| Issue 2 |
October 1998
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The Geneva Business Dialogue left the strong impression that the ICC has largely given up on the Multilateral Agreement on Investment in the OECD, and will instead concentrate on getting the rules it wants in the WTO. This is quite remarkable, given that many OECD governments are still struggling to keep the MAI afloat.
As the MAI has been one of the ICC's main policy priorities for the last years, one would have expected a massive offensive for the completion of the agreement. Like the other major corporate lobby groups behind the MAI -- UNICE, the US Council for International Business (USCIB) and Keidanren -- the ICC was quite upset when the MAI was not signed in April and negotiations were suspended for a period of six months, The organisation launched a new offensive in support of the MAI, with ICC President Helmut Maucher complaining about the delay and urging governments to "Move on MAI".[note 1] However, the ICC sees the completion of a global treaty for investment liberalization in the WTO as the ultimate goal. This message was also brought to the G-8 Summit in Birmingham later in May.
The Geneva Business Dialogue revealed a remarkable lack of business support for the OECD MAI. The conference declaration states that "a truly global framework of rules for cross border investment is needed, especially in view of the lack of progress so far at the OECD". When questioned on the MAI at the final press conference, Maucher stated that he is "not that supportive of the MAI, because they added social wording in at the very last moment". He claimed that developing countries would view this as protectionism and oppose it, and advocated "more cautious approach". In a moment of inspiration, he spoke about how "we have to think of the developing world. It cannot be right that 15% of the worlds population eats 80% of its resources!"
When asked whether Nestlé would be willing to sue a government under MAI rules if it felt 'unfairly' treated, Maucher responded that "this will not be the case as this thing will not get through, we can be sure of that". He continued that in such a case, Nestlé would only go to court to protect property rights. "On a softer issue", he explained, "Nestlé would be more cautious to risk damaging the long-term relationship with the host government".
Chairing a workshop on "Trade and Investment: the Next Hot Issues", Nestlé board member and head of the ICC's investment working group Arthur Dunkel [note2] quoted an article by Renato Ruggiero in the International Herald Tribune. In that article, the WTO boss characterizes the MAI debate as an "example of the gap between perception and reality" and warns that local content restrictions, export requirements and other rules could scare off FDI. Pirelli's Perissich painted a gloomy picture of the impacts of the financial crisis, and concluded that "the short term does not work in favour of those wanting trade liberalization, but rather against them". He regretted that the delay of the MAI, but also wondered "if it is essential right now, in the light of the financial crisis", concluding that it "would not have stopped the Asia crisis; now those in power work on financial regulation".
Hari Shankar Singhania, past ICC president and CEO of Indian JK Corporation, spoke out firmly against the MAI. "The growth in FDI happened without the MAI, through BITs [note 3] or even without, so why do we need it?" Referring to the financial crisis, Singhania pointed at the MAI's fundamentally flawed nature. Firstly, he explained, "FDI and portfolio were put in the same agreement".[note 4] Secondly, "the development dimension" was not addressed and "host country interests were ignored". According to Singhania, "the experiences of Russia and many other countries raise questions about prescribing one model for the economy despite different realities on the ground. The MAI is silent about investors' obligations [towards labour and local communities], which is a problem for both developed and developing countries". Singhania also worries about a MAI within the WTO, especially concerning cross retaliation with trade sanctions in case of conflicts. "Countries should be allowed to choose their own development strategies", he concluded, "and not be put in a strait jacket".
Nobody countered Singhania, who later in the same debate, warned against a WTO round on 'new issues' before implementation of the existing agreements. "Developing countries took large responsibilities in the GATT. They should be allowed to digest it first. Don't push them too much, otherwise there will be a backlash". His demand to delay the start of a WTO Millennium Round was followed by a surprising round of applause from the audience.
Perissich, Singhania, and a Professor Lawrence from Harvard University all agreed that the definition of investment in the MAI should be changed. Admitting that this might not be easy, Perissich said that "capital liked with the real economy and "purely short-term investments" should be distinguished from each other. Professor Lawrence said that the distinction was easy to make, and Singhania added that "FDI can come without portfolio investments".
The financial crisis has clearly changed the tone of the debate on finance and investment liberalization within the business community. Government negotiators still favouring the MAI's fundamentalist top-down approach to liberalization and its all-encompassing definition of investments [note 5] are quickly losing touch with reality. The ICC appears to have moved most of its eggs to the WTO basket, hoping that negotiations on a multilateral investment treaty will start there. If, however, citizens' groups manage to completely bury the MAI by denouncing its democratic, social and environmental flaws, such a victory will undoubtedly help to prevent the resurgence of a MAI clone in the WTO.
Notes
1. Journal of Commerce, 12 May 1998. |Back to Text|
2. Arthur Dunkel was Director-General of the GATT from 1980 - 1993. Currently he chairs the International Chamber of Commerce's "Commission on International Trade and Investment Policy". |Back to Text|
3. BITs: Bilateral Investment Protection Treaties. |Back to Text|
4. Portfolio investments are more volatile, short term speculative than direct investments (FDI). |Back to Text|
5. German, British and Dutch negotiators are among the
fiercest and most stubborn MAI supporters. |Back to Text|