Corporate Takeover

Dangerous treaty (MAI) would threaten laws governing investments, currency, and property

By Laura Grund and Lori Wallach, Public Citizen

Imagine an international treaty that empowers foreign corporations and investors to sue governments directly for cash compensation in retaliation for almost any local government policy or action that they allege cuts into their profits.

This is just one provision of a largely unknown proposed treaty called the Multilateral Agreement on Investment (MAI). The MAI would apply a World Trade Organization-like (WTO) deregulatory agenda to the few economic sectors not already covered by WTO rules, including where and under what terms investment in manufacturing and services can take place; trade in currency, stocks, and bonds; and ownership of land and natural resources. In the words of the director general of the WTO, "We are writing the constitution for a single global economy."

Public Citizen has been one of the leaders in an international campaign to expose the MAI, which is being negotiated in secret at the Organization for Economic Cooperation and Development (OECD) in Paris, France, and to educate the public and members of Congress about its real-life effects. (The "confidential" text is posted on Public Citizen's web site at www.citizen.org/gtw/.) Slowly, more and more public interest groups are becoming aware of the MAI and joining in the fight to prevent its implementation.

But the major national media, including The New York Times, The Washington Post, and television networks, have ignored this looming giant. The American public is uninformed of its consequences.

Like most international treaties, the MAI establishes a series of rights and responsibilities. Unlike most other treaties, the rights go only to foreign investors and corporations, while the responsibilities and burdens go to the governments. And once governments enter into the MAI, they are irrevocably bound to its terms for 20 years. By contrast, the North American Free Trade Agreement (NAFTA) requires only six months for complete withdrawal.

Lack of Protections for Citizens

The MAI contains no enforceable rules to protect workers, consumers, small businesses, or the environment. Negotiators have yet to include in the MAI provisions addressing corporate responsibility to working conditions, neutrality with union organizing, product safety, human rights, or fair business practices. 'The list of unbalanced, unjust provisions is endless," says Lori Wallach, Director of Public Citizen's Global Trade Watch.

The MAI would make it easier for foreign companies-transnational corporations that have no stake in creating local jobs, funding schools, or keeping drinking water clean-to replace locally owned or managed businesses. Under the treaty, governments would be forced to treat foreign and domestic companies equally. In other words, governments would have to provide the same tax breaks or other incentives they provide to locally owned businesses to huge, multinational corporations.

The MAI grants "Most Favored Nation" status to all member countries, overriding laws that prevent U.S. firms from investing in countries with poor records on human rights, labor rights, or the environment.

One provision of the treaty would ban "performance requirements," which are specific conditions for investment, such as establishing joint ventures, hiring a certain level of local personnel, or adhering to certain environmental standards. Community reinvestment laws which require banks to invest in economically deprived areas could be also be prohibited under this provision. "Giving corporations that kind of power will undermine the ability of state and local governments to regulate corporations and keep them accountable to communities," says Wallach.

The Slippery Slope to Deregulation

The MAI has generated outrage among environmental organizations worldwide because the ban on performance requirements could lead to the outright deregulation of environmental laws. Many environmental laws and standards could be challenged under the MAI as conditions to investment. For example, several states require glass and plastic containers to be made from a minimum percentage of recycled content. Some practice preferential purchasing of materials made with recycled content. Under the MAI, corporations could challenge state governments regarding the fairness of such a law, and the government would either be forced to pay fines to maintain the law or to overturn it.

Corporations could also challenge laws which restrict land ownership and use under the ban on performance requirements. For instance, Oregon and Idaho prohibit unprocessed timber sales to foreign companies. Also, several European countries plan to adopt a ban on tropical timber.

The "expropriation and compensation" rules are the MAI's most dangerous provisions. These rules arm every foreign investor or corporation with the power to challenge nearly any government action or policy from tax laws to environmental rules; from labor laws to consumer protections-as a potential threat to their profits.

One pending case serves as a preview for what consumers can expect from the expropriation rules if the MAI goes into effect. Based on a similar provision in the NAFTA, the U.S. - based Ethyl Corporation is suing the Canadian government for $251 million in damages over a public health and safety law that banned the toxin MMT-a gasoline additive which Ethyl produces. Ethyl Corporation filed an action against the Canadian government claiming that the very act of debating the ban of MMT in Parliament was a violation of NAFTA's expropriation rules, since a ban would threaten their profits. If Ethyl wins the action, the taxpayers of Canada will owe the private corporation $251 million for allegedly violating the terms of the treaty. "The ability of the treaty to chill government action protecting the environment and natural resources is overwhelming," notes Wallach.

Imagine how Congress will react to the news that the MAI would give every foreign investor and corporation even greater rights than U.S. property owners. Though MAI negotiations began in 1995, it was only in the context of last year's consumer victory in the United States against "fast-track" trade authority, the process which forces Congress to consider trade agreements without amendments and limited debate, that some members of Congress became aware of the MAI negotiations. Previously, not even the U.S. congressional committees with jurisdiction over international commerce or investment had been briefed, despite the fact that negotiations are nearly complete.

There are signs, however, that awareness to the treaty is building. The MAI was recently attacked by members of Congress on the House floor. And Public Citizen's fair trade allies, including Representatives David Bonior (D-Mich.) and Ron Klink (D-Pa.), expressed concern about the treaty in a letter sent to colleagues. Finally, the conservative Western Governors Association commissioned a major study of state laws that would be undermined by the treaty.

If the OECD completes the negotiations of the treaty in May, as planned, the MAI could be considered by Congress as early as this fall.

For more information on the MAI, and to find out how you can get involved, contact Chantell Taylor at ctaylor@citizen. org or 202-546-4996.

Multilateral Agreement on Investments