Winners Take All
by Andrea Durbin and Mark Vallianatos
Dollars and Sense magazine, May / June 1997
It is an investor's market out there in the global economy,
with countries around the world competing to attract corporate
money. But corporations aren't satisfied. They want assurances
that there will be no turning back from economic liberalization-and
they want lt. in writing. To respond to their demands, the United
States and Europe are negotiating a new international agreement
that will guarantee corporate rights and expand the market for
As soon as this May, the club of the world's 29 richest nations,
the Organization for Economic Cooperation and Development (OECD),
will finish negotiating their Multilateral Agreement on Investments
(MAI). All economic sectors and regions of the countries signing
the agreement would be opened up to foreign investment if their
governments ratify it.
The MAI could be characterized as a "bill of rights"
for transnational corporations. It will give foreign corporations
the right to challenge the national or local environmental, health
or worker protection laws that they feel are an unfair burden
on them. The agreement sets up a "court" system that
allows a company to sue a government, but there is no place in
those "courts" for citizens who have been harmed by
corporate misconduct to lodge their complaints.
We already know from NAFTA that giving corporations access
to these "courts" can have a chilling effect on environmental,
health and worker protection laws in the countries involved: in
NAFTA's case, Canada, the United States and Mexico. In NAFTA's
brief existence, corporations have used a dispute process under
the investment rules to challenge environmental laws in Canada
and Mexico. Ethyl Corporation, a U.S. company, has threatened
to file a $200 million claim if the Canadian parliament passes
a law that prevents them from importing the potentially toxic
fuel additive MMT. When the Mexican State of San Luis Potosi blocked
the U.S.-based Metalclad Corp. from operating a hazardous waste
treatment facility the company owns, Metalclad filed a grievance.
Perhaps this track record has led the Clinton Administration to
keep a low profile on its negotiations of the MAI; it has barely
consulted with Congress. Unless the public is involved, the agreement
will provide corporations with an unprecedented list of rights
with no word about their responsibilities. As it stands, they
would not be required to abide by international fair labor standards,
respect human rights, or provide information to the communities
where their enterprises are located. Neither is there any mention
that they must operate in an environmentally sound way.
The flow of money from multinational corporations and other
private sources reached an all-time high last year of $231 billion.
It was $45 billion in 1990. More of that money is going to developing
countries: 35% to 40% of it in 1995, up from 21% in 1990. Fifty-one
of the 100 largest "economies" in the world are corporations;
49 are countries. Two-thirds of global trade is between transnational
corporations or between their overseas affiliates. Poorer countries
bend over backwards to attract multinationals' investment by offering
tax breaks or by waiving environmental laws. The Caribbean government
of Dominica recently reviewed its mining laws to make them more
amenable to overseas companies -advised by the Australian mining
giant Broken Hills Proprietary. Similarly, in 1995 the Philippines
dropped its law limiting foreign investors to 40% of a mine's
But such power is not enough for the multinationals. They
want the flow of money to be liberalized, not only among the OECD
countries now negotiating the Multilateral Agreement on Investment
on their behalf, but to the developing world as well. The OECD
plans to invite other, less powerful, countries to join in on
the agreement's terms, but only after the most powerful countries
set them in place. This tactic shuts the developing world out
of the negotiations. The call of Malaysia and India to hold the
negotiations in a more open and inclusive setting-such as the
United Nations Conference on Trade and Development -has so far
fallen on deaf ears.
The stakes are high, not just in ensuring that our legislative
victories on behalf of workers and the environment are not reversed.
Unless the MAI places some controls over the rampant race of private
capital flows, they can throw an entire country into economic
chaos at a moment's notice. Mexico's peso crisis two years ago
was just the latest signal that private capital flows need to
be regulated, but the agreement's negotiators are not taking heed.
It is time for us to say "enough" to a world where corporations
and investment fund managers have more say in a nation's future
than a democratically elected government.
Andrea Durbin is director of international projects for Friends
of the Earth. Mark Vallianatos is a research associate at the
Corporations & the Third World