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How the web saved the world…

1999 January 10

You will probably not have read much about the collapse of the Multinational Agreement on Investment. That is hardly surprising.

It was one of the most clandestine events of last year.

Delegates from the 29 richest countries in the world – treasury officials, bankers and civil servants – had been meeting for two years to negotiate what might have been the most far-reaching international agreement this century. But you didn’t read much about that either, because they did it more or less in secret.

The meetings were so little publicised, in fact, that when Jack Straw was asked about it on the BBC’s Question Time a few months before, he had to admit that he didn’t know what it was. The Multinational Agreement on Investment – or MAI as it was more anonymously referred to – had not, it seemed, even been discussed in Cabinet.

Nor was it only British politicians who were in the dark. In France the politician who chairs the ruling party’s committee responsible for investment policy learned details of his government’s involvement only weeks before the document was due to be signed last November. And in the US, government officials were busy denying that a draft text had already been drawn up until, one embarrassing day, some worried dissident went and posted the entire 151-page document on the Internet. The story didn’t end there. When a US Congressman demanded to know why he had not been informed of the negotiations, the government claimed that numerous briefings had been conducted, and produced a list of meetings which no one on the invitation list could recall having been to. When a different member of Congress asked the same question of a different official, he was given a different list of alleged briefings. The discrepancy came to light when the two lists were posted on the world-wide web. The Internet again.

There were those who had been suspicious of the agreement from the outset. When it was launched in 1995 its sponsors trumpeted it as the final pillar in the globalisation of the world’s economy: it would release investment from the regulations that stopped it flowing freely around the world. These were coherent and familiar arguments. But to its opponents, it was a plot by multinational companies to shake off the controls that democracies might legitimately place upon their activities. It isn’t hard to see why people were alarmed. The US, whose civil servants dreamt up the agreement, insisted (perhaps out of distrust of the legal systems in developing countries) that it be handled by the Organisation for Economic Co-operation and Development (OECD) from which all but the richest nations are excluded. Nor was it just senior politicians who were kept in the dark about the details. The only outsiders consulted were officials from the US business organisation which represents multinational companies – its representatives admit that they participated in regular meetings with negotiators immediately before and after each MAI negotiating session.

The posting of all this on the Internet – after some two years of semi- secret negotiation – changed everything. The secrecy which had initially bred only mild mistrust ignited into widespread opposition. From the US to India, from Canada to New Zealand, and all across Europe, an ad hoc coalition of environmentalists, local councils, health workers, human- rights campaigners, trade unionists, aid agencies and church groups began to band together. What they shared was the conviction that the agreement – whatever advantages it might bring to multinational corporations – would be bad for everything from the cause of sexual equality and the autonomy of local government to the global environment and the lives of the world’s poor and its indigenous peoples. They came to see it as a “stealth treaty”, a “charter for neo- imperialism” and a “silent coup” to overthrow national sovereignty and the autonomy of local government. It was described as “the gravest threat to democracy that we have seen in this country this century” or, more snappily, as “the EU on crack”. But it was complicated and technical. The media ignored it, though there were references to it on the City pages where it was assumed, without the details being clear, to be both inevitable and a “Good Thing”.

The agreement, the argument ran, would streamline international investment. It would make it illegal for a government to discriminate against a foreign investor (or in favour of a local one). It would at last create that dreamed-for business utopia: the level playing field. It sounds fair; it sounds logical. But it involved a plethora of technical measures which went far further than any previous international agreement. And the exemptions under previous treaties – in areas concerned with public morals, human life or health, real estate, the press, exhaustible natural resources, the environment or measures to promote disadvantaged regions – all these were to be scrapped. Members from the interest groups who stumbled across the draft agreement while surfing the net began to work out the implications for themselves.

First on the scene were the aid agencies. Lobbyists for the world’s poor realised that the proposed agreement would put an end to attempts by Third World governments to shape their own destinies. Colombia’s ban on foreigners investing in the processing and disposal of toxic or radioactive waste produced outside the country would go. So would Chile’s requirement that investors stay in certain high- risk portfolios for at least six months (as a means of slowing speculation and encouraging investment in productive activities). More generally, it struck people that the agreement would accelerate a “race to the bottom” as countries felt new pressure to lower “costs” – ie, living standards and environmental safeguards – in order to attract capital. Environmentalists feared that the new agreement would over-rule the sovereign rights of states and encourage, for instance, investment in extractive processes (depleting natural resources) rather than in new industries. Laws to protect wildlife or prevent oil spills might be outlawed. Advocates of the agreement – civil servants, treasury officials and the free-market ideologues of the International Monetary Fund and World Bank – insisted that this was alarmist talk. The treaty would merely insist that the same standards applied to both foreign and domestic investors. But the international precedents were not encouraging.

Under similar – but less wide-ranging – legislation, th European Union’s ban on the sale of hormone-fed beef had been ruled an unfair trade barrier, even though the ban applies equally to both imported and domestic beef. Attempts to resist genetically-modified soya could fail on the same basis. Under the powerful MAI rules – which would take precedence over domestic law – corporations would be able to go further. They could sue governments for damages before an international tribunal over any legislation that increased their costs, such as higher wages, or social and environmental standards. Similar rules already exist under the North American Free trade agreement (Nafta). Meanwhile, human-rights pressure groups were becoming alarmed. The secret treaty would inhibit a state’s ability to abide by obligations incurred under earlier agreements such as the Convention on the Rights of the Child. More than that, they would prohibit campaigners in, say, the UK from imposing economic sanctions to punish a country for human-rights violations by preventing British corporations from doing business there. In Massachusetts, activists feared that the agreement would overturn a state law which says that no government agency may purchase from companies that do business in Burma. Boycotts of companies such as Shell would also be outlawed.

Had the agreement been in force 10 years ago, investment sanctions against South Africa would have been forbidden. Nelson Mandela might still be in prison. Trade unions grew anxious about jobs. It would suddenly become illegal, Canadian fishermen protested, to exclude American fishermen from local waters. Then local government became concerned: state and town plans to boost industry, prevent pollution and promote recycling were all in jeopardy. California’s 40 per cent corporate income-tax deduction for use of renewable energy in an economic development area was at risk. So was the requirement for Texas agencies to apply 8 per cent of their budgets to the purchase of recycled materials. Foreign investors would be able to argue that such incentives were aimed at influencing investment decisions more than at conservation. Health campaigners discovered that anti-smoking programmes would be open to challenge. The government of British Columbia was advised that if it pursued the idea of legislation to force tobacco companies to list key cigarette ingredients (including arsenic, lead and cadmium) on packages – and insisted that they be sold under plain wrappers – it could be sued under the agreement for infringement of trademark rights. Under Nafta precedent it would be liable to pay hundreds of millions of dollars in compensation to US tobacco companies. Dozens of non-profit health and social services agencies feared that they could suddenly face competition from American corporations demanding, under MAI rules, equal access to government funding.

In the arts world the same formula would mean that cultural policies in support of local artistic communities could be interpreted as giving preferential advantages to local citizens. There were even gender implications. Measures to enable poor women, particularly former welfare recipients, to become self sufficient – along with incentives to promote the advancement of women, minorities, and children – could easily be outlawed by the agreement as “investment-distorting”.

As all this apprehension mounted, the traffic on the Internet became furious, with scores of groups all over the world creating MAI web sites and cross-fertilising each other’s campaigns to lobby politicians, compile petitions, jam fax machines and all the other stratagems of modern protest. The most unlikely groups joined hands. The Harvard Lawyers’ Society announced that the agreement violated the United Nations Declaration on the Right to Development, which stipulates that: “States have the right and the duty to formulate appropriate national development policies that aim at the constant improvement of the well-being of the entire population and of all individuals, on the basis of their … participation in development and in fair distribution of the benefits resulting therefrom.”

In Canada even the Association of Librarians chipped in, anxious – in a measured, librarianly sort of way – that “policies affecting the creation and dissemination of information, could be severely restricted if considered to be inconsistent with MAI rules”. The politicians began to feel the heat. Delegates from all countries began to insist that exemptions be added to the draft. The negotiations – which should have been completed by May 1997 – dragged on. They were extended to April 1998. And then to November. By the end, more than 1,000 pages of exceptions had been lodged, including proposals for sweeping exemptions. As the lists grew, so did the disputes. In the end it was the French who killed it off. Along with the Belgians and Canadians they feared for their film and publishing industries and other manifestations of their national heritage which they wished to protect from foreign competition. (Because American made-for-TV movies fill 60 per cent of European TV screen time, that would mean the US movie industry could lay claim to 60 per cent of France’s Film Support Fund which is set aside for French films.) The French government pulled out of the MAI talks altogether. Even this is not the end of the story. The secret manoeuvring continues. The remaining governments have privately pledged to continue the aims of the agreement in another forum. The agreement may mutate into new forms and forums. Last month they extended the life of the World Trade Organisation’s trade and investment working party indefinitely, giving it a brief to slip some of the MAI provisions into a new round of negotiations. Elsewhere stealthy US and UK civil servants are trying to insert other measures from the agreement into the revised articles of the International Monetary Fund. And European bureaucrats are trying to inject bits of it into the next version of the Lome Convention, which governs relations between the developing world and the EU.

The opposition will now find that they have to fight their battle on more than one front. There will be those who wonder – in the current economic maelstrom – whether what we now need is more global deregulation rather than less of it. One of the world’s worst economic crises since the Great Depression has engulfed much of Asia, and it was set off by hot money that flowed in prior to August 1997, then gushed out in a panic when the Thai baht fell. This might not seem the best time to negotiate a treaty that makes it easier for capital to flow recklessly across national boundaries and makes it more difficult to prevent these kinds of self-reinforcing panics in the future. Those who think that deregulating international capital flows should take precedence over all other political considerations do not agree. They are already busy cloning the crumbled fragments of the agreement’s DNA. But they are chastened by one simple fact: in the end the world’s most secret treaty turned out to be a political Dracula which simply could not survive the light of day – or the glare of the world’s Internet screens.


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