The Multilateral Agreement on Investment

ABC copy of this transcript now on-line.

Transcribed from the ABC Radio Programme Sunday, November 30th 1997 by Global Web Builders on Saturday 6th December 1997.

Must read: How the Australian Labor Party , under Keating, sold Australia to the multinationals.

Background Briefing: The Quiet Debate


KM: Hello. Welcome to Background Briefing. I’m Kylie Morris.

Female voice: ‘Will the Prime Minister assure Canadians that this government will refuse to sign any multilateral agreement on investment that does not contain binding labor and environmental standards.’

Male Voice: ‘Mr Speaker, would have us remove ourselves from the world. No trade. No investment. No rules. And ultimately, no jobs.

KM: That’s the sound of the debate Australia’s not having. But in Canada, the prospect of yet another global trade deal is not only spicing up Parliament, it’s the subject of a best seller.

Sadly there’s no catch title for this trade deal. It’s called the Multilateral Agreement on Investment, or MAI. But what it promises holds more drama. It aims to grant multinational corporations unprecedented powers over governments. And it’s not getting many good reviews.

In New Zealand, activists warn the agreement could undo Maori rights set out by the Waitangi Treaty.

AS: It’s a fetter on the future sovereignty of nations. And worse than that, its being developed by six or seven men in the backroom in silence, and supposedly in the best interests of all of us. Without any consultation, without any open and transparent process of critique and analysis. You know, those kind of scenarios are recipes for anarchy in my view, because what they say to people is that governments can’t help you, that governments become irrelevant, that really its going to be a small group of elite businessmen, quite distant from your nation, developing policies for and on your behalf.

KM: In the UK and the US, Internet sites are thick with instructions on how to lobby politicians to put a stop to the MAI.

AD: You will find around the world people are empowered and emerging and speaking out against this agreement, because its so completely unbalanced.

KM: In Australia, there’s not been a murmur, although our Treasury has been at the table negotiating the deal at the OECD in Paris for two years. It’s ready to autograph the agreement within months. So why the silence?

SS: If you take Canada and New Zealand, I believe the public interest groups are more active on this issue than in Australia. I mean the other thing is the negotiation is being held in Paris, very far away from Australia and in secret mostly. And I mean they release very little information to the public and even if, when they release it, they release it very late, they don’t release it on time. And all these things contribute probably.

KM: What’s the reason for the OECD playing this one so close to their chest? Why are they being so secretive do you think?

SS: They know that from the beginning they might face strong opposition because the whole purpose of this MAI is to give privilege and power to our big multinational companies. Foreign direct investment, they call it, so this would obviously raise the interest of the nation, so they prefer to negotiate behind closed doors.

KM: Sharif Seid, from ANU’s Research School of Social Studies.

In effect, the MAI is a bill of rights for international giants like Shell, Lockheed, Du Pont, and Arthur Andersen. It prevents governments asking more of those multinationals than they ask of their own domestic companies. And any laws that discriminate in favour of locals, such as Australian media ownership laws, don’t fit.

What’s more if a multinational feels like it’s getting a rough deal from a government under the MAI it can take the government to an international court and demand emand compensation for lost business. It's NAFTA on steroids.

But MAI supporters say this is all part of writing the constitution for a single global economy that'll create jobs, improve living standards and promote growth the world over..

SC: What we have in the OECD is an attempt to offer investors the protection that their investment needs and at the same time to see if we can’t clean up and remove some of the restrictions that are on the books of different countries with regard to the flow of international investment.

KM: What is this unequal treatment of transnational corporations costing? Is their any kind of estimate?

SC: Very hard to quantify, but if you talk to the people who have put together the deals about what it means to them in terms of rates of return and premiums for risk capital...

KM: Ask Steve Canner from the US Council for International Business what’s really at stake in all of this, and it’s clear that he’s unclear, although it does have something to do with risk premiums.

SC: ... What is the difference in the risk premium with those sets of rules in place and without those sets of rules in place, and the answer I get over here is that it can be fairly significant. But I can’t give you a number. I think if anyone attempted to give you a number you should ask him what he’s smoking.

KM: You don’t have to inhale to know that for the United States for International Business, this agreement means the world to its members. That’s why the Council is the driving force behind the deal. It wants to create the first international agreement that would lock in rights for corporations.

On the Council’s board loom the largest brand names and biggest money of our age: BP, Ernst and Young, Exxon, American Express, BHP, Nabisco, Turner International and Ford.

Of the hundred largest economic players in the world today fifty one are multinational companies, forty nine are nations.

MAI critics say the agreement empowers corporations to compromise the sovereignty of nations.

Allan Asher, deputy at the Australian Competition and Consumer Commission, was one of Australia’s delegates to the UN on transnational corporations. While he supports changes to the MAI to protect consumer rights, he doubts whether national sovereignty is still an issue.

AA: I’ve for a long time had difficulty in believing that there is such a thing as national sovereignty any more. Now whether that’s a good thing or not is something that’s up to individuals. But if you look at the huge proportion of our lives, that is inherently trans-border, whether it’s culture, the economy, the environment, law enforcement, even the weather, even the smoke in Asia knows no national boundaries. And so for people who want to cling to a notion of national sovereignty that’s built along lines of geography on a map, it’s my perception that that’s something that is just no longer a tenable option. And if that’s the case, then it’s not of much help trying to isolate oneself from the world, and it seems to me that maybe that’s part of the problems of the Malaysian financial system, where they’ve tried to isolate themselves from pressures that you simply can’t resist any longer.

(Complete transcript of Dr Mahathir Mohamad, the Prime Minister of Malaysia's, speech to the World Bank in Hong Kong in September 1997).

KM: I mean geography aside, lines on the map aside, I mean there’s also ticks in the box that count here, in the sense that there’s a political entity that a lot of Australians would believe that they belong to, whereby if they elect a particular kind of government, they expect that government to be able to preside over a certain set of legislative guidelines that they broadly support. Now on that level, do you see the MAI as having any kind of impact that we should be worried by?

AA: Well again, I think this is perhaps the most profound exhibition of what I’m talking about in globalisation. Since World War II, since the Breton Woods Agreement, I believe that increasingly the governance of nation states is becoming collective, well not collective governments but the principles that drive the governments is. Let me give you some examples:

If you look at our food laws, our traffic laws, our drug laws, our criminal laws, economic regulation, utility regulation, pretty well all of our principles in these are no longer developed in the individual nations. That’s where they’re enforced, but the rules are developed at the International Standards Organisation, at the UN, at the OECD, at the World Health Organisation, the WIO increasingly, on trade rules and things, and I can’t think of a single major aspect of the governance of Australia or of any state that isn’t partly referrable to the elaboration and development of rules internationally. Now some people see that as frightening and a takeover by foreign states, but I guess I see it as more a fairly natural incidence of where you’ve got commerce and dealing at all levels between nations, that harmonising the way they approach them is just growing. Just a very trite example: Even the way in which our road signs are done, the colour of the paint in the middle of the road, warning signs, all of those things are increasingly internationalising, and while culturally there are clearly some losses there, that’s just the way things are going.

KM: ACCC’s Allan Asher.

While there’s no debating the inexorable process of globalisation, there are still those who believe governments can play a part in how it affects people’s lives, rather than simply clearing the way for the footprints of the corporate giants.

For example, Roy Jones, who’s a trade union adviser to the OECD, wants governments to ensure the MAI can’t harm workers rights.

RJ: I think governments are now at the crossroads, and have a choice in which they shape the governments and the global system. They have a choice for a free-for-all, where everybody is in competition with everybody else, governments against governments, workers against workers, companies against companies. Or they can choose the governance route, which seeks to have an inclusive way of managing the global system, and that means - and this is the route we favour - that governments listen to the voices of ordinary people; listen to the pain that they’re going through in many countries through elements of globalisation and seek to put a floor under that process.

KM: Trade Unions are joining forces with consumer activists, environmentalists and aid groups to demand governments protect citizens from the reach of the MAI. They want a clause in the agreement that makes sure corporations can’t get around labour and environmental standards set by governments.

Environmental group ‘Friends of the Earth’ says it’s wrong for the MAI simply to set out the rights of multinationals to invest when it asks nothing of them in return

Andrea Durbin.

AD: This agreement is about giving corporations the right to invest. There is not a word about the responsibilities of corporations or companies to protect the environment, to respect human rights, to protect the workers. And we feel that is absolutely unbalanced and unfair, and should not go forward without some kind of equal treatment and discussion about what the role of corporations are. Who are power players in the global economy; the responsibilities they have to protect the environment globally and nationally and locally.

KM: So do you see environmental laws as being a major cost of the MAI?

AD: Absolutely. What this agreement will do is, it puts the rights of corporations and the rights to their profits, once again, above the rights and wellbeing of communities and people.

KM: The idea of hardwiring labour and environmental standards into the MAI is out of the question, according to the US Council for International Business.

Steve Canner says it’s beyond the terms agreed by OECD ministers.

SC: This is an agreement on international investment, and when people ask me, ‘Why are you opposed to this labour and environmental stuff?’ there are sound, substantive reasons and starting with the mandate of the ministers. And the mandate of the ministers was quite clear: it was to provide high levels of investor protection and to reduce barriers to international investment. Period. Full stop. No more.

KM: I suppose though it doesn’t help in terms of the criticism of the MAI, that suddenly we have an agreement that’s being negotiated that only looks at the rights of transnational corporations and not the obligations of transnational corporations.

SC: Now where did you get that notion.

KM: Simply paraphrasing some of the criticisms, mainly from the NCOs.

SC: But if you stop to think about it...

KM: Well I’d like to hear what your response is to that. Is that the kind of agreement that we’re negotiating?

SC: As you can see, I obviously have a view and I’m jumping in so rapidly. The first obligation of any company investing anywhere, the first obligation they have is to obey the law, and generally speaking most of these laws are non-discriminatory. For example, with respect to protection of the environment, I don’t think countries care who owns the company that may be polluting the environment, if that company is violating the laws of the land, where they are situated, then they are punished.

So it is not true that this all about rights of investors and no obligations. And I hear that phrase very often, but it is a general tenet of international commerce that whenever an investor invests, they must obey the law of the land.

KM: But there is a difference between a general tenet that’s understood amongst players in the corporate world, and an agreement that’s been signed up to within the OECD.

SC: Look if the heart of the OECD agreement is national treatment, non-discrimination, if a country - Australia, for example - passes a law that says the standards for this, that or the other thing, that we have one set of standards for Australian owned companies situated in Australia, and another set of standards for foreign-owned companies situated in Australia, that’s discrimination. That’s against the heart of the MAI agreement. The first obligation of a company is to obey the law of the land. If that country where the investment takes place, signs onto an agreement that says ‘Thou shalt not discriminate’ and it provides for a mechanism for the agreed investor to pursue his or her rights, then it is part of the law of the land, because a treaty obligation in effect, becomes ingrained as part of the laws of the land that have to be observed, the treaty provision says that countries can’t discriminate and gives a route for companies to pursue their grievances.

KM: Steve Canner.

But do multinationals always obey the law of the land?

Only last week, OECD members agreed to make the bribery of foreign officials an offence, so presumably there are still some shoddy deals in the corporate world.

Consumer rights advocate Allan Asher says there is an expectation that companies be better behaved now than they were in the ‘70s and ‘80s. But he says some companies are as bad as they ever were.

AA: Their practices in the Third World, there is still dumping of hazardous and unsafe goods, there is still flaunting of cultural and legal systems in developing countries, and that’s the level at which one needs to operate. Of course, give all recognition to those companies who behave well, who really want to extend the ethical framework, but you can’t build policies around the behaviour of the best.

KM: Although developing countries may have suffered most the behaviour of the worst multinationals, they have no say in the Multilateral Agreement on Investment. Only OECD members - the 29 richest countries in the world - are negotiating the deal. Although non-members will be encouraged to sign up, once it’s complete. In other words, it’s an international benchmark in the making, but only those in the club are putting it together.

Aid agencies are in no doubt what that will mean for the developing world. In sporting terms, Mexican workers pitched it in this way.


Reader: A game of football, where the developing countries’ team are dwarfs, and the developed countries are giants; the pitch is sloping uphill against the south, whose goal is twice as big and the Third World players have no boots.


KM: Multinationals are already big winners in places like Africa, where most of the profits go straight back to the company’s home country. Annually between 1965 and 1985, and average American corporation took home close to US$400 million more than it put into an African country.

But no Africans belong to the OECD, so there are no poor cousins at the MAI negotiating table. Martin Khor from the Third World Network says once the menu’s set, there’ll be lots of invitations from the OECD to developing countries. In fact he suspects that’s the whole idea.

MK: This agreement is meant no so much for the OECD countries, but for the developing countries concerned and say, ‘Look you know your bilateral aid programme is due, and why don’t you sign up on the OECD agreement, that will make it easier for us to release funds to you?’ or ‘Your World bank loan is due, but before we have confidence that you’re able to use these funds correctly, it would help us if you sign an MAI agreement.’

So there are so many other instruments of leverage that can be used to persuade, cajole, and eventually pressurise countries to sign on.

KM: For Malaysia’s Martin Khor, history’s repeating itself. He says the MAI amounts to a return to the days of colonial economies, when merchants from the north dominated the economies of the south.

MK: Well you know that when the developing countries were colonies of Great Britain, or the Dutch, and so on, their main growl was that they were unable to have their own national economies shaped to meet the basic need of their people. Because in the colonial economy, the big company from Great Britain, from Europe, from the United States and so on, these big companies dominated the local economies and they could do as they want in terms of how they made use of their profits and so on.

And after independence, most of the developing countries then instituted economic policy to promote their own domestic enterprises, whether they be farms, or industry or service and so on, and took positive affirmative policies to nurture and to build up their own domestic enterprises and their domestic economy. So that these enterprises can grow strong, and one day they could compete more equally with the big transnationals that have developed over the last three hundred years.

Now if we have the MAI then the developing countries’ governments would lose their capacity and their powers to protect the domestic sector from foreign companies that are coming in, you see. And therefore, rules that they now have, the developing countries have, that require foreign companies, for example, to transfer technology, to have a local partner in a joint venture company, to reserve a certain percentage of equity share to local people, that the governments also, for example, favour local companies in certain ways, for example when the government privatises, it may prefer to privatise to local enterprises, or to local citizens - all these provisions that are there to protect the weaker partner in development would be made illegal by the MAI. So government would no longer be able to have policies to protect local farms, local firms or even local citizens, in terms of house ownership or land ownership and so on. And what we can then predict would then be for those countries that foreign investors would like to enter because of the market or for other reasons, that progressively those (local) economies would be lost, in terms of the participation of local people.


Operator: Thank you for calling the Council of Canadians national office in Ottawa. Our hours are from 9 to 5, Monday to Friday. If you know the extension of the person you are calling, please enter it now. If you are calling to make a donation, press 1; if you’re calling about the MAI, press 2.


Operator: Hello, thank you for calling the MAI information line. At the tone, please leave your name, mailing address and telephone number, and we’d be happy to mail you a copy of our MAI kit. If you’re calling to receive the full text of the MAI, please be advised that there is a $10 charge to help cover the photocopying and mailing cost.

KM: What the MAI could mean for the Canadian economy, has promoted a national campaign, supported by commentaries on CBC radio, like this one.

MD: The MAI is explicitly designed to forbid government use of investment rules to promote social, economic or environmental goals. The MAI states that no government, Federal, provincial or municipal, will be able to oblige any foreign corporation investment in Canada to provide jobs, do research, or invest in productive activity.

The MAI would not only stop governments from passing new regulatory legislation, it would actually oblige them to gradually role back existing laws which do not conform to MAI liberalisation goals.

If we sign this deal, our existing tax, labour, consumer protection and environmental laws could all be up for review by unelected international panels. One of the first challenges would almost certainly come from the tobacco and alcohol industries, who would use the MAI to turn back laws restricting the advertising and promotion of their products.

Unlike NAFTA, this agreement is binding for twenty years, and gives corporations the right to sue governments directly for any perceived violation of their rights. Like NAFTA, this dispute settlement mechanism is binding, beyond our courts and legislations.

For commentary this is Murray Dobbin in Vancouver.

KM: So where’s Australia in this debate? Peter Costello’s office is representing us in Paris. Our negotiators there won’t state publicly what they’re saying on Australia’s behalf, because the talks are still underway.

Not many outsiders have the inside word on the negotiations. But one observer placed within the OECD is Roy Jones, and he’s been keeping an eye on Australia.

RJ: Well my particular focus on this is on the labour side, and we are very, very concerned that the position of the Australian government, you know, if you can say as an aside, it comes back to the closed nature of these negotiations. We tend to find out which governments are backing which particular positions, either through corridor discussions or by contact with our trade unions in the national centre. And in that sense, we have the feeling that Australia’s not part of the mainstream. It could be argued that it’s taking an extreme view, an ideological view on the issue of labour standards within the MAI.

KM: Before Roy Jones explains in what way he considers Australia’s view extreme, you’ll need to understand some jargon.

The MAI can be one of three things with labour standards:

Now back to Roy for which way Australia’s leaning:

Roy Jones: They are against either a voluntary clause or a binding clause. There are a small majority of countries in favour of a binding clause. There are a group of countries who favour a voluntary clause. there are a group of countries who will go whichever way the majority is, and there is a small group of countries which includes Australia, New Zealand, Mexico and Korea, the outliers in that sense, who do not favour any attachment of labour and environmental issues and standards to the MAI.

KM: So this means Australia doesn’t favour any clause that would protect labour and environmental standards. The government line is the MAI is the wrong place for that.

Still there are some standards that Australia does want to protect in the MAI. Australia wants to protect the right to reject an investment that’s against the national interest. And it wants the right to keep majority Australian ownership of Telstra, QANTAS, certain sectors of our media and airports.

It’s asked for an exemption from the MAI to protect these conditions, but even if that’s granted, it’s not necessarily permanent.

The idea is, countries can begin the agreement with these laws on the books, but should, over the years, wind them back.

Other countries have put up other exemptions. It’s believed there’s at least six hundred of them, but it’s important to remember they’re all temporary, and no country can add new ones.

Oxfam’s Ruth Mayne describes some of them.

RM: Essentially countries will no longer be able to insist that their media sectors are controlled by national interest. They will have to open up to foreign sectors. So, for example, France is very worried; they’ve put down an exemption for media because they’re worried about being swamped by US films. There are potentially also other impacts for indigenous cultures. Even though there are apparently some exemptions being put down by countries such as New Zealand and Australia that say that laws pertaining to indigenous groups should be exempt. And there will be other indirect effects on local indigenous communities. For example, if countries will no longer be able to restrict foreign investors , or screen foreign investors investing in natural resources, and as you know this is one of the areas that we’ve seen most environmental and social problems with, with foreign companies coming in to developing countries and weak regulatory structures, unsustainably extracting minerals, oil and often creating serious environmental damage, but also displacing indigenous communities for their land, or affecting them in a number of ways.

And I think that’s one of the areas where we’d be very worried about this agreement.

KM: Ruth Mayne isn’t alone in her concerns for how the MAI will affect indigenous people. Annette Sykes is a Maori activist, who’s taken a long hard look at what the MAI, or ‘Mai’, as she calls it, would lock her people into.

AS: Just to give you an example: say we had the government at the moment that encourages foreign investment and as part of that, they've changed the trade union laws and they've changed the laws relating to foreign investment. But in five years time we decide that that experiment really wasn't in the best interests of our country. And so we get a new government which might be Coalition, of the Alliance Party and a multinationalist party, and maybe a centre right party. Now the new Coalition says, ‘Well that was all wrong, and we want to do away with it.’ Under the MAI framework they would find it very, very difficult to do away with the Employment Contracts Act, to cement the Treaty of Waitangi as having pre-emptive obligations over and above foreign investment criteria. And that for me is untenable.

KM: You mentioned that you’re afraid that foreign investment, if you like, would be given priority over the Waitangi Treaty and the kinds of obligations that the government is under.

AS: Well under the privatisation agenda of the new right which was first introduced in the Labour Party, I don’t know if you’re aware of it, but it was actually the treaty which prevented the railroading and the privatisation of some of the key assets in our country, like the dams, like electricity, like television in my view. You know, there was litigation which I was part of, to prevent the sale of our national television channel and the privatisation of the same, and one of the main arguments which was successful both in the Court of Appeal and later in the Privy Council, was the recognition that the government must provide, in the present and the future, for the treaty obligations that are cemented in the constitutional framework of this country. The treaty is a living document, and therefore there must be development of policy both nationally and locally, that gives force to those. The MAI investment agreement would supersede those arrangements.

KM: Indigenous people other than the Maoris are also feeling threatened by the ramifications of MAI. For example in the case of the Sami people from Lapland, Scandinavian governments want the following exemption written into the MAI:

READER: Not withstanding the provisions of this agreement, exclusive rights to reindeer husbandry within traditional Sami areas may be granted over the Sami people. This may be extended to take account of any further development of exclusive Sami rights linked to their traditional means of livelihood.

KM: So what are the implications for Australia’s indigenous people?

Background Briefing understands the Australian government is concerned enough to draft an exemption to ensure foreign investors can’t challenge laws that protect the rights of Aboriginal people. But remember the idea is to roll these exemptions back.

ANU’s Sharif Seid says the MAI could threaten Australian Native Title.

SS: A foreign investor can challenge the government on the basis that Australian government has given a more favourable treatment to the Aborigines than the foreign investor. But here countries are allowed now to make reservations where certain provisions of the MAI would not apply. So I expect the Australian Government to make some reservations on this area, land titles and Aboriginal rights. But again, these reservations are temporary because every country is required 1) to make no new restrictions on foreign investment; 2) to roll back, to withdraw, current restrictions through time. So even if certain reservations would be made now, after a certain period of time they should arise again, that is Australia will be required to withdraw that reservation and then this land title legislation will face extinction.

KM: This week, MAI negotiators begin another five-day round of talks. It begins with a retreat in Paris for the most powerful negotiators to discuss who is slowing down the deal.

There’s some nervousness that the pace of progress has slowed. It was all meant to be over by now. It was meant to be signed in May last year, but that resolution was deferred. Now the deadline’s fast approaching.

READER: Sir Walter Raleigh: Whoever commands the trade of the world commands the riches of the world, and hence, the world itself.

KM: The United States Council for International Business is optimistic the MAI will sail through to be signed next year.

Before the Council’s Steve Canner left the ABC studios in Washington, I put to him Martin Kohr’s image of the MAI meaning a return to colonial economies for the developing world. But the vision is not one he shares.

SC: I think its terribly distorted. I think fir the reasons I have stated, the MAI is about opening markets, its about national treatment, its about level playing fields. I think that the world has demonstrated that the old ways of government intervention don’t work, and countries on their own are discovering this. Those that choose not to discover it can continue on their own path and those who choose to discover it and proceed as they have for the past five, ten years in opening markets and becoming competitive, and privatising state owned enterprises, these are the countries that are moving ahead. It’s the country’s choice.

KM: That phrase ‘the level playing field’, isn’t that a little disingenuous when you factor in the power of transnational corporations?

SC: I’m concerned about the power of governments. The power of governments to tie up deals, the power of governments to unfairly distort market transactions so that somebody in the national economy can line their own pockets. I’m more concerned about the power of governments than I am in the power of transnationals.

KM: Where’s this happening? Where do you see governments interfering in the market most?

SC: I think history is replete with examples of expropriation, and in developing countries where they have a sort of ‘yes, but’ attitude: ‘Yes, you can invest in my country, but it must be a joint venture, it must be with a state-owned enterprise, or you must agree to purchase so much production from the local market regardless of the quality of that product for your import, or the price of that product; or you must agree to export so much of your production to third countries.’ It happens all the time in the Third World.

KM: So your members would be hoping that the MAI is going to have an effect on standards in Third World countries?

SC: It’s going to have an effect on everybody to the extent that it gets rid of these distortions and allows market forces to play and for firms, both foreign and domestic, to operate on a more level playing field.

KM: Do you see lots of cases of expropriation in the Asia-Pacific region, for example?

SC: I don’t think so. Fortunately in the last twenty years or so we haven’t seen that. But in the seventies there was a spate of expropriation in Latin America, and unfortunately my memory is not that good as to whether or not they were in the Asian region.

KM: But it’s not happening that much now?

SC: Not now. But government come and governments go. And governments can change their minds. That’s why we need a set of rules that will bind governments to levels of behaviour.


KM: Background Briefing’s Co-ordinating Producer is Linda McGuinness, and Researcher, Vanessa Muir. Technical production by Greg Richardson. The Executive Producer is Kirsten Garrett and I’m Kylie Morris.


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