The emerging debate over the Multilateral Agreement on Investments--the MAI--carries forward the debate that began with NAFTA and continued with the WTO and fast track. Many of the same problems are posed once again and would be extended even further. Indeed, the WTO's head calls this "The constitution for a single, global economy." It would establish the rights of business, with nothing said about its responsibilities.

In seeking to protect foreign investment from discrimination, the agreement would exalt business interests above all competing social concerns. All of these agreements put economic concerns ahead of all others and insulate them from processes that would balance competing concerns. And this would be done through processes that are less transparent and more remote from democratic accountability.

In seeking to facilitate the free-flow of capital around the globe, the agreement assumes that develop- ment is desirable everywhere. But from an environmental viewpoint, that is hardly the case. There are better places and worse places--some that are suitable and some that are not.

Globalization is not proving to be an environ-mentally benign phenomenon. Nature is already hard-pressed on nearly nine-tenths of all land. More development will simply press it harder. Some will argue that greater prosperity will result, and that, with it, more will be done to control pollution. But there will also be more pollution to control, and control will only come slowly--if at all. We should not be adding to problems of climate change and species extinction.

And the pressure of global competition and cost-cutting will inexorably press advanced countries to reduce outlays for environmental protection, as well as for social safety nets. We are already seeing our domestic industry arguing that the costs of environ-mental programs must be reduced to meet the costs of globalization.

Now admittedly, this agreement has not been finalized. Negotiators for the U.S. government say they are not satisfied yet and that they are trying to improve its environmental provisions. But many of these so-called improvements do not meet our concerns and are not binding, and even they are being strongly resisted. The U.S. Council for International Business opposes them, as do various other nations.

What then are our specific concerns? They arise out of the likely impact of the provisions of the MAI on the power of government to regulate to protect the environment, its ability to manage land and natural resources appropriately, the use of government procurement programs to pursue environmental objectives, and the threat that the MAI will override environmental programs at the international level.

Government Regulation

The gravest threat to government's power to regulate is embodied in the MAI's provisions on expropriation. These provisions go way beyond the area of settled law in the United States. In effect, they would enshrine the doctrine of "regulatory taking" in international law. Compensation would not only be required for property taken directly, but for that taken indirectly, or anything "having equivalent effect." Under this elastic wording, claims could be pressed for diminished value arising from regulation. While a regulation may not intend to result in a taking, investors may claim that was the indirect effect.

And that has already happened in Canada where the Parliament banned a toxic gasoline additive (MMT) from abroad, and the Ethyl Corporation has sued for damages under weaker provisions of NAFTA. If the MAI becomes law, many regulations governing toxics could be endangered as claims would be brought that the value of investments putting toxics into the environment would be curtailed. In the Ethyl case, as well as in the Metalclad case in Mexico, we have already seen investors trying to intimidate governments and forestall regulation by threatening to bring suit for huge sums.

Some developing countries fear that they would have less success in controlling pollution by powerful foreign corporations. Countries such as Taiwan have barred foreign corporations from enterring "highly polluting industries." Under the MAI, they could not do that.

Natural Resources

A number of developing countries have laws requiring that raw logs be processed to some degree before they can be exported. It is commonly believed that such laws help protect forests from rapid exploitation by providing more jobs domestically for each tree cut. These laws would be disallowed by the MAI.

The U.S. has such laws too. There are limitations on selling raw logs abroad from national forests in Alaska and parts of Oregon and Washington and from some state-owned forests too (Oregon and Idaho)--for the same purpose. These could not survive the MAI.

The MAI also might be used to challenge decisions made to restrict new development and mines under land use regulation; e.g., to protect aquifers. These restrictions might be viewed as discriminatory since domestic developers and miners have long since established their operations, or they might be viewed as unduly burdensome. And could foreign-owned industrial farms demand equal access to federal irrigation water, which has already been allocated to domestic users? Would turning them down be viewed as discriminatory? Would this pressure obstruct our efforts to re-allocate such water to instream uses?

Procurement

At various levels, government is now introducing social concerns into its procurement decisions. An executive order directs federal agencies to buy "green" products, such as those with recycled content or using renewable energy. Cities and counties are moving in this direction too. Some also avoid buying products, such as oil, from firms heavily involved with countries having bad human rights records. Others won't buy wood taken from endangered tropical forests (e.g., New York City). All of these could run afoul of the MAI because they violate its ban on performance requirements.

States providing tax incentives to encourage recycling or investments in environmental technology might be in trouble too.

International

In NAFTA, special provisions were inserted to make it clear that conflicting provisions of various environmental treaties were not to be regarded as overridden. These included the Montreal Protocol to reduce use of chemicals that destroy the ozone layer, and the CITES treaty to eliminate trade in endangered species. But the draft MAI includes no such provisions. Cracking down on traders in endangered species could be regarded as discriminatory. Some believe the MAI would prevail against earlier treaties.

International lending institutions have developed "green" guidelines to determine who is eligible for loans (e.g., World Bank and Overseas Private Investment Corporation--OPIC). The MAI would not countenance discrimination on the grounds of environmental or social responsiblity.

Many developing countries prevent foreign corporations from exploiting their natural resources; they want their own people to benefit instead. These restrictions have the effect of reducing the rate of exploitation. Brazil's rain forests are apt to disappear faster if these restrictions vanish because of the MAI. Asian logging and mining combines will got at the job with great efficiency and on a massive scale.

Dispute Resolution

The MAI sets up special arbitral panels to hear complaints by investors. In a plunge into the unknown, it also authorizes suits to be brought in the courts of those signing the MAI to hear these complaints. However, other affected parties, such as environmentalists, would have no rights to intervene or be heard. Environmental expertise would not have to be sought (that is optional). Much of the proceedings could be kept confidential. State and local governments could be sued but could not defend themselves. Agencies such as EPA could be sued by foreign corporations from around the world.

Conclusion

The MAI would take away the power of sovereign nations to balance competing economic and social interests. Fundamental imbalances would be embedded in international law. This should never happen.

The White House needs to hear how you feel about this issue. There is still time to turn this around. We don't need an unfair MAI. And we certainly can't tolerate a backdoor attack on our programs to protect the environment.

###

---

Malini Mehra
International Campaigns Officer
Co-ordinator, Sustainable Societies Programme

Friends of the Earth International
PO Box 19199, 1000 GD Amsterdam, Netherlands
tel. +31 20 6221369 fax +31 20 6392181
e-mail: sustsoc@foeint.antenna.nl
www: http://www.xs4all.nl/~foeint/

---

Bob Olsen           Toronto           bobolsen@arcos.org   (:-)