MAI ON SIX-MONTH HOLD

8th May 1998

Ministers from the Organization for Economic Cooperation and Development (OECD) last week agreed to a six-month hold on negotiations for a Multilateral Agreement on Investment (MAI). Ministers are to use this time as a "period of assessment and further consultation between the negotiating parties and with interested parties of their societies," according to a communiqui from last week's OECD ministerial meeting in Paris. Talks for the MAI began in 1995 and were to conclude with an agreement last year, until the deadline was extended until April 28, 1998. It became evident this winter that no agreement could be reached, which resulted in last week's decision for a pause in negotiations.

France remains the most outspoken against the MAI. According to French Minister for European Affairs Pierre Moscovici, a MAI will only be acceptable if it includes binding core labor standards for investors; provisions for separate liberalization standards for regional economic integration organizations (REIOs), e.g. the EU; and the renunciation by the U.S. of any possibility of sanctioning foreign firms who invest in Cuba, Iran or elsewhere.

With regard to the latter, Mr. Moscovici said, "The United States can't negotiate a multilateral agreement for trade and liberalization while at the same time taking unilateral measures that are purely extraterritorial in nature." The U.S. and EU remain far apart as well over the issue of separate standards for REIOs.

France and Canada together called for the MAI to protect cultural industries such as the arts from being overrun by foreign investors. This so-called "cultural exemption" position has gained popular support in France as a reason for opposition against the MAI.

Canadian Trade Minister Sergio Marchi gave voice to a concern held by many in the global trade community over whether the OECD is the appropriate forum for negotiating a MAI. Mr. Marchi argued that by negotiating a MAI via the WTO the agreement would be open to nearly all likely recipients and sources of foreign direct investment, rather than the small group of 29 OECD member-states. Indeed, developing countries have been ultra wary of supporting a MAI agreement they had no part in shaping. Mr. Marchi urged that investment requires a "more permanent approach," through the WTO and said that the work done thus far by the OECD is "important but preparatory nonetheless."

Japan last week also called for investment to be included in possible Millennium Round talks at the WTO, although it is not clear if Japan intended to call for parallel talks to the OECD or to move the MAI to the WTO outright.

The pause in MAI talks is seen in part as a victory for environmentalists, trade unions and consumer advocates who lobbied vigorously against the MAI. According to John Evans, secretary-general of the Trade Union Advisory Committee to the OECD, "[t]he new debate on the MAI has shown politicians where the fault line is on globalization...[This] agreement cannot be negotiated only with the needs of investors in mind."

OECD trade negotiators are formally due to meet again in October. EU trade commissioner Sir Leon Brittan urged for a firm date to be set to resume negotiations, lest absence of a date become "an elegant or not- so-elegant way of signing the death warrant to the whole thing."

"Investment pact in jeopardy in OECD as members agree to six-month pause," INTERNATIONAL TRADE REPORTER, April 29, 1998; "OECD accepts French demand to pause MAI talks, paves way for WTO work," INSIDE U.S. TRADE, May 1, 1998; "OECD agrees to continue talks on multilateral investment talks," WALL STREET JOURNAL, April 29, 1998; "Japan favors inclusion of investment in new WTO round;" "OECD fails to agree on opening up investment markets," AGENCE FRANCE-PRESSE, April 27, 1998, "OECD's future," FINANCIAL TIMES, April 28, 1998.

Return to The MAI