"OECD Multilateral Agreement on Investment: A Fact Sheet"
Proponents of free trade and globalization have turned their sights
to the next target for liberalization and deregulation--foreign investment.
Recognizing that foreign investment has become the main force behind economic
integration, multinational corporations and industrialized countries are
advocating a Multilateral Agreement on Investment (MAI). The MAI -- which
is being negotiated at the Organization for Economic Cooperation and Development
(OECD) --would'open' all sectors of countries' economies, strip nations
and localities of their right to differentiate between local and foreign
companies, and let corporations directly challenge our laws.
The OECD-MAI will:
1. Open all sectors of nations' economies to foreign companies.
2. Require countries, including states and localities, to treat foreign investors the same as local companies.
3. Ban performance requirements. Some states and localities require companies who get public money to hire locally or pay a living wage. These type of accountability measures may be struck down by an MAI.
4. Set binding dispute settlement rules. The MAI allows investors
to directly challenge laws and seek monetary damages.
Concerns -- What's Wrong with the MAI?
1. Closed secretive negotiations. The MAI has been negotiated with little public or congressional input. The wide range of concerns raised by international capital mobility -- sustainability, labor right, financial stability -- have largely been ignored.
2. Opens developing countries. OECD members are the source of 85% and destination of 65% of foreign investment, but increasing amounts of money go to developing countries. OECD countries will pressure developing nations to join the MAI, an agreement they had no role in drafting.
3. Preemption of local, state and national laws. The US may have to change some laws to join the MAI. Then foreign companies can use the MAI dispute system to challenge laws that affect their investments.
4. All rights, no responsibility. Corporate investors get new rights, but there are no mechanisms to hold them accountable to the social and environmental concerns of the countries they came from, or the countries they invest in.
5. Effects on sustainability. The MAI will contain weak, non-binding environmental provisions. Meanwhile, the agreement will let corporations go everywhere and buy everything, allowing us to temporarily live beyond our ecological limits and worsening an already inequitable distribution of resources.
It's All About Capital Mobility . . .
What does an agreement on foreign investment really do? It guarantees un-restricted capital mobility- the right of big companies and financial institutions to go where they want, leave on their own terms, and therefore play one country against another for the most favorable 'climate' for investment leading to a downwards spiral of labor and environmental standards.
What Should Be Done?
1. Slow negotiations down to allow Congress and citizens to have some input.
2. Study potential impacts of the agreement, including undertaking an environmental impact assessment.
3. Maintain nations' democratic right to protect the environment, health, workers and small businesses.
4. Balance corporate rights with obligations. Require investors to follow the stronger of home or host country environmental and labor standards.
5. Any agreement without such safeguards should be defeated. This investment agreement must protect the public interest, not just the narrow needs of transnational capital.
Foreign Direct Investment (FDI) -- FDI is investing for the purpose of gaining control. These are the big investment projects, where a foreign company takes over a local firm or establishes a new business. FDI is dominated by the biggest corporations in the world. The 100 richest multinational corporations alone control about $400 billion dollars worth of foreign investment, which is more than the foreign investments owned by all the world's small and medium sized companies combined. Removing restrictions on FDI the MAI threatens both industrial and developing countries. For the US and other rich nations, do we really want to create an international right for companies to seek out the lowest cost, least regulated production sites? Some American companies are already pretty cavalier about where their loyalties are, and that's without a treaty giving them a legal stamp of approval to move overseas. Developing countries would lose the power to attach conditions to transnational corporations, conditions that make sure that local people benefit from FDI.
Portfolio Investment -- Foreign portfolio investment is basically investing in an overseas stock market. Portfolio investors don't control or manage their investments; they provide capital in exchange for interest, dividends and the hope that share prices will rise. This means that portfolio investment is more speculative and risky than direct investment projects. The MAI could increase the risks by requiring countries to immediately turn themselves into 'emerging markets,' vulnerable to the ups and downs of international investment flows. Because the agreement would bar short term controls on dangerous investment in-flows and out-flows, we could be setting ourselves up for repeats of the Mexican Peso crash.
OECD -- The Organization for Economic Cooperation and Development (OECD) describes itself as "an intergovernmental organization comprising 29 advanced economies from Europe, North America and the Pacific region." It's mainly known for gathering economic data and is often called the 'think tank' of the rich countries of the world. So why is a research organization negotiating an important investment agreement? The OECD sometimes set rules, and it has a history of looking at investment issues. More importantly though, foreign investment regulation is a hot topic on which different countries around the world have different opinions. Some developing countries think that foreign investment should be regulated to allow their own domestic economies to grow. Going through the OECD lets Governments from rich countries get an agreement that favors the interests of wealthy investors. In addition, the OECD's low profile makes it an ideal forum for proponents of liberalization to negotiate without much public awareness or input.
For more information, contact:
Andrea Durbin, Director International Projects tel 202-783-7400 ext. 209, fax: 202-783-0444 email: firstname.lastname@example.org
Mark Vallianatos, Research Associate tel: 202-783-7400 ext. 231,
fax: 202-783-0444 e-mail: MValli@aol.com