Big business wants to tighten its hold with a
new global trade pact
-- the Multinational Agreement on Investment (MAI)
by David Moberg
The Progressive magazine, March 1998
Since 1995, negotiators from the world's twenty-nine ~ richest
countries have been meeting regularly in Paris _ with almost no
public scrutiny to draft what the director of the World Trade
Organization calls "the constitution of a single global economy."
But James Madison wouldn't recognize any kinship between his work
and the Multilateral Agreement on Investment (MAI). This new pact
would enshrine a planetary regime built around a one-sided bill
of rights for corporations and wealthy investors, not the human
rights of individual citizens.
You may not have heard about the MAI before. Its beneficiaries
prefer it that way. The free-trade establishment-multinational
businesses, their law firms, and trade officials of both Republican
and Democratic parties-began pushing for deregulation of global
investment practices during the lengthy negotiations that led
up to the formation of the World Trade Organization in 1995. It
was part of a drive to expand the goals of trade negotiations
beyond tariff reductions to a broad range of new topics, like
protection of intellectual property and deregulation of financial
Because there was so much opposition, especially from many
developing countries, the United States shifted its strategy.
Clinton's trade representative, Charlene Barshefsky, urged negotiation
of an investment agreement first among the members of the Organization
for Economic Cooperation and Development (OECD), a grouping of
the main industrialized nations.
Barshefsky believed that these countries were more likely
to agree to a radical reduction in controls over global investment.
Once they signed on, they could then pressure other countries
to come aboard or risk losing foreign investment.
Behind the scenes, big business is pushing for the MAI and
helping to draft its language. The U.S. Council for International
Business is playing a central role. This fifty-year-old group
consists of more than 300 transnational corporations (like American
Express Intel, and Philip Morris) and high-powered global law
firms (like Arnold & Porter and Baker & McKenzie). Despite
its name, the group includes many corporations that are principally
based outside the United States (like Matsushita and Nestle).
The draft text of the MAI-publicly available only because
it was leaked to ' public-interest groups-would give investors
a legal status on a par with that of nations. And it would require
that almost all of a nation's economy be open to forcign investment.
It would also allow corporations to sue governments and claim
"This agreement gives big corporations an extraordinary
set of new rights vis-a-vis political authorities around the world,"
says Alan Fonelson, research fellow at the United States Business
and Industrial Council. a trade group of small and medium-sized
businesses. "The more people learn about this, the more scared
they get. And they should, because it is a dangerous and audacious
power grab that must be stopped.'
Whether their "investment" is a shoe factory in
Indonesia or a momentary blip on a currency trader's computer
screen, businesses want to be able to place their bets on the
global-money roulette wheel unimpeded by government regulations
or social obligations. At the same time, they want citizens and
their governments to assume as much of the risk as possible. That's
why they want the MAI.
Already past their first deadline, MAI negotiators hope to
sign an agreement by May, but persistent squabbles among the participants,
growing pressure from public-interest groups, and the rising tide
of disenchantment with globalization-intensified by the Asian
financial collapse-may make it difficult to reach a consensus.
Many governments are trying to carve out broad exemptions
from the treaty's rules to make the MAI more palatable to their
domestic constituencies, even though over time they will be expected
to fall into line. For example, the United States proposes that
state and local laws should not be affected by the MAI, but this
exemption would be lifted down the road.
For the MAI to take effect, negotiators first will have to
settle their differences. Then the Clinton Administration would
bring the MAI to the Senate, where it would require a two-thirds
The agreement would stipulate that foreign investors be treated
no less favorably than domestic companies. Governments would make
a broad promise not to "impair" by unreasonable or discriminatory
measures the use of any investment. National governments would
be expected to make sure that all state and local laws comply
with MAI standards.
Countries that sign the MAI would also have to eliminate all
"performance requirements" for investors-such as targets
for sales, local employment, or research in a given country-and
lift all restrictions on the movement of capital, such as preferences
for long-term investments over short-term stock speculations.
Governments would have to compensate investors when their property
is expropriated for a public use, like building a road. But they
would also have to pay for "partial" expropriation or
the 'equivalent effect" of expropriation, which could force
governments to pay corporations if regulations delay or reduce
potential profits. In addition, governments would agree to treat
foreign investors like all others in compensating for any strife,
such as revolution. That protection might even extend to strikes-giving
governments a new excuse to crack down on unions.
Though the MAI requires foreign investors to be treated no
worse than national businesses, it does not prevent them from
being treated better. Many of the corporate rights enshrined in
the MAI could give foreign companies more power and protection
than domestic companies. With fewer regulations and new powers
to threaten governments, global businesses will be able to force
governments to compete on their terms, to attract investment,
to hold down workers' wages, and to color the political debate.
Governments could not withdraw from the MAI for five years after
signing, and investments would be protected from governmental
interference for fifteen years after withdrawal.
The MAI allows only a few exceptions. Countries could depart
from the rules of the pact only to protect national security or,
temporarily, to deal with balance-of-payment difficulties.
The draft also includes purely voluntary exhortations to protect
the environment and to abide by labor guidelines for responsible
multinationals. Business interests like the U.S. Council on International
Business and the International Chamber of Commerce have made it
clear that they will oppose the MAI if the agreement includes
any language obliging businesses to protect the environment or
respect labor rights.
The MAI could undermine a wide range of legislation in the
United States. MAI critics say the agreement could threaten the
community renewal act, local economic development initiatives,
unilateral state or federal actions against human-rights violators,
set-asides for minorities, women, or small businesses, rules promoting
socially responsible investment by public pension funds, and government
promotion of recycling. Nobody knows whether corporations will
file lawsuits that challenge these laws, and nobody knows how
case law before international tribunals will evolve.
"The central issue is that the MAI is a virtual constitutional
amendment," says Georgetown University law professor Robert
Stumberg. "It creates very broad doctrines that arc as open-ended
or vague as their analogous cousins in the U.S. constitution.
But the MAI is not part of our legal system, and the result will
be indeterminate. We know one thing: It's one-dimensional. It
is designed to protect corporations. Our Constitution is famous
for checks and balances. That's the issue- one-dimensionality
versus checks and balances."
The MAI could void the checks and tilt the balance. One key
to the MAI provision-that government cannot impair the use of
investment-strongly resembles limits on legislative interference
in commerce that prevailed in U.S. law until the Supreme Court
overturned them during the New Deal era, Stumberg says.
The MAI is more sweeping than other trade agreements, like
NAFTA or GATT, in its assertion of basic rights for investors
and corporations. It greatly broadens the scope of international
economic deregulation. And, building on a precedent that NAFTA
set, it would allow corporations to sue governments and then have
those disputes heard by an international trade tribunal, which
is usually stacked with free-traders.
Already under GATT and NAFTA there are inklings of how corporations
could use the broader rights they would obtain with the MAI to
bully governments and gain political power.
For example, the Ethyl Corporation has sued the Canadian government
for $251 million because it banned the gasoline additive MMT as
a public health risk and a pollutant. Ethyl claims that the ban,
which it tried to block by threatening to sue even before parliament
acted, is "tantamount to expropriation."
Last year, another U.S. firm, Metalclad, sued the Mexican
government for $75 million in damages 'linked to the delay in
opening" a hazardous waste disposal facility it bought because
the state government is blocking operation of what had been a
Several years ago, U.S. tobacco companies threatened to seek
compensation from the Canadian government for diminishing the
value of its "trade dress" if the government, in an
effort to discourage smoking, required that cigarettes be sold
with generic white packages.
Oil companies, toxic-waste dumpers, and tobacco companies
all want the power of the MAI. That should tell us something.
So, too, should the secrecy behind the deal.