Rage Against the Machine

By Chantell Taylor

This article is from the July/August 1998 issue of Dollars and Sense: The Magazine of Economic Justice available at http://www.dollarsandsense.org

This article is from the July/August 1998 issue of Dollars & Sense magazine.

issue 218 cover

"We are writing the constitution for a single global economy," announced Renato Ruggerio, the director-general of the global commerce agency called the World Trade Organization (WTO). This single economy is a radically deregulated one, and it is being created by new global trade and investment agreements—the most audacious of which is the Multilateral Agreement on Investment (MAI).

Since 1995, the 29 rich-country members of the Organization for Economic Cooperation and Development (OECD) have been negotiating the MAI in secret, with massive input from multinational corporations and none from citizens. Even the U.S. Congress was left in the dark by the State Department and Trade Representative. Nothing was to sidetrack the MAI from joining the WTO and the North American Free Trade Agreement and becoming the final pillar in the architecture of corporate economic globalization. The MAIís special focus was on reducing the barriers blocking the flow of investment capital in and out of countries, much as the WTO helps lower barriers to the flow of goods.

But the April deadline for completing the negotiations came and went. Happily, an unexpected tidal wave of public and legislative attention worldwide temporarily beached the treaty.

For years, the government and industry promoters of the MAI denied its existence. But like a political Dracula dragged out of his crypt, the MAI simply cannot survive sunlight. In Canada, the sudden exposure of the treatyís text ignited political turmoil greater than that of the decade-old fight against free trade with the United States. A Canadian book about the treaty is No. 7 on the best-seller list, five provinces refused to participate in the treaty by declaring themselves MAI-free zones, and the Canadian government announced it cannot sign the current treaty. In France, tens of thousands of protestors took to the streets, forcing the French government to call for a renegotiation of the treaty. In New Zealand, the parliament exploded into fury against the government when word leaked out.

In the United States, the MAI was attacked on the floor of the Congress. After receiving calls and letters from home, Congressmembers sent around letters opposing the treaty. The Western governors association commissioned a major study listing their statesí laws that the MAI would undermine. Major U.S. cities, most recently San Francisco, have declared themselves MAI-free zones, and Public Citizen is supporting campaigns in scores more. Yet, the Clinton Administration remains one of the MAIís leading boosters.

What is so bad about the MAI? With 90% of the text completed, it is clear the MAI would undermine many existing federal, state and local laws and policies, and limit the ability of elected governments to regulate the actions of businesses.

Now negotiators are pursuing a two-part plan to push the treaty forward: a charm offensive to seduce the public away from their "confusion" about the MAI, and more intensive—and underground—negotiations. Like a political hydra, elements of the MAI also are popping up, ready to become enshrined, at the World Trade Organization, the International Monetary Fund (IMF), and the newly proposed TransAtlantic Free Trade Agreement (TAFTA).

At the core of MAI are new "investor rights" for corporations. The MAI would deregulate the rules foreign businesses must follow when investing in a country, and establish their right to buy land, currency, natural resources, telecommunications and other services. The MAI is notorious for giving corporations the right to sue governments directly—even the WTO requires corporations miffed about trade barriers to have their home government lodge the complaint for them. Among its other unsavory details:

  • Investor Right #1: The MAI would ensure that foreign investors and corporations would be compensated for actions a government takes that undermine their ability to profit from their investment in that country. Because of their expansive reach, these provisions are nothing like the common law notion found in many constitutions that provides compensation with due process when, for instance, a government takes your property to build a road. These "expropriation and compensation" rules are one of the MAIís most dangerous provisions because they arm every foreign investor or corporation with the power to directly challenge nearly any government action or policy—from taxes to environmental or labor rules to consumer protections—as a potential threat to their profits.

  • Investor Right #2: Governments would be prohibited under the MAI from treating foreign investors differently from domestic investors. Policies benefiting small business or programs fostering development of certain categories of investors or investments could all be attacked. The MAI also would forbid states or towns from restricting business or land use licenses to residents only. For example, to obtain a lobster license in Maine, water use rights in many Western states, a mining, farming or timber concession on state land, or a commercial license, one must be a resident of that state.

  • Investor Right #3: The MAI would ban many of the policies countries use to shape investment so that it benefits broad public interests. Many governments require investors to hire some local employees or minority employees. In the U.S, the Community Reinvestment Act—designed to promote investment by domestic or foreign banks in impoverished areas—could be threatened. Under the law, a bank can only receive the OK from regulators to open new branches if its record of loans and other investments in underserved locales is up to snuff. Also threatened are the unique laws passed in many U.S. states to protect natural resources. For example, several states require that glass or plastic containers be manufactured from a minimum percentage of recycled material or by using a production process less damaging to the environment. These policies are precisely what the MAI aims to eliminate even if they do not discriminate against foreign investors.

  • Investor Right #4: Governments will not have the right to select who they do business with, nor to block local investment from companies or investors operating in countries with horrendous human rights, labor or other "nontrade-related" records, except in certain narrow cases. If the MAI had been in effect in the 1980s, Nelson Mandela might still be in prison, since these very investment sanctions helped bring down apartheid.

  • Investor Right #5: By giving foreign corporations and investors the power to directly sue governments for compensation if they donít receive all the treatyís benefits, the MAI would expose governments to untold legal and financial liabilities. Right now governments are protected by the sovereign immunity accorded them in domestic legal systems. This same section of the MAI also makes clear that only investors and corporations, not citizens or communities, have this right to claim compensation.

  • Investor Right #6: The MAIís crowning provision would deny countries the right to get out of the treaty. They can only get out after five years, but even then they remain bound to all their obligations to foreign investors and corporations for an additional 15 years!

To cut off the many heads of the MAI, we must get the word out. The proposal is so extreme it requires a high level of ignorance to succeed. The November 1997 citizens victory stopping the so-called "fast track" trade authority to expand NAFTA, and the MAIís missed April signing date, show our actions are beginning to create a political space for new rules for the global economy that will serve the public interest, not only narrow corporate interests.

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