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Effects of the Multilateral Agreement on Investment (MAI)
on Sub-national Governments
Documents from which excerpts were taken include books, policy papers, articles, letter to the PM, briefs to the Parliamentary Committee on MAI, and Recommendations of the Parliamentary Hearings Committee on MAI Prepared by Janet M. Eaton, Systemic Change Agent, Educator, Researcher and Writer January 5, 1998 jeaton@fox.nstn.ca 1) MAI-Day!
2) Writing the Constitution of a Single
Global Economy:
3) MAI:
4) Canadian Public Health Association:
5) Excerpts from Barry Appleton Briefing
Notes:
6) New Democratic Party Minority Report
on the MAI:
7) Concerns of the PC Party:
8) Recommendations of the Parliamentary
Hearing:
9) The Hon. Paul Hellyer: Notes:
10) Sierra Club of Canada:
11) The Western Governor's Association
(WGA)'s s policy paper:
General implications for Governments: "In short, the MAI seeks to empower transnational corporations
through a set of global investment rules designed to impose tight restrictions on
what national governments can and cannot do in regulating their economies.
The ability of governments, for example, to use investment policy as a
tool to promote social, economic and environmental objectives will be forbidden
under the MAI. While corporations are to be granted new rights and powers
under the MAI, they are to have no corresponding obligations and
responsibilities related to jobs, workers, consumers, or the environment."
In effect, the MAI amounts to a declaration of global
corporate rule.
I) Political Rights:
"If enacted, the proposed MAI will further consolidate and enhance the political rights of corporations in the following ways: (See # 5 below re: municipal) i. The MAI seeks to codify a special set of rights for corporations as investors. ii. The MAI attempts to expand the scope of investor rights of corporations by advancing a much broader definition of investment. iii. Under the "national treatment" and "most favored nation" clauses of the MAI, foreign-based corporations or investors are to be accorded special rights and privileges. iv. In addition to codifying property rights ranging from the rights of petroleum corporations to hydro-carbon resources (p.95, sec. 35), to all forms of intellectual property rights (e.g., patents, copyrights, industrial design, trade secrets, etc.), the MAI emphasizes the right to the free flow of capital. v. These investor rights of corporations would be applied in all political jurisdictions by all levels of government in those countries that are party to the MAI. While the precise details of how the MAI is to apply to sub-national levels of government are not spelled out, it is clear throughout municipal, as well as federal governments). Moreover, the MAI grants to corporations the right to sue governments or states and provides a binding investor-state dispute settlement mechanism (pp. 53-64) for these purposes (see below). While governments can also challenge other governments under the state-to-state dispute settlement procedure (pp. 44-52), governments are not granted reciprocal rights to sue corporations for damages on behalf of their people. Hence, the political rights of corporations are greatly enhanced by the inclusion of this investor-state dispute mechanism." "In effect, the draft MAI points to a massive transfer of "rights" from citizens to investors in the new global economy. At a time when peoples all over the world feel that their fundamental democratic rights as citizens (e.g., the Universal Declaration of Human Rights) and the ecological rights of the planet (e.g., the Earth Charter from the Rio Summit on the Environment) are not protected by governments, the rights and freedoms of transnational corporations are being guaranteed through trade and investment treaties (like the MAI) that have become the new global economic constitutions. This transfer of rights, in turn, is reinforced by radical shifts in the balance of power between governments and corporations." III) Political Security: the fifth implication Constitutional
Politics notes:
  2) "Writing the Constitution of a Single
Global Economy: A Concise Guide to the MAI - Supporters and Opponents'
Views" by Michelle Sforza-Roderick, Scott Nova, and Mark Weisbro.
[U.S. based Preamble Collaborative's Preamble Center for Public Policy]
Domestic Laws that May Violate the MAI: "Opponents cite a host of American laws that they believe
could be subject to challenge under the MAI. Some laws that
protect the environment and public health could be ruled to be discriminatory
against foreign investors, to constitute expropriation of investor assets,
or to be illegal performance requirements, opponents argue.
"In addition, the MAI, as drafted, does not include the exceptions usually included in trade agreements that allow governments some leeway with respect to environmental and public health protections." "Opponents also cite a range of laws encouraging local
economic development, that because they may put foreign investors at a
competitive disadvantage, could be subject to challenge under the MAI.
"Laws designed to enhance financial and economic security
could also be illegal under the MAI, opponents assert. Laws that could
be challenged include:
Counterarguments:
3) Clarke, Tony and Maude Barlow. 1997. "Multilateral Agreement on Investment: and the Threat to Canadian Sovereignty." Canada: Stoddard This authoritative analysis of the impact of the MAI on Canadian sovereignty covers every arena of public policy implicated as well as sovereignty issues within a broad context of the historical development of both the rights of citizens and rights of corporations. Many implications for sub-national governments both provincial and municipal are examined throughout the book. A few key excerpts are cited. "..the MAI will directly affect municipal governments, by seriously hindering their ability to implement their own local policies and programs. In their relationship with provincial governments, municipal councils are directly involved in delivering services that will be affected by MAI, such as public education, social housing, health care, and social assistance. Many municipal governments have their own procurement programs for purchasing goods and services, to help local economies and job-creation. The MAI could also affect municipal regulations on local real estate, bank loans for and investment in community development, and the privatization of public services ranging from garbage collection to libraries." (Clarke and Barlow, 1997 P. 177-78) Also the implication for sub-national governments to create meaningful legislation after MAI implementation: In Chapter Two ""The Emergence of Global Corporate Rule" they characterize the MAI as a "toolbox" for corporations, a set of power tools, the use of which will enable corporations to "take resources away from the public and the commons". (p. 33) Take:
Under Take 5 Public Legislation they state: "The MAI contains measures specifically designed to take away government's ability to maintain existing laws or enact new laws in the public interest. Like most democratic societies, Canada has built up a vast body of economic, social, and environmental legislation - a broad range of public concerns ranging from foreign ownership, consumer protection, and social programs to regional development, environmental legislation designed to protect public interest and the common good. This body of legislation covers a broad range of public concerns ranging from foreign ownership, consumer protection, and social programs, to regional development, environmental conservation, and cultural identity. Yet, this kind of public interest legislation could very well be jeopardized by what the MAI proposes as "roll-back" and "stand still" clauses. The roll-back legislation is designed to ensure that any pieces of legislation or regulatory measures of member countries that did not conform with the basic principles and conditions of the MAI would be reduced and eventually eliminated. All member countries signing on to the agreement are expected to list in advance any current laws, policies, or programs considered "non-conforming" with respect to the disciplines of the MAI. At the same time these roll-back measures would be reinforced by "standstill" provisions. These stipulate that governments not introduce any new non-conforming laws, policies, or programs in the future. In effect the MAI would forbid any future government in Ottawa, or the provinces to take public ownership or control over a sector of the economy that had been previously privatized or to reintroduce regulations that had been scrapped in the past. (Clarke and Barlow, 1997 pp 43-44) Another crucial implication is found in the Chapter on the Threat to Environmental Rights: "The MAI principles of national treatment and most favored nation would explicitly apply to the privatization of government and hydro-electric facilities. .... the same rules would apply to municipal water and sewer systems, now financed by local tax payers. Shrinking provincial transfer payments have caused municipalities to consider privatizing these services; The Globe and Mail reports that Canada has become a "hot prospect for foreign water firms". Under the MAI, there might be no way to control this process or keep these vital services in Canadian hands. Canada is one of a handful of countries to allow provinces and municipalities to cede control of energy services without policy constraints from higher levels of government. Once they are gone, they will not be retrievable." Clarke and Barlow, 1997 p 88) 4) Canadian Public Health Association
(CPHA) Letter to the Prime
CPHA has three specific concerns with the draft MAI:
The draft MAI fails to protect existing policies on social equity and environmental sustainability, in two ways. "First, many social and environmental policies are now under the jurisdiction of provinces and municipalities. It is also at these levels that social and environmental performance requirements on investment are most likely to be found, and to be enforced. The U.S. federal government, concerned that the draft MAI would infringe on state and local government sovereignty, has filed reservations that would exempt their laws from MAI obligations. To our knowledge, as of this date, the Canadian government has not done this, nor have provincial or local governments been engaged in debates or decision-making about the draft MAI. Until provincial and local governments become fully engaged in MAI debates, including negotiations of the Government of Canada's position on the draft MAI, Canadian negotiators should ensure that these levels of government are exempted from MAI obligations." "Second, the draft MAI contains no provisions allowing other multilateral agreements on environment, health, labour, and human rights to take precedence when conflict arises. NAFTA, at least, allows seven international environment-related agreements to take precedence. The draft MAI allows governments, "notwithstanding" any other MAI obligations, to take "prudential measures" to protect the interests of investors and depositors in financial services, but no similar "notwithstanding" clauses are granted for the protection of ecosystem integrity and stability, or movement in the direction of social equity." At a minimum, Canadian negotiators should ensure that the draft MAI contain "notwithstanding" clauses for social equity and environmental stability, specifically exempting governments from MAI obligations if these obligations imperil social policies and programs that improve social equity. 5) Excerpts from Barry Appleton ,
Canada's leading expert on International Trade, Briefing Notes
Excerpts re Provincial State and Municipal Legislation with regard to social services (i.e. health care, public education, child care, etc) i. Although the language of Canada's proposed reservation for social services is identical to the reservation taken by Canada at II-C-9 under NAFTA, because it applies only to the federal level, it would only totally cover the provision of public law enforcement and correctional services, thus excluding health, education, childcare, etc. (p. 13) ii. The US government's interpretation of the NAFTA social services reservation suggests that any services not directly provided by government would not be considered within the definition of the term social services. This is particularly serious in the Canadian context where a mix of providers - government, private for-profit and private not-for-profit - are involved in the health, education, childcare and other sectors. (p. 13) Environment:
As Minister Marchi has confirmed, the Government of Canada has chosen to accept weak, non-binding language on the environment in the preamble of the MAI. By failing to even propose reservations to try to protect the ability of government to take environmental measures that would otherwise violate the MAI, Canada has "chosen to voluntarily bind itself, its provinces and its municipalities to obligations which protect investments over the environment" (p.23). Environmental deregulation currently underway at the federal and provincial levels (provincial environment budgets have been slashed by between one-third and sixty percent in most provinces in the last two years) would be permanently locked in under the MAI. Conclusion:
The Government of Canada's strategy for protecting Canadian interests at the MAI negotiating table is poorly thought out and seriously flawed. Meanwhile, the OECD Secretariat reported in November 1996
that "MAI negotiators are determined to keep [general exceptions and country-specific
reservations] to a minimum". With an opening position this weak and
only five months remaining until the OECD deadline, it is hard to imagine
that the final result will not be disastrous for Canada.
6) New Democratic Party Report on
the Multilateral Agreement on Investment: (MAI) Issued by the Office
of Bill Blaikie, M. P. (Winnipeg-Transcona) December 11, 1997 Sub-Committee
on International Trade, Trade Disputes and Investment
"The aforementioned features of the MAI, when added to other objections that the NDP has about the agreement, such as th uncertainty about the effectiveness of reservations in protecting health-care, education and social services, the extension of national treatment to "investment incentives", the stigmatization of "performance requirements", and the possibility that the provinces will also be included, give rise to an even greater objection about this affront to the flexibility of democratic decision making. The MAI would bind Canada for 20 years. Unlike even the NAFTA, which has a six month notice period for termination, MAI requires at least a 5 year period before notice can be given, followed by the requirement to honor existing obligations to existing foreign investors and companies for another 15 years. This is a feature of the MAI that would bind several Parliaments, and is so anti-democratic on the faceof it that the MAI cannot be supported by the New Democratic Party of Canada." 7) Concerns of the PC Party in
Canada- from Constituency letter of Mr. Scott Brison, PC Critic International
Trade and Foreign Affairs.
Secondly, the MAI may potentially weaken domestic environmental laws by undermining the ability of the government to introduce environmental standards. Measures must be put in place which will enable the government to act as required to protect the environment. The PC Party will not support any agreement that does not adequately protect Canadian cultural and environmental interests. A final important issue requiring clarification is the affect the agreement will have on our provinces and municipalities. The United States and the European Union have clearly protected the sovereignty of their sub-national states. The current Canadian government has failed to protect sub-national jurisdiction. The Government of Canada has also failed to conduct an impact analysis on current Federal, Provincial, and Municipal programs as was undertaken during the NAFTA negotiations. We will continue to pressure the current government to carry out a study. In summary, the PC Party supports the principles of the Multilateral Agreement on Investment. However, a number of issue must be carefully considered, before Canada signs the agreement. Further, the PC Party will continue to pressure the current government to provide a forum for meaningful consultation with theCanadian public throughout this process. 8) Recommendations of the Parliamentary
Hearing of the Sub-Committee on International Trade, Trade Disputes and
Investment.
Recommendation No. 1
Recommendation No. 3
Recommendation No. 4
Recommendation No. 5
Recommendation No. 13
Recommendation No. 15
Recommendation No. 16
9) The Hon. Paul Hellyer - Notes to the Parliamentary Committee Hearings on MAI. Ottawa, Ontario, November 25, 1997 http://news.flora.org/flora.mai-not/1197 "The loss of sovereignty I want to talk about is the loss
of our right to restrict foreign investment if the survival of our country
is at stake. Under the MAI we would not be able to say enough is enough.
We could not say that foreigners could not buy more than 50% of our
forests. They could buy them all. We could not say that foreigners
can not own more than 80 per cent of our oil and gas
reserves. They could own them all. We could not say that American
agribusiness's could not buy more than 50 per cent of the farms in Elgin
county. The MAI treaty would say that they can buy them all."
10) Sierra Club of Canada's: Presentation to The Standing Committee on Foreign Affairs and International Trade, Trade Disputes and Investment. November 18, 1997, Ottawa http://www.sierraclub.ca/national/mai/brief.html The Sierra Club of Canada's Director Elizabeth May raised 5 points: the fourth of which pertains directly to "provincial and municipal governments". i) The MAI would restrict Members of Parliament's freedom to legislate, without fear or threat of financial penalty to Canada, to protect the environment, public health and other non-monetary interests deeply valued by Canadians. ii) The MAI would greatly extend the major enforcement tool found in Chapter 11 of NAFTA -- the right of multinational corporations to claim compensation directly from the Government of Canada. iii) Environmental protection virtually absent in draft MAI text. iv) Canada's ambiguous position on the application of the MAI to provincial and municipal governments must be resolved: "In recent years, the federal government has handed off its environmental responsibilities to the provinces at an alarming rate. Meanwhile, it is very uncertain how those interests would be protected at the sub-national level in the MAI. In its February, 1997 submission of reservations, the Government says the agreement's application to Canadian provinces depends on a satisfactory overall balance of rights and obligations in the MAI. We are not confident that the federal government has demonstrated an understanding of balance in the MAI and are deeply concerned that the provinces have not been engaged in the MAI debate to date. If the provinces are to be exempt from the MAI, the federal government must explicitly and publicly state that they will be exempt. The U.S. federal government is clearly concerned that the MAI would impinge on state and local government sovereignty and has filed reservations that would exempt all state and local government laws from MAI obligations on national treatment, Most Favored Nation treatment, performance requirements and senior management and boards of directors. While these reservations may prove inadequate, they are at a minimum, an attempt at protection of a multitude of state laws that balance economic development with sound resource management; to ensure the ability of states to use performance requirements to protect jobs and the environment; and to limit development of private land and provide incentives for investment in pollution prevention and control equipment." v) The MAI is a profoundly undemocratic document negotiated in a profoundly undemocratic manner. 11) The Western Governor's Association
(WGA)'s policy paper "Multilateral Agreement on Investment: Potential
Effects on State & Local Government"
The WGA's policy paper "Multilateral Agreement on Investment: Potential Effects on State & Local Government is a 47 page document examining implications for state sovereignty of the MAI in order to recommend action for governors, to aid in dialogue occurring between the federal government and the states on the MAI and to satisfy Federal governments request to the States for information on laws that the MAI may impact. It is a comprehensive report provided in 6 sections the
fourth of which examines the potential MAI effects on state governments
under the following headings:
Summary of Areas covered: A. Economic Regulation:
B. Land Use and Environment:
i) limits on the use of state lands
C. Economic Development There are many state programs that fall within the scope of MAI recommendations to limit development incentives. Examples of the potential conflicts between state interests and MAI proposals to limit or eliminate incentives follow: i. Tax incentives. ii. Non-tax incentives. Almost every state also provides investment incentives in the form of grants, low interest loans (industrial revenue bonds, direct loans, loan guarantees), equity investments, and in-kind assistance such as customized job training. Again, depending upon how the MAI effects incentives, foreign investors may be able to argue that state non-tax incentives favor recipients in the offering jurisdiction and violate the MAI. iii. Enterprise zones. Enterprise zones are geographic areas, recognized by federal, state, and local governments to receive coordinated targeting of investment incentives and deregulation. As noted above, the WTO has a general exception for subsidies that are targeted to disadvantaged regions.{179} No such exception is proposed for the MAI.{180} iv. Discriminatory practices in granting incentives. In
addition to bans or limitations on investment incentives, the MAI may also
protect foreign investors against discrimination in the provision of incentives.
Several states explicitly limit certain kinds of development assistance
on the basis of residency or citizenship. For example:
v. Economic accountability. A growing number of states
have provided development incentives only to see their value vanish as
beneficiaries move out of state or otherwise fail to fulfill their promises.
In response, at least 15 states have enacted accountability measures that
legally bind beneficiaries to perform in various ways, refund the contribution,
or suffer penalties. These are called "clawback" policies.{188} Economic
accountability policies could run afoul of MAI proposals
banning or limiting the incentives with which they are linked. They might
also run counter to MAI proposals limiting performance requirements that
distort investment to the benefit of the jurisdiction offering the incentive{189}
and protecting investors' right to transfer assets or funds, as illustrated by
the examples below:{190}
vi. Domestic procurement preferences. State procurement
practices receive major emphasis in foreign complaints about U.S. barriers
to trade, particularly "buy domestic" programs and small business set-asides.{195}
These practices could run afoul of the MAI if they are viewed as discriminating
against foreign investors or creating investment-distorting incentives.
D. Enforcement and State Sovereignty:
i. MAI legal remedies
V. Conclusion:
Foreign investors consider many of the policies that distort
investment to exist at the state level, where corporations are chartered
and real estate and other assets regulated. The European Union claims that
American federalism results in "market fragmentation" which thwarts national
treatment.{218} But federalism is by design a bottom-up assembly of democratic
institutions with diverse and conflicting outcomes.
The MAI could supplant bottom-up processes for preserving
differences between nations, much less between sub-national governments.
The MAI may be more than merely a tougher NAFTA or WTO. Unlike those agreements,
the MAI may protect investors by curtailing both sovereign powers and sovereign
immunity. While America's overseas investors may stand to gain
from these trade-offs and FDI may grow even faster, American state and
local officials have much to think about. The complexity of our federal
system, which confounds foreign investors, also complicates the task of
assessing the ways in which this system would be impacted by the proposed
MAI. MAI proposals and country positions are also subject to change as
negotiations proceed, making ongoing attention necessary. No one can do
this job better than governors and other state officials, once they know
what the MAI portends. This report is intended to help state leaders get
started on the MAI, and balance state interests with the forces of global
economic integration."
12) MAI front page of Washington Times
12/15 "Trade storm brews over corporate rights" By Lorraine Woellert
THE WASHINGTON TIMES 15 December 1997
It embodies the worst fears of isolationists, environmentalists and labor groups because it could give foreign corporations a way to bypass America's court system. Challenges to U.S. laws would go before an international panel of industry experts that would interpret the treaty and issue binding rulings. "It strikes right to the heart of our state government," said Steve Moeller, policy adviser to Nebraska Gov. Ben Nelson. "We may be destroying states' rights or states' abilities to govern themselves just to promote international business." A report by the Western Governors' Association in April concluded that the MAI, among other things, could prevent states from giving incentives for economic development, could outlaw government contracting laws that give preference to local companies and might gut environmental restrictions on land use. "It takes the kind of dispute that used to be settled through the U.S. courts and turns it into an economic and political issue, and it does so without the process of reviewing that statute in the U.S. courts," said Robert Stumberg, a professor at Georgetown's Harrison Institute of Public Law and author of the report. U.S. negotiators want to exempt all existing U.S. federal, state an local laws from the MAI, but a provision in the agreement also calls for a "rollback" of existing laws that run contrary to the agreement. U.S. negotiators also are seeking exemptions from a so-called standstill provision, which would prevent governments from enacting new laws that may violate the agreement. The United States particularly wants to protect future legislation in areas such as government contracting, affirmative action and environmental protection. "Before we would move forward with any multilateral treaty, we'd take care to ensure we had completely safeguarded our ability to act under existing laws and certain areas where we need further flexibility," said Alan Larson, undersecretary of state for global affairs." J.M.Eaton Associates Systemic Change Consultants P.O. Box 1525, Wolfville, N.S. Canada B0P 1X0  |