Firm deadline
now needed for MAI
By Helmut O. Maucher
The Multilateral Agreement on Investment (MAI)
is too important for it to be allowed to lapse now that ministers have failed
to meet their deadline at the annual meeting of the Organisation for Economic
Cooperation and Development.
The enormous progress in trade liberalisation over
50 years and the emergence of a rules-based multilateral trading system stands
in marked contrast to the hundreds of bilateral and regional treaties that govern
foreign investment. The MAI remains a valuable if elusive prize for the world
economy – a secure, coherent and predictable framework for cross-border
investment among OECD member countries and others who may wish to join.
To their credit, it was OECD governments that took
the initiative in launching the negotiations. Incoming investments create jobs
and almost always offer local consumers new and better products and services.
They significantly improve social and environmental standards in recipient countries.
Business will benefit because a coherent international
set of rules for foreign investment will improve access to markets and resources
and provide an incentive to greater efficiency. Increased competition will ensure
that efficiency gains are passed on to consumers.
Foreign investment is a win-win proposition. It
has been growing much faster than trade in goods and services and is the driving
force behind globalisation. But any agreement reached at the OECD must have
much wider application to be effective. Non-OECD countries will have to be brought
in. This is why business sees a role for the World Trade Organization.
Bearing in mind the undoubted benefits of foreign
investment, OECD governments must ask themselves why, despite three years of
negotiation in the OECD and the accumulation of a mountain of country-specific
exceptions and concessions, agreement on binding rules for the treatment of
foreign investment was beyond their grasp.
The writing has been on the wall for the MAI negotiations
for months. Outside pressure groups mounted a campaign of wild charges that
the agreement would allow foreign corporations to override decisions of national
legislatures in areas such as the environment, labour standards or culture.
Somehow, amid all the vilification, the core concept of the agreement –
non-discrimination – was left out of the public debate. Parties to the
MAI will commit themselves to treat foreign investors and their investments
no less favourably than they treat their own investors.
But business was not happy either. In consultations
with negotiators in January, major international business groups, including
the International Chamber of Commerce, complained that the agreement might not
do enough to reduce restrictions on investment and create a more certain environment
for foreign investment. Business hoped for genuine "added-value" from
the agreement that would raise standards of non-discrimination, protection,
and dispute settlement from those currently provided for in the existin
g network
of bilateral treaties.
Was the OECD the right forum for the MAI negotiations?
While the MAI could do much to liberalise investment further among OECD countries,
there is an even greater challenge to remove restrictions on investment outside
the OECD area. In order to address these restrictions and develop a truly multilateral
framework governing cross-border investment, a more global forum – such
as the WTO – may be more appropriate., A fresh look at the whole issue
will be necessary if we are to achieve progress.
Did the MAI negotiators aim too high? There is
a case to be made for building from a modest base rather than producing an ambitious
text and then whittling it down. Next time round, negotiators must resist pressure
to include provisions that would make it nearly impossible for developing countries
to join the agreement.
That the negotiators were wrong to introduce issues
like labour standards and the environment –all too often used as a smokescreen
to hide protectionist moves – was borne out by the way the negotiations
became bogged down. While it is understandable that governments should want
to negotiate further improvements in these two areas, they will stand the best
chance of genuine progress if they use the appropriate international fora.
There is a set of institutions to handle environmental
issues – like the Conference of the Parties to the Framework Convention
on Climate Change, which produced the Kyoto agreement on global warming. The
International Labour Organisation is the right place to negotiate improvements
in labour standards in local and international business, in private and public
employment.
Government must never lose sight of MAI’s
purpose, which they fixed in the interest of their own economies: to increase
investment flows by building investor confidence through greater predictability
and transparency, in the interest of all parties concerned.
The OECD deserves great credit for preparing the
ground. Areas of agreement have been identified, definitions were clarified
and difficulties exposed. The importance has been demonstrated of excluding
issues, however legitimate, that do not meet the agreement’s central purpose.
Business applauds OECD ministers' decision that
negotiators should continue their work "with the aim of reaching a successful
and timely conclusion of the MAI and seeking broad participation in it".
It is encouraging that the OECD governments, in the words of the communiqu,
will "seek the support of all their partners for next steps towards the
creation of investment rules in the WTO".
But speed matters. The process of creating global
rules and adapting institutions should now be accelerated so that it keeps pace
with the evolution of investment and cross-border business. Failure to set a
clear deadline for completing MAI, despite almost three years of negotiations,
suggests that governments are merely papering over their differences and accepting
the risk of further delays.
Meanwhile, the world economy is changing fast and
the need for a comprehensive multilateral agreement on investment will become
more acute. OECD governments should regard their failure to agree last month
as no more than a temporary setback, the signal for a fresh start.
Helmut O
. Maucher is President of the International
Chamber of Commerce and Chairman of Nestl.
ICC
Commission for International trade and investment policy