Tuesday, December 1, 1998
Investment agreement hurts democracy
CORPORATIONS: Proposed treaty gives business excessive power,
threatens environment, freedom
By Ellie Cijvat
Imagine a world where the Clinton administration, the House of
Representatives, the Senate, the government of California, the Los
Angeles City Council and every other elected body is subject to the
whims of any corporation – by law. It might be hard to imagine, but
it is actually not that far away; a worldwide treaty is being
negotiated at the moment to take care of that – namely the
Multilateral Agreement on Investments (MAI).
The MAI is a NAFTA-like agreement, but is even broader in scope
and is to be applied worldwide. It is based on the principle that
one company (investor) cannot be favored above others. If a company
feels discriminated against, it has the right to sue the body it
feels is discriminating against it (mostly federal or local
governments, since they decide about allowances and possibly apply
restrictions to the settlement of companies). The consequences of
this principle are enormous.
But first let me give a historical overview of the MAI
negotiations.
A couple of years ago, the 29 wealthiest countries in the world,
united in the Organization for Economic Cooperation and Development
(OECD) and started to secretly discuss a trade treaty that would
give investors the right to freely move assets from one country to
another. Predictably, the negotiators agreed on having a broad
definition of "investors," "assets" and "freely".
After this treaty would be ratified by the 29 developed nations,
other (developing) countries would be asked to sign up, so that
their markets would open to investors, and everybody would profit
(according to the negotiators).
But it didn’t go as smoothly as they expected. About a year
before the supposed completion date (set to be in April of 1997), a
draft version of the treaty accidentally became public and caught
the attention of some non-governmental organizations concerned
about free-trade agreements. These organizations started to raise
objections to the implications of such a treaty (although not
formally counseled, of course) and gained just enough momentum to
delay the completion of the MAI. At the same time the 29
negotiators started disagreeing about details more and more.
This is where we are now:
The MAI negotiations have not been completed yet, and a decision
will be made soon whether to continue with the MAI within the OECD,
or move it to another organization such as the World Trade
Organization – or stop the negotiations altogether. This last
option is not very likely; most probably, the second option will be
chosen. In this way, a fresh start can be made and the developing
nations will have the illusion of being involved in the
negotiations.
Now, back to the consequences of the MAI. First, the
implications of having broad definitions of "investors," "assets"
and "freely" are that basically any kind of organization (from
transnational corporations to single-person companies to
pseudo-governmental institutions) can start a branch in another
country without any restrictions – such as having to hire local
people, use a part of the local profit to invest in the local
community, or having to stay for at least a certain amount of time
on the same spot. This opens the road to large-scale speculations,
similar to the ones that have caused the economic crisis that is
making a trip around the world at the moment. So it is very
unlikely that every country will profit from the MAI, to say the
least.
A second implication has to do with the "settling of disputes"
between investors and governments. A dispute can occur if an
investor claims that his profit has decreased as a result of
governmental legislation. The investor can then ask for
compensation for the loss and for the withdrawal of the
legislation, even if this legislation has been established long
before the ratification of the MAI. The committee that is supposed
to judge the dispute will not be democratically elected, will not
have responsibility to a democratically elected body nor be subject
to "openness of government."
The two mechanisms described above are likely to create
conflicts in an ethical sense. Take, for instance, labor rights: if
it is very easy for a company to move abroad, the management might
be tempted to put pressure on employees or unions in order to lower
the labor standards, keep the wages low or de-unionize the
company.
In addition, institutional boycotts would not be possible
anymore under the MAI. Remember the boycott of companies doing
business with South Africa in the 1980s; maybe apartheid would
still rule now had the MAI existed then.
Then there’s the environmental issue. If a company loses money
as the result of an environmental law (because they have to make
new investments, change their product or even withdraw a product
from the market), they will have the right to sue the government
that issued the law.
This situation is likely to occur when two countries have
disagreeing environmental standards – a company already established
in one country will claim that another country is blocking its
expansion. The result of the dispute-settling mechanism will be
that (worldwide) the environmental standards will be lowered to the
smallest common denominator. Needless to say that this would mean a
giant leap backwards for the environment.
This environmental backlash of the MAI is exemplified by the
case of Ethyl Corp. versus. the Government of Canada. Ethyl Corp.
is a U.S.-based company which makes methylcyclopentadienyl
manganese tricarbonyl, an additive for gasoline that is forbidden
in most states. The Canadian government issued a law prohibiting
the use of this toxin in gasoline, but with NAFTA provisions on
their side Ethyl Corp. sued the Canadian government, asking for 340
million Canadian dollars in compensation. The Canadian government
didn’t dare to take the risk and decided to settle for 20 million
Canadian dollars, withdrawing the law and writing an apology to
Ethyl Corp.
This is just one outrageous example of corporations having more
power than democratic governments. In addition to the MAI being
undemocratic and a threat to the environment and labor rights,
there are some other nasty details. Once a country signs the MAI,
it is bound to the treaty for at least 20 years. Third World
countries could be forced to join the MAI if they want to receive
support from the International Monetary Fund, even though they have
had no voice in the MAI negotiations.
In summary, it is clear that the MAI is a huge threat to
democracy. The consequences of the MAI for the environment and
labor rights will be disastrous, both in developing nations and
developed nations. As a result of the MAI, economic crises such as
the one going on right now will be even more likely to occur. The
MAI must be stopped, and fair trade should be considered, instead
of the unlimited free trade as proposed in the MAI.
UCLA’s Environmental Coalition believes it is important to
inform people about the MAI and other globalization issues, and
about their potentially disastrous consequences. Therefore, we are
organizing a forum debate with Lori Wallach, Mark Weisbrot and
Deepak Lal, on Thursday at 7 p.m. in Kerckhoff Hall.
Comments, feedback, problems?
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