to regulate in the public interest. The treaty process must be stopped in its tracks if it is not to do untold damage to people and the planet."  

The two day talks failed to establish whether the political will remains among the other OECD members to make the necessary compromises on the four main areas of dispute.

These issues are further complicated by the fact that pact's terms of reference have always fluctuated according to national agendas. Almost unlimited wrangling over dozens of national exemptions in various sectors is possible.

Meanwhile global suspicions have deepened among emerging market nations that the U.S. and unregulated capital market traders will use the MAI as a weapon -- particularly in the wake of the South East Asian crisis, largely attributed to uncontrolled movements of foreign investment.  

The experience has turned governments against allowing global investors even more freedom than they already have, undermining the draft pact's original conception as an agreement that countries outside the OECD would want to join.

 

"We hope that the combination of public pressure and government cold feet will keep the MAI from being finished by April," said Dunion. "But negotiators should know we mean business. If the agreement is signed, we and our allies will be ready to fight its ratification in all the major capitals of the world."  

Engering said Tuesday that the delegates had recognised the need for the MAI to "address social concerns." He maintained that the core aim of the MAI was non-discrimination.  

But he said that most delegations believed that the MAI should not give corporations the right to force governments to reduce environmental and labour regulations. 

Many states feared that a MAI would set up a disputes panel where investors could challenge local legislation that they believed interfered with their 'right' to put in or take out their funds as they liked, where they liked.  

To U.S. dismay this meant that the pact could also force Washington to lift the so-called Helms-Burton and D'Amato laws that allow the imposition of sanctions on foreign companies operating in the United States who trade with Cuba, Libya or Iran. 

"Many delegations do not foresee any agreement on the MAI without an acceptable solution on the Helms-Burton law," Engering warned.  

He also eased fears that the state subsidised European audiovisual and cinema sector, already allowed a hard-won exception under the GATT/WTO pact, would be forced open to US market giants under the MAI. The same rights for the European film sector under the GATT would be preserved under the MAI.  

The talks drew delegates from all 29 OECD industrialised member nations and observers from Argentina, Brazil, Chile, Hong Kong and the Slovak Republic. 

"We agreed that intensified efforts with ever more flexible mandates can be made until April, but, what we can achieve (in the time remaining) is difficult to foresee." Many observers believe the MAI is too fraught with problems to salvage.

However a year ago, faced with similar obstacles, the 29 nations extended the negotiating deadline for another year, and that option remains open. Alternatively other OECD countries might proceed without the United Stats to wrap up a framework pact by April. But this seems unlikely.