Business advisory council criticizes MAI negotiations

[Sid Shniad <shniad@xxxxxx>]

JOURNAL OF COMMERCE 			January 16, 1998

OECD advisory panel slams proposed investment treaty

	By John Maggs

	A committee of advisers has delivered a scathing verdict on a
proposed treaty to protect international investment, further endangering a
pact that already faces strong opposition from those who claim it will be
used to erode labor and environmental standards, and infringe states' rights.
	The Multilateral Agreement on Investment is being negotiated in
Paris by the 29 developed countries that are members of the Organization
for Economic Cooperation and Development. It is already a year overdue,
and governments are supposed to decide in mid-February whether the talks
are far enough along to warrant trying to finish in April.

Aimed at barriers

	As originally proposed, the agreement was supposed to remove the
remaining barriers to investment in the developed world and serve as a lure
for developing countries to drop their much more substantial barriers to
foreign capital.
	But the Business and Industry Advisory Committee to the OECD
told the member governments Thursday that the talks have strayed far from
that goal. In a four-page statement softened with the conventions of
diplomatic language, the committee ticked off a list of major deficiencies:
	OECD members are refusing to liberalize their investment
restrictions. For example, France and Canada are insisting on preserving
exemptions to help preserve national "culture," something U.S. officials
claim is disguised protectionism.
	Taxation is carved out of the agreement, allowing governments to
continue using discriminatory taxes to lock out foreign investment.
	New proposals would cite minimum levels of environmental and
labor standards, scaring off some poorer countries who say they cannot
afford the higher standards of advanced economies.
	Watered-down protections for expropriation and investor-
government dispute settlement.
	Speaking from Paris, Steve Canner, a BIAC member representing
the U.S. Council for International Business, denied that the poor review
from the OECD advisers meant that the negotiations were hopeless.
	"We are encouraged with the way our remarks were received"
Thursday by representatives of the member governments. While there is
very little time to correct all the problems identified by the BIAC "we still
think it is possible to do it, if there is a will to."

Far more complex

	In fact, congressional aides and business officials in Washington say
the challenge is far more complex, starting with the Clinton administration.
In the same way that the administration has sought to accommodate
Democrats who see free trade as a threat to wages and environmental
standards, the administration is trying to add labor and environmental
exceptions to the MAI's rules.
	This has rankled U.S. businesses, the main supporters of the
investment pact, who fear that the labor and environmental provisions will
undermine the pact's investment rules. This has put these business advisers
in conflict with their negotiators in Paris.
	But one business representative in Washington said the fighting
over labor and the environment was secondary to more fundamental flaws.
	"When this started out, the plan was to use it to raise protections
for investment (among developed countries) and then get some developing
countries to sign on to these higher standards," he said. "Somewhere along
the way, the major OECD members decided that, for whatever reason, they
weren't ready to get rid of their restrictions, and that they wanted a lot of
exceptions."

Negotiating agreements

	At the same time, the United States has been slowly negotiating
bilateral investment agreements with dozens of countries that are affording
levels of protection for investors that in many cases would be higher than
the MAI offered.
	"With all the opposition (from environmentalists and states' rights
activists) the question was, 'why expend all this energy?' " if it does not
raise investment protections very much, the business adviser said.
	While the Clinton administration has tried to respond to complaints
from U.S. labor unions and environmentalists in the MAI talks, it has not
been able to satisfy those who say the pact would be too much of an
infringement of states' rights. The agreement would make illegal possible
restrictions on investment imposed by U.S. states, although it would not
affect state tax incentives meant to attract investment, according to U.S.
government officials.