Reference:

"Investment Treaty Rotten to the Core"

by Aziz Choudry, Corso National Officer and spokesperson for the fair trade coalition "GATT Watchdog".

Contact:
GATT Watchdog, PO Box 1905, Christchurch, Aotearoa/New Zealand
Fax 64 3 3668035
Email: gattwd@corso.ch.planet.gen.nz


Investment Treaty Rotten to the Core

Aziz Choudry, May 1997

In April, Opposition MPs and pip-fruit industry representatives lambasted the Government over its decision not to prosecute a visiting Chinese horticultural delegation after a foiled attempt to steal 15 apple budwood cuttings. Was this "theft" a genuine mistake, some asked - or a case of industrial espionage which could have seriously threatened New Zealand's $1.6 billion horticulture export industry?

By contrast the fact that, just a few days later, New Zealand government officials met in Paris for negotiations on the Multilateral Agreement on Investment (MAI) with officials from the 28 other OECD nations rated barely a mention. Following the leak of a January 1997 draft copy of the MAI to a Canadian group, internationally, a growing number of people alerted to the existence of this agreement are alarmed and appalled at the vastly expanded freedoms for corporate investors being proposed, and the speed and secrecy with which negotiations are being conducted. Put simply, the MAI is a binding international agreement which would remove nearly all restrictions on foreign investment. Critics have dubbed it a "charter of rights and freedoms" for the transnational corporations which already dominate the global economy. US trade attorney Lori Wallach of Public Citizen warns that "the MAI represents a quantum expansion of corporate power" beyond NAFTA and GATT.

While the Chinese apple-smuggling issue erupted into a major political storm, the Government remains tight-lipped about the OECD investment treaty and its negotiating position, let alone the implications of the MAI for New Zealand and its peoples. This low-profile international agreement launched in 1995 poses a far greater threat to New Zealand than what was found in a Chinese scientist's hand luggage a few weeks ago.

Once concluded among OECD nations, it is likely that other countries will be invited to sign, with the possibility of transferring the role of maintaining and enforcing the agreement to the World Trade Organisation (WTO). By late 1996, OECD countries accounted for about 85% of all foreign direct investment outflows, and 68% of all inflows. William Witherell, Director, Financial, Fiscal and Enterprise Affairs at the OECD told a conference in Washington last November that the MAI would "set a new internationally recognised standard of market access and legal security for potential investors". Subtle coercion and the fear of being "left out", as well as the likelihood that accession to the MAI would be made a condition of receiving loans from international financial institutions like the World Bank and the IMF are likely to pressure developing nations into signing the MAI.

A binding global treaty on investment is not a new idea. The USA, the European Union and Japan all pushed for such a deal during the GATT Uruguay Round, and had subsequently sought to secure an investment agreement under the aegis of the WTO. But many countries, especially in the Third World, opposed the idea or voiced serious reservations about it and so this bid was not successful from the point of view of those governments seeking to impose a global, uniform and binding "open door" regime on investment.

The right of national governments to regulate foreign investment is fundamental to ensuring that investment brings benefits to local communities. MAI signatory countries will be denied the freedom to choose which particular mix of policies and conditions on foreign investment they will adopt. Foreign investment was a major election issue last year, especially for the Alliance and New Zealand First. Locally and internationally, the merits or otherwise of unrestricted investment remain a hot topic of debate. A 1996 report by the Washington-based Institute for Policy Studies found for example that while the biggest 200 corporations recorded sales in 1995 exceeding 28% of the world's total economic activity, they provide jobs for only a mere 0.75% of the world's workforce.

As drafted, the MAI could prevent governments from limiting what foreign investors can own (whether strategic assets or rural land) or from imposing obligations on them to use local content, hire local managers or staff, or share technological knowhow. It would facilitate easier access for investors to be able to move assets - financial instruments or production facilities - across borders - regardless of social and environmental considerations. It would guarantee the free transfer of all payments relating to an investment in and out of a country. Moreover it could allow investors the right to challenge, and even sue governments to overturn laws which they view as violating their "rights". These could include laws to protect the environment or those designed to support local businesses and develop economically deprived areas. It could override the Crown's fundamental obligations to tangata whenua as guaranteed in the Treaty of Waitangi. Investors could seek to enforce the MAI in local courts. But the MAI does not set out reciprocal rights for governments or local communities to initiate action against foreign investors.

The rights of overseas investors would apply to all privatisations. The agreement could stop signatory countries from affording any preference to local businesses or investors, guaranteeing national treatment for investors, and requiring that all foreign investors and investments be given most favoured nation status - that is, they are to be treated no less favourably than other investors and investments. The MAI has immigration implications, too. If an investor has committed or is committing "a substantial amount of capital" in a signatory country, they or their senior managers, and their spouse and families could have automatic rights to enter and reside there for one to three years. The MAI does nothing to protect workers, indigenous peoples, consumers, small businesses or the environment.

Each country could make exceptions to the basic commitments. But given successive New Zealand governments' zealous embrace of the free market, it seems unlikely that it will opt for many. Double standards abound. US Assistant Secretary of State Alan Larson bluntly stated that the USA "cannot agree to an MAI that places unacceptable limits on the ability to protect its essential security interests or to deal effectively with the threats posed by rogue states". He was critical of France's proposal to exempt "literary and artistic works" from the MAI's coverage in order to protect and promote French culture. Meanwhile, he indicated that US broadcasting laws require US citizen ownership of TV broadcasting stations, and that the USA would seek to exempt this from its offer. Ironing out the remaining differences on such issues among the OECD nations - the world's rich countries club - is the primary reason for the original May 1997 deadline (the OECD Ministerial Meeting) for concluding the agreement being extended to the end of this year or early 1998.

Government commitments at the MAI, would, under "standstill and rollback" provisions, be subject to conditions preventing the imposition of stricter restrictions upon foreign investors and ultimately eliminating existing ones over time so that they cannot be "rescinded or nullified over time". The aim is to lock in and ratchet up new liberalisation measures. Although a government can withdraw from the agreement after a period of five years, the MAI's provisions "shall continue to apply for a period of [fifteen years] from the date of the notification of the withdrawal to an investment existing at that date".

Critics of trade and investment liberalisation like GATT Watchdog and Corso have long called for an end to the secrecy surrounding negotiations on free trade agreements and for open debate on the benefits or otherwise of successive New Zealand governments' ideological commitments to globalisation. Last year, Clerk of the House of Representatives, David McGee, criticised the way that New Zealand enters into international treaties as "fundamentally undemocratic" - without Parliamentary approval or a formal mandate to negotiate. Public participation in treaty-making, formal Parliamentary approval before ratification, select committee oversight and publishing reports on the effects and values of treaties for New Zealanders were all recommended in a Ministry of Justice 1996 post-election briefing paper. While investors demand "stable, transparent economic policies", ordinary people are excluded from having any input into the MAI negotiations. So much for transparency. If the government signs the concluded MAI, it will bind future governments without debate or Parliamentary approval, let alone consultation with Maori.

It would be inaccurate to suggest that opponents of free trade and investment agreements like GATT and the MAI are "anti-trade" or opposed to all forms of foreign investment. What is at issue is the fundamental right for people to determine their own futures: the right to set limits on the level and type of investment in the interest of social and environmental outcomes, not just a narrow blinkered set of financial and economic motives. National governments are becoming increasingly subordinated to the role of filing clerks for transnational capital as investors demand the inalienable right to decide for themselves when, where and how to set up or expand their operations in a host country, backed up by legally enforceable rules.

The vigilance of customs officials at Auckland airport stopped the Chinese scientists from getting away with the apple cuttings. We need to maintain a similar degree of vigilance and scrutiny to expose and challenge what could be one of the greatest corporate "steals" of all time. It's high time the government fronted up to some searching questions as to its position in Paris.


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