1998

• Whither the MAI?
• ILO Responds to Globalisation
• QUNO briefing on the OECD Multilateral Agreement on Investment
• MAI: A preliminary assessment
• Other reports

 Whither the MAI?

This report follows on a previous Quaker UN Office assessment of the MAI, entitled "The Multilateral Agreement on Investment: A Preliminary Assessment." Issued in March 1998, it reviewed particularly the environmental, labour and developmental concerns the MAI raised as well as the major disagreements among the negotiating governments. Readers of this report , if not already familiar with the basic provisions of the MAI, will find the Preliminary Assessment a helpful start. Copies are available from the QUNO or can be downloaded from the QUNO homepage: www.quaker.org/quno, or can be obtained directly from QUNO at the above address.

I. Where is it now?

After a six month negotiating hiatus, 29 member governments of the Organisation for Economic Co-operation and Development resumed negotiations on a Multilateral Agreement on Investment (MAI) on 19 October 1998. Virtually no basis was established that would allow the negotiations to continue. Instead, negotiators raised a number of objections to many of the main elements of the agreement, all of the fundamental political differences dividing important member states remained unresolved, and important environmental, labour and development concerns that had not been resolved in previous meetings of the negotiating group became major recommendations for reforming the agreement.

On October 14, Prime Minister Lionel Jospin told the French parliament that "France will not take part in the negotiations in the OECD framework." He claimed that the MAI threatened French national sovereignty, that further liberalisation of investment was not wise in light of the recent turmoil in financial markets, and that the MAI would be better negotiated in the World Trade Organisation (WTO). This deeply jeopardises all future MAI negotiations in the OECD.

A more detailed French criticism of the MAI was issued by the French Member of the European Parliament, Catherine Lalumière, Jean-Pierre Landau, Inspector General for Finance and Emmanuel Glimet, Advisor to the Court of Auditors reflecting many of the concerns raised in the QUNO "Preliminary Assessment." In essence, the French government refused to continue negotiations on the MAI unless environmental, labor and cultural amendments are strengthened and exclusions and assurances are made to the agreement that:

1. Portfolio investment and financial flows are excluded from the definition of investment,
2. Investor to state mechanisms are excluded, limiting dispute procedures to between states,
3. The general treatment article is eliminated (an obligation to give foreign investors constant and effective protection),
4. "Measures having the equivalent effect of expropriation" are eliminated (e.g. the Ethyl suit against Canada would not be upheld),
5. Performance requirement are excluded except those already controlled by WTO Trade Related Investment measures,
6. "Standstill" rules that prevent governments from weakening MAI commitments are replaced by a right to derogate from agreement if willing to pay compensation as under WTO rules, and,
7. Effective participation of developing countries are ensured by making entry into force of an agreement dependent on the signature of a sufficient number of non-OECD countries.

On October 19, the United States Under Secretary of State, Stuart Eizenstat told the OECD Executive Committee that:

There was a consensus among delegates (to the MAI Negotiating Group) on the need for and value of a multilateral framework for investment. The goal should still be sought. At the same time, delegates noted that significant concerns have been raised during consultations on the MAI. These include issues of sovereignty, protection of labour rights and environment, culture and other important matters.

At the same time, US delegates made it known that they want MAI negotiations to continue in the OCED and seemed to confirm US opposition (for reasons noted below) to introducing the MAI into WTO negotiations.

Others, however, seemed to favour a shift of negotiations to the WTO. The Canadian Minister of Trade, Sergio Marchi, claimed that "the negotiations at the OECD are over. We said we would only sign the right deal, and the right deal hadn’t come along. It became very clear in the last few weeks that the juice was getting slower and slower in the OECD. It became clearly obvious that the end of the road had approached and a new road needs to open up. The OECD has taken it as far as it can go." It is time for the WTO to take it on "where developing countries can be included."

Leon Brittan, EU Trade Commissioner, said that prospects for an MAI agreement were "not very promising. I always believed the WTO was the most adequate forum for negotiations."

Others, however, seemed to favour a shift of negotiations to the WTO. The Canadian Minister of Trade, Sergio Marchi, claimed that "the negotiations at the OECD are over. We said we would only sign the right deal, and the right deal hadn’t come along. It became very clear in the last few weeks that the juice was getting slower and slower in the OECD. It became clearly obvious that the end of the road had approached and a new road needs to open up. The OECD has taken it as far as it can go." It is time for the WTO to take it on "where developing countries can be included."

Leon Brittan, EU Trade Commissioner, said that prospects for an MAI agreement were "not very promising. I always believed the WTO was the most adequate forum for negotiations."

These and other reports on frustrated efforts to restart negotiations make the MAI in the OECD appear at best stymied and at worst at a permanent impasse. Formally, OECD work has been downgraded from negotiations to consultations; while it is clear that any future work will have to face the important differences still existing between governments and environmental, labour and development issues. It seems most unlikely that any progress could be made in the OECD without France rejoining the consultations, presumable on the terms stated above. In the meanwhile, a new initiative, perhaps to save face and salvage an OECD failure, may be in the works to negotiate a multilateral investment agreement, if not the MAI, in the World Trade Organisation.

Sharp disagreements have confounded the negotiators from the start of the negotiations in 1995. First the French and Canadian governments insisted on the exclusion of cultural industries, such as films and audio-visual materials. The US opposed to this exclusion. This is the sovereignty concern that Prime Minister Jospin raised. Second, the US insisted on no reference to secondary boycotts because of the US Helms-Burton Act which allows the US to boycott industries investing in Cuba and using US properties nationalised by Cuba. The EU is insisting that the secondary boycott clause be retained. Third, many non-European governments opposed the inclusion of a Regional Economic Integration Organisation clause. This was proposed by the EU and would exempt EU member states from applying the MFN principle to investors from and operating within the EU. And fourth many governments insisted on an open-ended list of national level exemptions. Domestic pressures, including that from sub-national governments for the inclusion of such precautionary measures would make it difficult to ratify in many domestic parliaments given opposition by local and regional interests.

Compounding these intergovernmental differences, negotiators became increasingly concerned about environmental and labour organisations rejection of the MAI because it failed to meet their demands for more balance between investor rights and environmental responsibilities. By May 1998 about half of the negotiating governments wanted a clause binding international and domestic environmental and labour standards and regulations to the agreement to disallow the "the lowering of standards" to attract investment.

Joining the environmental and labour groups, developing countries and development NGOs attacked one of the centrepieces of the MAI architecture: national treatment that would give foreign investors equal status in rights of establishment as domestic investors. This would prevent developing country governments from screening investments on the basis of development criteria and national goals. Moreover, performance requirements prohibit a host government from placing any conditions on "the establishment, acquisition, expansion, management, operation or conduct of an investment."

Finally, one of the most serious criticisms of the MAI was that, as a "free standing agreement" negotiated in the OECD, developing countries would only be invited to accede after the agreement had been negotiated. They would not have had formal participation in the negotiations. In diplomatic language this is a failure in international co-operation.

II. What next?

With the dismal prospects for more MAI negotiations in the OECD, Sergio Marchi, Lionel Jospin and Leon Brittan share widespread developed country support for the WTO to start negotiations on an investment agreement, if not some versions of the OECD draft MAI. Sweden had insisted from the beginning that the MAI should be negotiated in the WTO. Only the US has expressed reservations to this, for reasons that will be discussed below. Those advocating a MAI move to the WTO assert that only the WTO negotiations can include developing countries. They do not acknowledge however, the developing country apprehensions about including investment, especially as has been defined by the MAI, in WTO negotiations. Rather, most would prefer the UN Conference on Trade and Development (UNCTAD) where their development priorities are given first consideration in coping with the problems of volatile international capital flows.

III. The UNCTAD Preference:Developing countries have argued, since the beginning of MAI negotiations, that investment liberalisation should be negotiated in UNCTAD. Developed countries have resisted. Over the past year, nonetheless, UNCTAD has convened several consultations with member governments and NGOs in an effort to define its contribution to investment liberalisation. These have not yet yielded a consensus on whether and how UNCTAD should attempt to negotiate an international investment agreement or, if it should attempt to negotiate a "multilateral investment framework," what should constitute this framework. Whether this will change with the prospective demise of the OECD’s MAI remains to be seen.

In April 1998, an initial consultation on a "framework for investment" did reveal a development-oriented critique of the MAI by most developing countries. They expressed a need for an investment agreement that would: 1) minimise the destructive effects of volatile capital flows; 2) limit definition of investment that did not include portfolio investment, allow for selectively opening up in stages as an economy gets stronger; 3) recognise that development requires developing countries to have performance requirements such as exports and indigenisation; 4) and commit investors’ home countries not to impose high standards that restrict the exports of developing countries to developed countries and thus reduce the attractiveness of developing countries as investment sites. It also revealed a developed country stance that the OECD MAI negotiations were of paramount importance in establishing multilateral investment rules.

The UNCTAD mandate for work on investment in general and the MAI in particular comprises a number of objectives: 1) to ensure that the development dimension of any multilateral investment agreement is understood and adequately addressed, 2) to explore the issues that need to be considered in the context of an MAI, such as restrictive business practices, transfer pricing, technology transfer, employment, etc., and, 3) to assist developing countries understand in depth and detail the contents of an MAI – for example, should portfolio investment and intellectual property rights be covered in such agreements.

UNCTAD faces two challenges to its work on investment: one comes from NGOs and the other from some developed country members.

In June 1998, UNCTAD convened a meeting with NGOs that revealed sharp NGO hostility to the approach the UNCTAD secretariat seemed to be taking towards an investment agreement. A Third World Network report of the meeting claimed:

Many NGOs were very critical of the approach taken by UNCTAD. In their opinion, the role of UNCTAD should have been to analyse the possible effects of investment liberalisation on development and developing countries, and then help point out the implications that an MAI-approach would have. Instead, the UNCTAD approach was to adopt the MAI-type model and examine ‘development dimensions’ in elements of the MAI..Some NGOs felt UNCTAD had taken on the role of persuading (or ‘massaging’) developing countries and NGOs to accept the inevitability and even desirability of negotiations for an investment agreement (probably in the WTO), even as many developing country diplomats have stated they are not in favour of such negotiations in the WTO.

In a response, Carlos Fortin, Deputy Director General of UNCTAD, questioned the MAI’s ability to enable the kind of investment needed by developing countries. While UNCTAD assessments of the MAI were theoretical, they did not give evidence that if there is an MAI more investors would come. He was critical of the MAI performance requirements. He did not believe that developing countries should accede to an MAI negotiated in the OECD and would advise them not to accede. "One does not accede to something one did not negotiate." As to whether UNCTAD should undertake negotiations on a new agreement, he added that this was something for the governments to decide.

The debate between UNCTAD and the Third World Network points to an important issue before UNCTAD. Until the mid-1980s, UNCTAD itself initiated multilateral negotiations on such important North-South issues as commodity agreements and a generalised system of trade preferences for developing countries. With the dawn of the neo-liberalism, important developed countries have coerced UNCTAD into a more limited role of research, analysis, training and technical assistance in areas of economic policy of importance to developing countries wanting to enter into the rapidly liberalising global economy.

Given UNCTAD experiences and expertise in developing country interests in the world economy, however, there is an important legitimate role for it not only for assessment of and advisement on international investment. It should also be active in negotiating developing country interests in any multilateral investment agreement. How to do this is a critical challenge. With OECD negotiations at an impasse, a more proactive UNCTAD role seems essential for the kind of international co-operation needed to incorporate development interests in an MAI. A more proactive role might also obviate debilitating debate with some NGOs. Less insistence by some developed countries for a more UNCTAD role might allow for more work based on the interests of its majority developing countries. Equally importantly, if the WTO does take on investment, its developing country members, who are also in the majority in the WTO, may need UNCTAD to level the WTO playing field.

IV. Should the MAI move to the WTO?It seems most OECD governments appear to favour negotiating an MAI in the WTO. They foresee this happening in the context of the next round of multilateral trade negotiations that could begin as early as 2000. They see investment as an important element of global economic liberalisation and should be subject to multilaterally agreed rules in the same way as international trade. The WTO, as a rules based system with 132 member countries, is viewed as a logical, more representative forum.

There is some opposition to this, not all of which come from developing countries preferring and UNCTAD forum. The US reportedly does not want WTO coverage of investment because a WTO agreement would necessarily be weaker than an OECD agreement. WTO rules could not, for example, provide for investor to state dispute settlement procedures or for equally enforceable rules on national treatment and performance requirements.

Developing countries, on the other hand, prefer the WTO "bottom up" agreements in which specific products and restrictions are offered for negotiation of rights and responsibilities. The MAI envisaged "top down" negotiations in which all investment would be included unless specific exceptions or reservations are submitted. Less discussed issues include the suitability of WTO rules that currently cover trade – e.g. movement of goods and services between countries – to also cover issues of foreign ownership and control of sectors of a national economy.

A special quandary for the WTO would be how to incorporate proposed MAI provisions for "not lowering of standards." WTO experiences to date with environmental and labour standards have ranged from barely satisfactory study of coherency between trade rules and environmental standards and measures to out right rejection of studying linkages between trade and labour standards. WTO debates on these issues have evoked bitter North-South debates on protectionism and social dumping. If the OECD developed country members could not cope with these quandaries in MAI negotiations, could 132 WTO member governments do any better?

Within the WTO itself, a Working Group on the Relationship between Trade and Investment is currently conducting a study of the implications of the relationship between trade and investments and taking stock of existing international agreements on investment. It will finish in December 1998. It is expected that any effort to enter thereafter into negations will be strongly resisted by developing countries, who would demand that national development strategies’ requirements be a starting point for negotiations. Moreover, all member countries are fully aware that many developing countries are having difficulties to bring their legislation up to their existing Uruguay Round commitments. Expanding WTO coverage to include investment, along the lines envisaged in the MAI, would only exacerbate these problems.

V. Are any conclusions possible at this stage?

It is hard to draw any conclusions at this time. The OECD has not buried the MAI; it has only replace negotiations with consultations and admitted that major reforms of the original negotiating text need to be made to address environmental, labour and development concerns. The WTO has only discussed investment in a working group on the relationship between trade and investment and in a Trade Related Investment Agreement. But if negotiations on an agreement of the scope of the MAI are to proceed, it will face hostilities and quandaries. The OECD experience combined with developing country reluctance, point to the increasingly important recognition that multilateral policies dealing with economic globalisation must address increasingly related environmental, labour and development issues. Otherwise, as the fate of the OECD MAI initiative may indicate, global economic institutions will fail if they do not link economic and commercial opportunities with social and environmental responsibilities.

ILO Responds to Globalisation

QUNO in-depth briefing on:

Child Labour, Contract Labour and Fundamental Worker Rights at the 86th International Labour Conference (June 1998)

Over 2000 representatives of the International Labour Organisation (ILO) tripartite membership attend the annual International Labour Conference: governments, trade unions and employer associations. The Conference takes the pulse of labour relations among its members, and reviews various aspects of ILO activity. In recent years, the Conference has been absorbed by social justice issues arising in an increasingly liberalised global economy. Three issues addressed by 86th Conference are at the core of social dimensions of liberalisation: contract labour, child labour and the ILO ability to protect and promote fundamental worker rights.

Brewster Grace, David Heathfield, Emily Miles, and Ray Stanton attended the Conference on behalf of Friends World Committee for Consultation. Their reports on these three aspects of ILO work follow.

All ILO documents can be found on the worldwide web at Reportsfrom ILO

New ILO Vitality on Fundamental Worker Rights

Agreement on a "Declaration on Fundamental Principles and Rights at Work" and a "Follow-up to the Declaration" was a major achievement of the 86th International Labour Conference. Both are based on a historical ILO commitment to fundamental worker rights and awareness of the costs and benefits of global economic integration. The ILO 1919 Constitution states that "…the failure of any nation to adopt humane conditions of labour is an obstacle in the way of other nations which desire to improve the conditions in their own countries." In the contemporary debate on globalisation, this obstacle is the downward pressure on labour standards that increased global competition can bring as a result of the liberalisation of international trade.

In recent years, unsuccessful efforts to bring labour standards into the World Trade Organisation (e.g. a ‘social clause’) have strengthened the ILO role to address international trade and labour standards linkages. This it has done in its Governing Body Working Party on the Social Dimensions of the Liberalisation of Trade. Out of these deliberations have come the recognised need for a major ILO Commitment to fundamental labour rights, in the form of a Declaration, and the means to monitor and strengthen these rights by effective mechanisms, especially where governments have not ratified relevant conventions.

Nevertheless, in recent years, the ILO tripartite members have fiercely contested whether trade and labour standards are linked and how ILO work should respond. Some members deny any linkage, real or alleged, claiming that other members would use the linkage as a pretence for protection against competitive advantages based on different levels of economic and social development.

Other members, especially representatives of Worker organisations, claim that downward pressures do exist and lead to suppression of fundamental worker rights. These rights are enshrined in ILO Conventions on child and forced labour, discrimination and rights to freedom of association and collective bargaining as well as in United Nations covenants and conventions. They are known as the 'core labour standards', are deemed universal, and should be upheld regardless of levels of development. Moreover, the application of these rights leads to improved productivity and thereby support economic and social development. They can also be strengthened by economic and social development.

The Declaration

The Declaration is a careful balance of these fundamental concerns of both developed and developing countries.

It "stresses that labour standards should not be used for protectionist purposes." Many developed countries, especially the Asia - Pacific group, wanted to include the Follow-up mechanism in this injunction. Furthermore, they wanted to assure that ILO work is not linked to other multilateral institutions, particularly the World Trade Organisation, by declaring that it was the exclusive organisation to establish, supervise and promote labour standards. Arguing that many other international institutions were promoting fundamental standards, (e.g., the World Bank, European Union) and that Article 12 of the ILO constitution calls for co-operation with other international institutions in related activities, many developed and developing countries successfully insisted that the Declaration encourage "other international organisations with which the ILO has established relations to support efforts" to attain the Declaration’s objectives of strengthening and supporting fundamental worker rights. Such established relations include those with the International Monetary Fund, the World Bank group and the World Trade Organisation.

The Declaration also carefully balances obligations of Member States "to respect, to promote and to realise … the principles concerning the fundamental rights which are the subject of the core labour standards Conventions with the obligations of the ILO to assist its members to attain these rights by making full use of its constitutional, operational and budgetary resources." Explicitly, work is "promotional:" to use these resources to assist positively all countries to apply fundamental worker rights in law and practice. The debate clearly established a consensus that the Declaration and Follow-up mechanism would not justify or resort to any punitive measures.

Finally, the Declaration recognises the demands of developing countries that the ILO should not view its response to globalisation solely in terms of more supervision of fundamental worker rights. Its preamble proclaims that the ILO should draw on all its resources in its work on employment and vocational training, as well as working conditions and should give special attention to the unemployed and migrant workers and the need for job creation. Worker delegates feared that such language would water down its main intention. But its placement in the preamble, rather than the operative part of the text, acknowledges the importance developing countries attach to such ILO work, without diluting the Declaration's emphasis on the need of the ILO to promote the "strong social policies, justice and democratic institutions" required to uphold fundamental principles and rights at work.

The Follow-up to the Declaration

The mechanisms whereby the objectives of the Declaration are followed up in ILO activity represent an important advance in ILO capability to respond to social problems resulting from global economic liberalisation. Criticised for its lack of vigour in promoting core labour standards, the ILO now has new means to do so, both by holding member States accountable, and by highlighting and analysing the world-wide needs of workers’ rights.

By drawing on provisions of its Constitution and thereby not establishing new legal obligations of its members, one of the two Follow-up mechanisms provides for annual reports from its member governments which have not ratified one of the fundamental Conventions covering core labour standards noted above. According to ILO established practice, worker and employer groups in the concerned countries can make observations on the reports, all of which will then be reviewed by the ILO Governing Body and group of experts. The objective will be to provide a basis for ILO assistance to member states in establishing these rights in law and in practice to allow for ratification of the concerned Convention.

The other follow-up mechanism is a global report that will "provide a dynamic global picture relating to each category of fundamental principles and rights … to serve as a basis for assessing the effectiveness of the assistance provided…." The report will be drawn up by the Director-General and will also include reports from Member states that have ratified relevant Conventions under other provisions in the Constitution. Discussion of the report in the annual conference and the Governing Body Review will further sharpen priorities and plans of action for technical assistance.

The global report will also provide the world with indicators of an important element of social justice in a liberalising world and what needs to be done to assure that social justice is not lost in the current headlong rush to create a global economy.

Contract Labour Convention is Stalled

For the second consecutive year, a contract labour Convention was debated in the ILO Conference. Given the ILO's fundamental commitments to adequate pay, health care, job security, sick and maternity leave and retirement benefits, it is naturally concerned by abusive contracting practices. Yet neglect is increasing as manufacturing and service enterprises are seeking greater competitiveness through contracting and sub-contracting production in less supervised labour markets. Consequently, more and more workers who would formerly have been employees are now contract labourers, and new employment is often in the form of contracts or sub-contracts. These workers work alongside the employees of the firm doing similar work, or in some cases, the work traditionally performed by employees. Often they are not legally employed, nor are they covered by traditional labour law and practices. Therefore they do not receive the benefits legally guaranteed to the employees of the firm.

Employers, on the other hand, benefit, because contracting allows a work staff that is essentially external and temporary. Thus staff reductions, plant closings, staff transfers, staff subordination and union problems are all handled more easily.

Substantial confusion has characterised the Conference debate because of the spectrum of employer-worker relationships. Direct "bilateral" employer-worker relationships where the worker has an individual contract differ substantially to "triangular" relationships where a sub-contractor provides workers. In the latter case, workers are located outside of the agency employing them and are subordinate to and dependent on management at the enterprise where they perform the work.

Efforts to devise ways to deal with these essentially hidden or disguised employment relationships are expected to become only more demanding as increased international flows of goods and services magnify them.

The Conference debate starkly revealed a wide variety of perceived social relationships, levels of moral acceptance of employer-worker responsibility, and legal arrangements among member States. Labour law in some countries is based on a formalistic test of the relationship between the employer and worker. (i.e. Does a contract exist and what does it cover?) In other countries labour law is based on a substantive test of the actual relationship and contracts are non-existent or less important. (i.e. A labour relationship signifies a contract.)

The Conference tried to establish criteria and procedures to identify when a disguised employment relationship actually exists and, when it does, to ensure that adequate procedures exist for enforcing the laws that govern the actual relationship. In 1997, the Conference Committee on Contract Labour considered an ILO secretariat report with proposals for a Convention. A second report submitted this year attempted to improve and amend these proposals based on last year's debate. However, it rapidly became apparent that the Committee could not agree to any final draft Convention. The practical and conceptual problems surrounding its acceptance were too large, and the Employer representatives formally obstructed most discussion.

The document eventually adopted was an agreement to continue the work already begun and to meet again within four years. >From its wording, and from the closing comments of some participants, it is apparent that at least four major obstacles must be overcome:

No universally accepted definitions of "contract labour" and "sub-contract labour" exist, and the translation of these terms into French and Spanish further complicate the problem. Working definitions will have to be found or the terms will have to be replaced.

Some participants had expressed the fear that a third category of workers could emerge in the Convention, somewhere between employees and contract workers, and that this category would weaken the status of individuals now protected as employees. They were assured that the ILO constitution does not allow this to happen.

There seemed to be universal agreement that the relationship between an employer and a worker is best defined through tests of "subordination" and "dependency". Subordination relates to who trains, manages, promotes, schedules, and evaluates performance of the worker. Dependency is considered basically to mean economic dependency. However, national practices and concepts differed so widely, the Conference Committee saw major problems incorporating these in a single Convention.

Some participants felt it would be better to deal with the problems of bilateral and triangular relationships separately. Applying triangular relationships to the tests of subordination and dependency, however, pose more problems as contracts become more complex. Cleaning contracts, for example, are relatively simple. Contracts for the highly specialised services provided by computer experts, however, would not be. Again, capturing these differences in a Convention will not be easy.

Given these problems, it is understandable that the Conference could only conclude by asking the ILO Secretariat to examine in more depth:

1. Which workers, in the situations that have begun to be identified, are in need of protection;
2. Appropriate ways of assuring protection and how to deal separately with various national situations, and
3. How to define such workers given different legal systems and language differences.

In spite of these frustrations, the problems of contract labour will be followed closely in ILO work. The closing comments of the South African government delegate paraphrased the hope of many delegates that future work would deal less with theoretical employment relationships and more with actions that will address empirically observed problems.

Draft Child Labour Convention Agreed at ILO Conference

In early June, the Global March arrived at the annual International Labour Organisation (ILO) Conference to a standing ovation. Children from Africa, Asia, Europe and Latin America were in the Salle des Assemblées in the Palais des Nations. After a week of negotiations, governments, employers and workers came up with a text for a Convention and for a related Recommendation, which will now go out for a consultation process with governments. Delegates will return next year to negotiate the final version of the text.

This Convention on the worst forms of child labour is intended to become one of the 'core labour standards' of the ILO, and delegates remained conscious throughout the negotiation process that massive, if not universal, ratification was the aim of their process. Their experience of drafting a minimum age Convention in the 1970s has taught them that, although good in theory, elimination of all child labour (including, for example, children working with their families on their farms) is still a long way from reality and ratifications have been low. Unfortunately, the aim of universal ratification occasionally sounded like an excuse for weaker standards in the Convention. The Convention is accompanied by a non-obligatory Recommendation, and therefore some provisions, though absent from the Convention text, have their place in the unbinding Recommendation.

1. Definition

Perhaps the most controversial set of negotiations was on the definition of the worst forms of child labour. This ultimately included slavery, the use of a child for prostitution, or pornography, the use of a child for illegal activities like drug trafficking, and anything else likely to jeopardise the health, safety or morals of children.

The inclusion in the definition of "the participation of children in hostilities, and the recruitment of children into the armed forces", is to be discussed again in 1999 in light of UN negotiations on the Draft Optional Protocol to the Convention on the Rights of the Child on children in armed conflict which are at a 'sensitive' stage. However, it is a few key governments who are behind this move to include child soldiers (particularly Uruguay and Italy). Worker representatives seem prepared to compromise on this if push comes to shove, and Employer representatives question whether being in the armed forces actually constitutes work.

Attempts to include in this definition "work or activity that would be likely to jeopardise children's physical, mental, psychosocial, spiritual, moral or social development" were rejected, on the grounds that these would not constitute the worst forms of child labour. However, in the Recommendation, Governments are asked to ensure that their national programmes of action on child labour address children's educational, physical, emotional and psychological needs.

Another failure was the attempt to include "work which constitutes an obstacle to basic education" in the definition. Sweden distinguished between education as a tool to prevent and address the problem of child labour and its worst forms, and the issue of the prevention of access to education. This latter was, Sweden maintained, not so serious that it warranted inclusion in the definition of the worst forms of child labour. The outcome on the education issue is that the final version of the draft Convention has references in the preamble to education, and an expectation that Members will take time-bound measures to provide necessary assistance for removal from work, rehabilitation and social integration through access to free basic education. The expectation of ‘free’ basic education was disputed by India and the Employer representative, who argued that this was too much to expect of poorer countries. The Committee’s response was that a time-bound plan did not mean that States had to ensure these provisions immediately, and so the reference to 'free' basic education was retained.

2. Definition of hazardous work

The Worker representative tried to introduce a definition of hazardous work into the article of definition in the Convention but did not succeed. The final list remains, therefore, in the Recommendation, in a form of wording which implies that it is up to Governments whether these areas are included in a definition, but they should be considered in the identification process. The definition includes work and activities exposing children to physical, emotional or sexual abuse, work with dangerous machinery, work in an unhealthy environment and work in difficult conditions for long hours.

3. Consultation with NGOs.

This ILO Convention has been unusual in the way it has attracted attention from non-governmental organisations as well as trade unions, employers and governments. In fact, many NGOs have given voices to children who would otherwise not have been represented in the Convention drafting process. Some governments proposed amendments to make consultations compulsory between national authorities and 'other concerned groups [in particular those defending the rights of the child]' as well as with employers' and workers' organisations. They wanted the Convention to legislate for consultation with such groups in the process of determining the types of child labour to which the definition would apply, and in the process of designing and implementing national programmes of action. These amendments failed consistently, with the Worker and Employer representatives defending the sacred 'tripartism' of the ILO to the hilt, although they thanked NGOs profusely for their help in bringing attention to the issue. In the end, the Recommendation has a reference to the fact that programmes of action should be designed and implemented with government institutions, employers' and workers' organisations "and, as appropriate, other concerned groups." This means that there is no explicit reference to child rights NGOs, or to direct consultation with the constituency protected by the Convention. Furthermore, the appropriateness of such consultations rests in the hands of governments.

4. Penal Sanctions

The application of penal sanctions for child labour abuses was left up to the Members to deal with as they felt appropriate in the Convention. In the Recommendation, the sale and trafficking of children, using, procuring or offering children for illegal activities, prostitution or pornography, and slavery, are all clearly expected to be criminal offences. The use of children in conflict as a criminal offence has yet to be decided.

5. Gender

Although there were some calls for gender-neutral language, the Government of Jamaica reminded States of their commitments made under the Beijing Platform for Action in 1995. The Preamble of the child labour Convention recalls the Beijing Declaration and Platform for Action, the Declaration on Equality of Opportunity and Treatment for Women Workers. In addition, each Member is asked in the Convention to take account of the special situation of girls.

6. Action oriented text

There is an emphasis in the Convention and the Recommendation on programmes of action to be carried out at a national level. The Recommendation also lists what Members should be doing with regard to collation of relevant data, determination of criminal offences, and ensuring that competent authorities have the responsibility for implementing provisions on child labour.

It remains to be seen how much of this year’s negotiated text will stay after consultation with governments, but the essence of a Convention which safeguards children from the worst forms of child labour, and which emphasises implementation and action, was successfully drafted in 1998. The Global March brought attention to the drafting process this year, but the Convention still faces a challenge in the coming months and public pressure must not wane in the light of any perceived successes this year.

QUNO briefing on the OECD Multilateral Agreement on Investment

Rights, Responsibilities and the Liberalisation of Investment:

A QUNO Briefing on the OECD Multilateral Agreement on Investment

Background to the MAI

The MAI seeks to liberalise investment amongst the 29 members of the Organisation for Economic Co-Operation and Development (OECD)*. If agreed, the MAI will be the first investment agreement which extends beyond purely state-to-state or regional agreements. It may also have a large impact as a precedent for the World Trade Organisation that has itself recently established a committee on trade and investment, but is more tentative in considering a truly multilateral investment agreement.

*The OECD consists of Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, The Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States of America.

MAI: A preliminary assessment

I. Background:

Negotiations on the Multilateral Agreement on Investment (MAI) in the Organisation for Economic Co-operation and Development (OECD) began in 1995. These were scheduled for conclusion by May 1997. This target date was put off until May 1998 and may have to be postponed even further.

The MAI is not the first agreement on investment in the OECD – a Paris based organisation that aims to strengthen economic co-operation and co-ordination among its 29 industrialised member states. A Code of Investment Practices has existed since the 1960s. In 1976 the OECD founded its Guidelines for Multinational Enterprises (MNEs) which are recommendations by OECD member governments for MNE practices that are in harmony with policies of the countries where they operate. (1) These policies include providing for national treatment for foreign-owned enterprises, governmental co-ordination of investment incentives, and minimising conflicting governmental requirements of MNEs. The Guidelines also include both standards for environmental and labour practices and "national contact points" (usually government offices) where the Guidelines can be promoted and disputes among various parties – including management and labour – can be discussed and mediated.

While the MAI resembles the Code on Investment Practices, it is a major departure from the Code in its intended stature as a free standing international treaty. While its original contracting parties will be OECD members, developing countries will be invited to join.

Its coverage and its treatment of international investors would dramatically liberalise investment among its contracting parties. Furthermore, a number of OECD members view it as a stepping stone towards an investment agreement in the World Trade Organisation. The WTO has just established a Working Group on the Relationship between Trade and Investment which many of its developed country members view as leading to negotiations on an investment equivalent to WTO coverage and rules for trade in goods, services and intellectual property. The OECD has already convened conferences in Hong Kong and Cairo to introduce the MAI to developing countries.

These far reaching implications of the MAI are a source of both the complexity of the negotiations and the criticism on the part of many developing non-OECD countries, environmental and development NGOs, and trade unions. In fact, one of the most serious criticism is not of specific contents of the Agreement but of the negotiations themselves. Developing countries will be invited, if not urged, to accede to an MAI in the negotiation of which they have had no formal participation. In diplomatic language this is a failure in international co-operation, notwithstanding the Hong Kong and Cairo conferences. Five non-OECD countries are observing the negotiations. But these, like many other developing countries, may find themselves in WTO negotiations on investment with the MAI as the only model available.

Similarly, NGOs feel left out of a process that could affect their important social and environmental interests.

The availability of a draft and heavily bracketed draft text "For Official Use" has not diminished these suspicions and apprehensions. Yet the text does reveal substantial differences on a number of social, environmental and development issues. Some of these are arising as a result of non-negotiating parties' interests that are seeping into the negotiations. There is increasing speculation that these disagreements are expanding rather than diminishing and that the deadline will again be put off. Some observers are now conjecturing that the negotiations may collapse and an Agreement eventually abandoned.

The following perspectives are organised around the contents of the MAI draft text itself and based on comments and commentaries QUNO has obtained from a number of sources: seminars it has sponsored at Quaker House for developed and developing country delegates to the WTO, NGO strategy meetings, an OECD consultation for OECD delegations and NGO representatives, and individual discussions with officials, international secretariats, several development and environment NGOs, and trade union representatives.

Since the MAI is still in the process of negotiation, some positions reflected below at time of writing may well have changed at time of reading.

II. The case for investment liberalisation:

The case for the MAI was made by the Secretary-General of the OECD at its consultation with NGOs in October 1997. (3)

His fundamental premise was that economic growth generated by an "high-performing world economy could begin to eradicate poverty, misery and disease in many parts of the world. "To achieve this, developing countries need the benefits of an open trading and investment system as well as macro-economic stability and reforms." These premises are major features of all industrialised countries advice to developing countries. They can be seen, for example, in the basic policies advocated by the UK Department for International Development recent white paper. (4)

The key roles of foreign direct and portfolio investment, especially for developing countries, are to provide opportunities for increased productivity and competitiveness and for benefits from the transfer of managerial and technological expertise. The sheer growth in the volume of direct international investment has been enormous, reaching $360 billion in 1996, most of which is between OECD countries. Thus the Secretary-General referred to the Agenda 21 statement that investment – foreign as well as domestic – "is critical" for developing countries to achieve economic growth to achieve sustainable development and improve the welfare of their populations.

Given the rapidly increasing importance of investment, an international framework would "avoid potential sources of international friction." Markets, of course, are crucial; but investors need international rules and procedures to assure stability and security in these markets. This is especially true for investments in developing countries. This framework, of course, must have rules that account for vital public policy goals: "Governments must be able to protect their national security, protect the environment, maintain high labour standards, and offer solid consumer protection."

With these macro-economic arguments enshrined in the current draft of the MAI, there are no doubts that it is first and foremost an investor friendly Agreement. The main questions posed in the following perspectives is whether it offers satisfactory "solid protection" for environment and labour standards, developing countries' national economic priorities and policies.

III. The Contents of the MAI:

1. General Provisions
2. Scope and Application
3. Treatment of Investors and Investments
4. Investment Protection
5. Dispute Settlement
6. Exceptions and Safeguards
7. Financial Services
8. Taxation
9. Reservations
10. Relationship to other International Agreements
11. Implementation and Operation
12. Final Provisions

The following assessments focus only on those articles in these contents where QUNO perceives significant and substantive concerns from development, environmental and labour interests.

IV: General Provisions:

The preamble states the general objectives of the MAI: To create a "free standing" multilateral agreement open to all countries that will establish transparent and predictable rules for international investment and will contribute "to the efficient use of economic resources, the creation of employment opportunities and the improvement of living standards." It emphasises that such an investment regime will complement and benefit international trade.

Many observers of the MAI have pointed out that these general provisions also represent general assumptions about the basically positive nature of investment. However, foreign investment cannot be presumed beneficial. It can lead to job losses in small and medium enterprises and put downward pressure on environmental and labour standards, while speculative investment can lead to destabilisation of financial markets and systems. Still bracketed in the preambular text are proposals that the agreement reaffirm commitment to the Rio Declaration and Agenda 21 and renew commitment to core labour standards. A few governments have notably resisted these commitments. Others are insisting on their incorporation in the text. All concerned NGOs agree that such preambular references are needed yet they recognise that they are non-binding and unbalanced with the general objectives of investment liberalisation.

V. Scope and Applications:

The MAI seeks as wide a scope and application as possible. By investment, it means "every kind of asset owned or controlled, directly or indirectly, by an investor." This would include both direct and portfolio investment in enterprises, stocks, bonds, rights under contracts, intellectual property, and tangible and intangible property. Moreover, coverage is based on a fundamentally different approach than, for example, in the WTO. In the latter, coverage is based on a "bottom up" approach in which specific products and restrictions are offered for negotiation of rights and obligations. The MAI is "top down" in that all investment is included unless specific exceptions or reservations are submitted.

Investors may appreciate this sweeping coverage. But, as we will see when we look at its more specific contents, the Agreement seems to fail to satisfy any one negotiating government in all regards. This problem is probably at the heart of current uncertainty about its future. Too much agreement will be required on too many details in too short a time. Many negotiators, in fact, admit that most of the difficult and controversial issues currently remain unresolved. Such scope only increases the need for prospective contracting parties to establish exceptions and reservations -- the debilitating proliferation of which will be noted below.

VI. Treatment of Investors and Investments:

This is divided into two parts, one section on basic obligations and one on special topics.

A. Basic obligations

require national treatment, most favoured nation and transparency. These three areas are among the most troublesome for developing country governments and NGOs. National treatment requires that foreign investors be treated in all operations with equal status in rights of establishment as domestic investors. It forbids both de jure and de facto discrimination. There are hosts of objections based on development needs. Developing country governments could not screen investments on the basis of development criteria and national goals. Many of these are intended to promote domestic enterprises – often labour intensive small and medium and industrial enterprises and independent small farmers. It could constrain the promotion of important sensitive social objectives such as Malaysia's successful affirmative action for its Malay population. While much criticism has been levelled at the inefficiency of state protection and assistance for strategic sectors or industries, state financing and subsidising nonetheless remain important development policies. National treatment for foreign investment could impair such strategies

One particularly contentious issue among the negotiating governments that is indirectly related to national treatment is "secondary boycotts." European and Canadian governments are angry at U.S. boycotts of European companies with investments in such countries as Iran and Cuba. So European and Canadian negotiators are attempting to include an article that would forbid a member from "taking measures that either impose or may be used to impose liability on investors or investments of investors of another Contracting Party."

Most favoured nation (MFN) treatment (that requires one member to accord another "no less favourable treatment" than it accords any other member) is a basic operating principle of the WTO and without which neither the WTO agreements nor the MAI could benefit all its members equally.

MFN poses special problems for the European Union, which has more favourable treatment for investors within it. The EU has therefore proposed that the MFN clause in the MAI reflect that accords within a "regional economic integration organisation" need not be subject to MFN within the MAI. This would apply to all such special relationships as ASEAN and other regional pacts and would be a major exception to the MAI or a major deterrent to accession if not applied. South - South investment initiatives would not be exempted.

Transparency requirements are well known to developing country governments. Experiences with compiling and submitting notifications to the WTO are posing serious difficulties for overworked and under trained government bureaucracies. MAI notifications would compound these problems.

B. Special Topics

Cover a dozen issues ranging from treatment of key personnel, corporate practices, employment requirements and technology. All pose special problems for investment and require separate articles. Three in particular raise the most focused objections: performance requirements, investment incentives, and not lowering of standards.

Performance requirements prohibit a host government from placing any conditions on "the establishment, acquisition, expansion, management, operation or conduct of an investment." Specifically, an investor cannot be held responsible to produce a given percentage of export, to achieve a level of domestic content in inputs, or to transfer technology.

Performance requirements have been a major means for developing countries to achieve development goals through technology transfer and developing supplier industries as links to the domestic sector. The MAI could thus undermine important strategies to utilise direct foreign investment to support domestic development. Since this goes well beyond the terms of the WTO Trade Related Investment Measures Agreement (which many developing countries find difficult to accept), it has ominous overtones if the MAI is eventually a model for a WTO investment agreement.

Investment incentives are posing difficult problems for governments. The objective is to apply national treatment, MFN and transparency to such incentives as tax holidays and subsidies which governments use to gain competitiveness in promoting inward investment. Many fear that increasing use of incentives is counter-productive and distorts investment decisions or adversely affects other potential investment. But few are ready to surrender such competitiveness measures, all the more so because many incentives are at a sub-national level and involve important regional constituencies.

At present, there seems to be little agreement on how to cover strategic and sensitive incentive measures. According to one MAI negotiator, many OECD governments are not interested in any incentive disciplines while others are recommending agreement to disagree and settle now for later negotiations on a built-in agenda.

Not lowering standards provisions, or lack of provisions, are at the heart of environmental NGOs and trade unions objections to the MAI. There is also disagreement among OECD members.

The central concern underlying "not lowering standards" is that governments should not lower environmental and labour standards (including health and safety) in order to attract investment. Mexico, Korea, New Zealand and Australia have so far resisted any reference whatsoever to such standards. Others have still to choose between several alternatives. One position argues in favour of "universal" and the other in favour of "domestic." Universal would refer, in the case of labour to "core" standards – which are limited to five (freedom of association, collective bargaining, child and forced labour and non-discrimination). "Domestic" standards, in this case, are viewed as more comprehensive because they refer to a full range of domestic environmental and labour law. Another choice is whether or not there should be any recourse mechanism when standards are lowered. The only such mechanism identified so far is a "request for consultations with the other party."

As an example of how positions can change, the United Kingdom, which had opposed any mention of standards before the new Labour government, has stated its "commitment to seek strong binding labour and environmental clauses."

The most important issue is whether consultations adequately guarantee recourse against lowing of standards. An apparent majority of governments now agree that not lowering of standards should be binding. This would allow an aggrieved party to require violations be redressed. What kind of mechanism would enable grievances to be addressed will be the next major issue once agreement is reached that this article should be binding.

While negotiators search for a binding mechanism, environmental NGOs and trade unions are suggesting several possible mechanisms. The World Wide Fund for Nature (WWF) has pointed to the North American Free Trade Agreement (NAFTA) example. In this, side agreements have created rules, institutions and procedures that are designed to allow citizens to lodge complaints when a party is not enforcing its environmental laws. When a persistent pattern of non-compliance is established, fines backed by the threat of trade sanctions can be imposed. (5) However, the burden of proof has been placed on environmental interests. The MAI should go further to include an exception for legitimate environment laws.

Environmental NGOs are also calling for an environmental assessment before any agreement is reached on a final text. The assessment could, as proposed by the WWF, evaluate the MAI's effect on governments' ability and willingness to establish regulations to address environmental problems. An assessment should also try to estimate future challenges that might arise if the MAI were to encourage "pollution havens." WWF notes that the US government in preparing for ratification of NAFTA made such an effort. (6)

The Trade Union Advisory Council to OECD (TUAC) has proposed that the preamble should contain a strong affirmation of support for core labour standards and a full annexation to the MAI of the OECD Guidelines for MNEs, enshrining these standards. With these foundations the Agreement should establish National Contact Points (along the lines noted above in the Guidelines) to "enforce the Guidelines which should be a legally binding element of the Agreement;" the text should also require new members to adopt the Guidelines; and the article on not lowering standards should be binding as well as explicitly refer to both universal core labour standards and domestic standards. (7) Summing up both environmental and labour proposals, a joint NGO statement issued at the October OECD/NGO consultation calls for the MAI to:

Require multinational investors to observe binding agreements incorporating environment, labour, health, safety and human rights standards to ensure that they do not use the MAI to exploit weak regulatory regimes, Ensure that an enforceable agreement on investor responsibilities takes precedence over any agreement on investor rights. (8)

VII. Investment Protection:

Much of this part of the draft Agreement refers to protecting investment against strife and assuring transfer of capital and proceeds.

Expropriation is of particular note among protection requirements. Many environmental NGOs claim that the draft article on expropriation and compensation is not necessary and could threaten established national environmental legislation. It forbids expropriation of an investment except "for a purpose, which is in the public interest." The argument against this article is based on several assertions. One is that there are adequate principles of national law to protect investors in case of expropriation and that the MAI exceeds these in granting an absolute right to compensation. Another is that "in the public interest" is not specific enough to encompass categorically individual environmental laws. Finally, the sweeping provisions against expropriation would keep the host country on the defensive.

The Canadian experience with the U.S. Ethyl Corporation was forcefully cited at the OECD/NGO consultation as an example of how expropriation and the right to compensation under NAFTA are threatening to undermine Canadian environmental legislation. Earlier this year the Canadian Parliament banned the import and internal transportation of MMT, a dangerous toxin in gasoline emissions. The Ethyl Corporation products containing MMT and marketed in Canada were banned under the new legislation. In accordance with expropriation provisions in NAFTA, the Corporation is now suing the Canadian government for $250 million on grounds that the ban is "tantamount to expropriation."

The Canadian judicial system has not yet agreed to hear the case. Yet the Canadian NGOs speaking about the Ethyl case apparently stirred up some apprehension on the part of governments about prospective corporate suits.

The dispute settlement procedures in the Agreement are an integral part of this apprehension. They consist of state to state disputes and investor to state disputes.

In the former, a case could be brought, following failed consultations, to a tribunal which can judge the case and recommend that a party conform to its MAI obligations and award compensation for losses. These awards are final and non-compliance can lead to suspension of MAI rights.

These serious enforcement mechanisms and the wide coverage of the MAI will be a challenge to any legal system. In case of a deluge of cases, the stronger financial and legal resources of MNEs could overwhelm developing countries.

In investor to state disputes, an investor could bring cases to a domestic court or to a tribunal as in state to state disputes. As exemplified by the Ethyl suit, this raises a number of questions for prospective members of the MAI: Would governments have to compensate investors when new regulations adversely affect the latters' interests? How can governments limit the number of suits when the right to sue is so firmly established as in the MAI? Could the right to sue be used by investors to influence legislation aimed at regulating industry? Such questions are the basis of environmental NGOs essential concern about national sovereignty when investors are given such power and international tribunals have the ability to decide over national authorities.

An important proposal by NGOs to counter these new powers by investors is to enable non-governmental, non-commercial groups, however they are to be defined, to have legal recourse against investors.

Transfers are a third important element of protection. The MAI is brief and to the point in requiring each Contracting Party to "ensure that all payments relating to an investment in its territory … may be freely transferred into and out of its territory without delay." Furthermore, these transfers may be made in a freely convertible currency and at the market rate of exchange. These are extremely liberal provisions, however, in the context fluid capital markets and net capital outflows faced by many developing countries . In light of the financial crises in Southeast and East Asia, several developing country participants in Quaker seminars have expressed apprehension about these provisions.

VIII. Exceptions and Safeguards:

Temporary safeguards that are "inconsistent" with such transfers are allowed in the event of serious balance of payments problems or cases that such transfers threaten to cause serious difficulties for monetary or exchange rate policies. The current Asian crises would presumably be a case in point.

These crises are the more dramatic manifestations of extremely complex trends in capital flows and policies required by developing countries to cope with vagaries of such flows. Developments in international financial markets over the past two decades have shown many unfavourable shifts in investors commitments to emerging markets. These have led at some times to strong trends towards integrating markets and at other times to large outflows of capital. (9) Given such fluctuations, developing countries do not need to be convinced by the current Asian crises of acting pre-emptively to maintain stable balance of payments. As a result, there is serious doubt that the temporary safeguards would provide the controls required to prevent such crises from arising in the first place.

IX. Reservations:

The most significant defence that MAI members would have against such threats to national sovereignty is by their right to establish reservations: namely, the right to exclude from their MAI obligations non-conforming legislation. To an important extent this is limited by "standstill and rollback" commitments in the MAI that prevent members from adding reservations once ratified it and commit them to eliminating reservations in the future.

600 reservations are already submitted. So it would seem that OECD countries are ready to use this defence. Furthermore, Canada, France and Belgium are seeking to exclude their entire media, film and publishing sectors. This would be tantamount to a general exception to MFN and national treatment. Some examples of reservations are: 1) British Airways Articles of Association that limit foreign equity to 25% and the UK Broadcasting Act of 1990, 2) a U.S. reservation on its "right to adopt or maintain any measures according rights of preferences to socially or economically disadvantaged minorities" and on its Atomic Energy Act of 1954; 3) Norwegian legislation requiring that all board members of fishing industries be Norwegian citizens and not more than 40% of equity in these industries can be foreign.

This is too disparate and as yet incomplete a list to suggest any patterns of reservations. It does show, however, that a wide range of legislation and sectors can be reserved. In which case, many developing country governments are asking if the spirit if not the substance of the MAI is already fatally undermined. Thus some observers are beginning to ask if the MAI negotiations will implode and ultimately fail.

X. Some QUNO Assessments:

The above observations are both preliminary and not intended to be comprehensive. The MAI is complex and not subject to superficial assessment. Negotiations are still in progress. As noted, the most difficult problems remain unresolved, and the proposals put forth by various NGOs, as well as the concerns raised by developing countries as prospective OECD customers, for accession are not passing unnoticed by OECD negotiators. At this stage it seems best not to prejudge any outcome. Yet several basic points should be kept in mind in following the negotiations.

First, with the negotiations far from concluded and negotiators more sensitive than ever to public scrutiny and debate, the next few months should offer opportunities to try to influence national governments' negotiating positions.

Second, given these opportunities, there are important proposals, such as those reported above, for modifying the MAI to meet environmental and labour needs. If they were to be incorporated, the Agreement could take on important regulatory functions in international investment and financial markets. Such international regulations of environmental and labour standards are in short supply. They are increasingly recognised as needed additions to institutions managing a globalised international economy. (10) Even though investors enthusiasm might well deteriorate if the MAI becomes too regulatory, there is still hope that a more balanced Agreement could be negotiated.

Third, whatever is achieved in the MAI will be a precedent that most likely will appear in WTO debate and possible negotiations on trade and investment. If this occurs, an MAI with more regulatory features could raise constructive issues for the WTO. For example, labour standards are not on the WTO formal agenda. Labour standards in an MAI could put them on the formal agenda.

All of these points, of course, assume that an MAI will eventually emerge with enough energy to command truly multilateral attention beyond the 29 members of the OECD. If it does, it could be an important instrument in the regulation of the international economy. If it does not, many of the actors with whom QUNO has had contact will either breathe a sigh of relief or mourn a lost opportunity to bring important regulations into international investment.

Brewster Grace

FOOTNOTES:

1. The OECD Guidelines for Multinational Enterprises. OECD, Paris. Available by internet at OECD
   
   
2. Multilateral Agreement on Investment: Consolidated Text and Commentary. DAFFE/MAI/NM(97)2, OECD, Paris, October 1997.
   
   
3. "Opening Remarks by Donald J. Johnston, Secretary-General of the OECD, Unpublished speech, OECD, Paris, October 1997.
   
   
4. Eliminating World Poverty: A Challenge for the 21st Century, Department for International Development, UK, November 1997. Available on the internet from ONEWORLD
   
   
5. "Is the Multilateral Agreement on Investment Sustainable?" World Wide Fund for Nature, Gland, Switzerland October 1997.
   
   
6. "The Multilateral Agreement on Investment: Key Issues of Trade Unions." Trade Union Advisory Committee to the OECD, Paris, September 1997.
   
   
7. "Joint NGO Statement on the Multilateral Agreement on Investment (MAI)." Unpublished manuscript available from the World Wide Fund for Nature, Gland, Switzerland.
   
   
8. Ibid.

Other reports

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