High Tide for 'Global Economy'?

By Gwynne Dyer

LONDON (JP): Whom the gods would destroy, they first make very arrogant. "We are writing the constitution of a single global economy," boasted Renato Ruggiero, director-general of the World Trade Organization, as 29 of the world's richest countries hammered out the terms of a Multilateral Agreement on Investment (MAI). This week in Paris, they will finish it -- just in time, perhaps, to miss the boat.

It has been a remarkably low-profile negotiation, for one whose implications could be so far-reaching. This was not entirely by accident.

Back in 1995, with capitalist triumphalism at its peak, the governments of the industrialized world and their corporate allies decided that creating a world-wide 'level playing field' for investment would be a really neat idea. They rightly suspected that many of their citizens would be upset if they knew about it, so the negotiations took place behind the closed doors of the Organization for Economic Cooperation and Development (OECD), the club for rich countries.

International investment isn't the sexiest subject to put into a headline, so they didn't have to work very hard to keep the MAI talks off the front pages. Organized labor and a whole range of non-governmental organizations from Oxfam to the World Wildlife Fund tried to raise the alarm, but nobody was listening. And though poor countries, a main destination of international investment, will be invited to sign the MAI, they had no voice in framing it.

The MAI comes out of an ideology which holds that markets are always right, and governments are always wrong. Give corporations the right to buy, sell, and move their operations around the world without any government control or regulation, says the OECD, and the result will be greater prosperity for all.

What the MAI does, in effect, is remove the ability of signatories to control the behavior of big foreign investors on their soil. Foreign investors must not face different rules than domestic companies, even if they are backed by a hundred times as much capital. No foreign investments can be refused in any sector apart from defense. And there can be no special conditions for foreign investors, like requirements to employ local people.

Once a country signs up for MAI, it cannot withdraw for five years -- and even if it then exercised that right, it would be bound by the agreement for a further fifteen years. So long as it is subject to MAI rules, any government that tries to protect local companies, or guarantee local employment, or impose special conditions for protecting the environment, can be sued by the offended multinational before a special international tribunal, and could face huge fines if it does not comply.

Of course, the OECD cannot force anybody to sign up for these rules. It just assumes that most developing countries will have to sign up, because if the MAI takes off, countries that stay out would effectively be cutting themselves off from the main international flows of investment.

It is a proposal of breathtaking audacity, seeking to impose one particular sector's view of the ideal world on everybody else by the force of law. To call the MAI anti-democratic is not technically correct, since countries are free to stay out (if they want to starve), but it is certainly fanatical in its prescriptions for the world economy. Not even the United States, the spiritual homeland of free-market ideology, goes this far domestically in subordinating government to corporate rights.

Yet had the MAI been ready two years ago, when corporate hubris was sweeping all before it and the left was everywhere in shock, we would probably now all be living under its rules. Timing is everything -- and the last year has made all the difference.

Not only has there been time for the trade unions, the environmental outfits, and the Third World countries to organize a coherent response -- out of over 1,000 MAI-related web sites on the Internet, virtually the only ones supporting it are the OECD's own -- but the whole intellectual climate has changed.

The Asian financial debacle has taken the shine off the argument that capitalism knows best. Half the OECD countries now have governments that are on the left of the political spectrum: Britain, Italy, France, even Canada and the United States (by the rather skewed local standards). The tide has begun to turn.

The real battle over MAI begins after the OECD countries sign the draft treaty in April. That's when it emerges from the in- house consensus of the finance ministries and enters the real world of political debate. It will not have an easy ride.

It won't be just Chile trying to preserve its rule barring repatriation of capital until one year after a foreign investment is made, and Taiwan not wanting to repeal its legislation forbidding foreign investment in 'highly polluting industries'. It will be American states realizing that the MAI would make them repeal laws restricting non-residents' use of public lands for grazing and mining, and Australia realizing it must stop screening large foreign investments on the criterion of 'national interest', and European trade unions mobilizing to protect their jobs...

It is possible, of course, that the MAI will still make enough headway among OECD countries to start forcing the hold-outs to join up, but changing the international rules like this is always critically dependent on momentum: most people sign on for fear of being left out. But on this issue, the psychological momentum has been lost, and it is unlikely to return.