[PEN-L:708] AFL-CIO executive council statement on the MAI (fwd)

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Date: Tue, 27 Oct 1998 14:16:40 -0800
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Subject: AFL-CIO executive council statement on the MAI
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AFL-CIO Executive Council
October 14, 1998
Statement

MULTILATERAL AGREEMENT ON INVESTMENT (MAI)

	Since 1995, the U.S. government has been leading an effort by 29 of the
world's richest nations to negotiate a Multilateral Agreement on Investment
(MAI).  Negotiated under the auspices of the Organization for Economic
Cooperation and Development, the MAI was scheduled to be completed in April
of 1998. Growing popular opposition forced a temporary suspension of
negotiations, which are scheduled to resume in October 1998.

	The principle objective of the MAI is to strengthen and expand
international rules that elevate the mobility of capital and the rights of
investors above all other considerations.  In this system, worker rights,
environmental protection, and necessary government regulation of the economy
take a back seat to the interests of private capital.  The AFL-CIO rejects
this model as irredeemably flawed, harming workers across the globe, while
enriching the financial sector.  At a time when the current system is
increasingly being questioned, it is folly to lock in rules that only serve
to perpetuate this system.

	Unpredictable and uncontrollable capital flows have created turmoil in the
global economy.  The sudden outflow of investment funds has undone years of
growth in a matter of moments, leading to economic meltdowns in Mexico in
1994-95, in Thailand, South Korea, Indonesia, and Malaysia in 1997-98, and
in Russia this year.  The conventional wisdom that countries should respond
to such crisis with austerity and export-led growth exacerbates the problem
of weak global demand.  The U.S. economy suffers the impact of the
international crisis in import-competing markets like steel, auto, apparel
and electronics; in the loss of export markets; and in all the industries
and activities that support these sectors.

	We are at an important historic turning point. The expert wisdom of a few
years ago -- that a deregulated world market would create prosperity for all
-- is now discredited. We have an opportunity to rethink and reshape the
rules of the global economy.  We should ensure that the global economy of
the future is one built on a solid foundation of democratic, sustainable,

and egalitarian growth, not unlimited profit for a few corporate giants.

	The model of globalization promoted by the MAI underlies many of the
problems in the world economy.  The AFL-CIO rejects the MAI as flawed in
both model and design. We will oppose this and any similar set of rules in
the OECD, the World Trade Organization, the International Monetary Fund, or
any other forum.

	The problems with the draft of the MAI include:

Labor Rights -- The labor rights provisions in the MAI are unacceptable,
consisting only of weak hortatory language that imposes no effective
penalties for violation of internationally recognized labor rights and no
meaningful obligation to enforce existing laws.

Expropriation and Compensation -- The MAI grants extraordinary rights to
corporations, protecting them from government action that might reduce the
value of their investments. Using broad definitions of investor rights,
these rules would empower corporations and investors to demand cash damages
for any government action that has the "equivalent effect" of an "indirect
expropriation."

National Treatment - The MAI requires governments to treat foreign investors
"no less favorably" than domestic investors. This principle is at odds with
some legitimate domestic political and economic objectives, such as
preserving jobs or protecting natural resources.

Performance Requirements - The MAI restricts governments' ability to impose
restrictions on foreign investors. For example, governments may not require
foreign investors to give preference to domestic inputs, achieve a given
level of domestic content, or hire local citizens. These measures are
important tools for local economic development, and the decision whether or
not to use them should be one made by democratic process, not an
international agreement.

Most Favored Nation - The MAI requires governments to give the same
favorable treatment to all investors.  That means that federal, state and
local governments cannot differentiate between companies from countries that
don't comply with international labor or human rights standards and those
that do.

Investor-to State Dispute Resolution - The MAI grants individual
corporations the right to sue governments when they believe their rights
under the agreement have been violated. This opens the possibility of
exposing governments to potentially large liabilities, forcing governments
to defend public health or environmental regulations against charges that
they unfairly discriminate against foreign investors or constitute
"indirect" expropriation.

Capital Controls - The MAI prohibits countries from regulating capital flows
except in times of crisis.  This provision restricts the tools governments
may need to shield their economies from the destabilizing impact of
speculative capital.

Immigration - The MAI allows unrestricted "temporary entry" for employees of
multinational corporations. This particular type of immigration allowance
has been subject to misuse in the past.

Long Lasting Impact - The MAI locks in most of its provisions for twenty
years. Countries may not exit for five years after ratifying the agreement,

and the investment provisions will continue to apply to existing investments
for an additional fifteen years.

	For all of these reasons, the MAI is irredeemably flawed, and the U.S.
government should reject any attempt to lock in these rules. The AFL-CIO
calls instead for a restructuring of the world's international financial
institutions to promote sustainable, egalitarian economic development around
the globe.  We support global rules that create strong enforceable rights
for labor, communities, and the environment; that enunciate clear
responsibilities for investors; and that create democratic accountability
over capital.

	Such rules should be negotiated in a forum that allows for an open,
inclusive, and democratic process.  Labor rights and environmental
standards, with the same enforcement mechanisms that apply to investment,
must be an integral component of any agreement.  Governments should retain
the right to restrict inflows and outflows of speculative capital, and set
health, safety, environmental and worker protection standards that
corporations cannot challenge as barriers to investment.  All investment
should be subject to public disclosure including the site, wage rates,
benefits, and environmental performance of facilities.



--
Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail michael@xxxxxxxxxxxxxxxxx