The Multilateral Agreement on Investment TUAC Status Report on Negotiations April 1998  


The following status report has been prepared on the basis of informal discussions with government delegations and members of the OECD secretariat. The appendix sets out the situation at the national-level as regards the state of play between trade unions and  governments as regards the MAI. This has been prepared on the basis of correspondence and discussions between the TUAC Secretariat and affiliates and others. 

Will the negotiations be concluded by the 27-28 April 1998 deadline? No, due to major differences on key outstanding points between governments, and also due to internal differences within the US government alongside domestic political difficulties over ratification in some countries. Outstanding disagreements are in the following areas: labour and the environment; the type and scope of general and national-level exemptions covering specific economic sectors and activities (the REIO clause exempting the EU from applying National Treatment and Most Favoured Nation clauses, and the tit for tat US proposal to exempt domestic subsidies, alongside culture, and government procurement); the question of "extraterritoriality" arising from conflicting requirements, secondary investment boycotts and illegal expropriations (Helms-Burton and D'Amato type sanctions); and how to limit investor to state dispute settlement. 

None of these problems are new, and while negotiators thought they were moving towards a consensus on issues such as the REIO clause and culture, along with progress on labour and the environment, a disagreement broke out at the 16-17 February 1998 High-Level meeting. This was prompted when the US delegation questioned the validity of the revised EU proposal for the REIO clause, and the proposal to limit a cultural carve-out to that agreed in the GATS. Other governments charged that the US had done this for domestic political reasons and retaliated by criticising the US proposal to exempt subsidies to domestic industries from the scope of the Agreement. 

What will Ministers discuss in April? Ministers will receive a Report from the Negotiating Group outlining the progress made on key issues, with a summary of the main outstanding issues. The contents and "message" for the Report are under discussion. Most governments want a strong message such that the MAI would not undermine the ability of governments to regulate, that labour and environment issues will be accorded strong treatment in the Agreement, that increased public debate is required, and that more efforts are required to incorporate non-OECD countries in the negotiating process. The Negotiating Group hopes to finalise the statement at its next meeting on 14-17 April. 
Ministers will have to agree whether to continue negotiations at the OECD, shelve the Agreement or move it to another forum such as the WTO. It is almost certain that the MAI negotiations will continue, that the OECD will remain the competent body, and that a mechanism will be found to increase the participation of non-OECD countries in the negotiating process. 

A heated discussion is taking place around the desirability of releasing a "Chairman's Text" on the MAI at the Ministerial meeting. This, if agreed would be seen as locking in those areas where agreement had been reached by negotiators. It would also allow the Chair of the Negotiating Group to leave a legacy. Opponents of this approach argue that a "Chairman's Text" would violate the principle whereby "nothing is agreed until all is agreed". Whilst this may change the consensus view appears to be against such an idea. 

What Next Steps for the MAI must Ministers agree in April? Ministers will release a short statement on the MAI, which is now under discussion. This will be in addition to the normal Communiqué that will include only a passing reference to the Agreement. The Ministerial statement is expected to reflect the discussions on the Negotiating Group's Report to Ministers. 

It must also state whether a new deadline will be set for the completion of negotiations. Key governments oppose this. US opposition is said to centre around the need to keep the MAI out of the public arena in the run-up to the November 1998 mid-term Congressional elections. At the same time many governments fear that a further deadline will give opponents of the Agreement a visible target for their campaigning. The consensus view at this time appears to be against a deadline. 

Linked to this is the debate taking place on the way in which future negotiations will be conducted after the Ministerial meeting. With no deadline it is likely that few formal meetings will be held of the full Negotiating Group, at least until the late Autumn. This would allow governments to have a period of reflection in which to have informal or bi-lateral discussions on the outstanding "deal breakers". It has been suggested that following the US mid-term elections a special high-level conference could be called to raise the tempo of the negotiations, with a race to the finish line of the Spring 1999 OECD meeting of the Council of Ministers. 

Ministers have also to endorse the replacement for the outgoing Chair of the negotiating Group, Frans Engering of the Netherlands, who will formally step down at the Ministerial meeting. Discussions are now taking place over his replacement, with the expectation that a political figure, rather than a civil servant be found. The search for a replacement has been clouded by the lack of a clear strategy for the negotiating process following the Ministerial meeting, including the desire to avoid a deadline for the negotiations, and the high degree of uncertainty as to whether an eventual MAI will emerge from the OECD negotiations.  

Developments On Matters Related To Labour and Environment  

Reflecting the pressure that governments are under to meet the concerns of trade unions and NGO's on labour and environmental matters a Chairman's Note covering these issues was tabled for discussion at the 17-19 March 1998 Negotiating Group meeting. The Chairman's Note included text for the Preamble and a binding clause on not lowering (domestic) labour and environment 'measures' and highlighted developments in other text that would relate to labour and the environment. Importantly, the text had no square brackets, indicating the growing realisation that binding text is required on these provisions. 

Matters Relating Directly to Labour and Environment Standards 

As regards the Preamble, Parties to the MAI would "renew their commitment to the Copenhagen Declaration ... and the observance of internationally agreed core labour standards": the core labour standards are then listed. The text then notes that the ILO is the "competent body to set and deal with core labour standards world-wide". The notion that the ILO is the competent body to deal with core labour standards would be inconsistent with a binding provision on core labour standards in the MAI, and would undermine the trade union campaign to include core labour standards in the WTO. 

Concerning the proposed binding clause on not lowering domestic labour and environment 'measures', the following text was proposed: 
 "A Contracting Party shall not waive or otherwise derogate from, or offer to waive or otherwise derogate from, its domestic health, safety, environmental, or labour measures, as an encouragement to the establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment and sale or other disposition of an investment of an in investor." 

The use of the word shall would ensure that the clause become binding on the Parties to the Agreement. Its relationship to the dispute settlement procedure would depend on the scope and application finally agreed for this, and the present consensus appears to be that it should, but on a government to government basis only. The use of the term measures as opposed to standards would allow consistency with other text referring to government action.  

atters Relating Indirectly To Labour And Environment Matters 

The Chairman's Note set out a range of areas where the MAI text would either not touch on labour and environmental concerns, or where an interpretive note would clarify this. In particular the following points were raised.  - There would be a specific affirmation that the MAI would not inhibit normal government regulatory powers. It was proposed that this would cover health, safety and environmental concerns, and that it could be extended to cover "measures that set labour standards". However, this proposal was framed in such a way that normal government regulatory power would have to be non-discriminatory between domestic and foreign investors. 

- The National Treatment (NT) and Most favoured Nation (MFN) provisions granting foreign investors treatment no less favourable than that granted to domestic investors  would be qualified by the inclusion of "in like circumstances". An interpretive note would state that this would make NT and MFN relative concepts, and allow governments to accord differential treatment to different investments, in particular as between domestic and foreign investors. It has been suggested that this point when taken together with the previous point would allow governments to initiate discriminatory regulation. 

- The articles covering General Treatment, Expropriation and Compensation would include an interpretive note to qualify the phrase that governments could not "take any measure tantamount to expropriation or nationalisation" This would be taken to mean that the phrase "does not establish a new requirement that Parties pay compensation for losses which an investor or investment may incur through regulation, revenue raising and other normal activity in the public interest undertaken by governments". TUAC is in detailed discussion with the OECD to stop any possibility that investors could invoke the expropriation clause to claim compensation for strike action. 

- An exception clause was proposed for the provisions covering performance requirements. This would in effect allow discriminatory measures to be maintained, adopted and enforced covering health, safety or environmental concerns. Employment requirements were not included on the grounds that a footnote to the performance requirements provisions would state: "Nothing in this paragraph shall be construed as interfering with programmes targeted at disadvantaged regions/persons or other equally legitimate employment policy programmes". 

- Though not included in the Chairman's Note, discussions have continued on the investor to state dispute settlement process. Some governments want to delete this provision from the MAI, but at this point the majority view is that barriers to the initiation of complaints, such as screening requirements, should be included in the provisions on this matter. The narrowing of the expropriation clause is seen as part of this. 


Concluding Remarks 

Even though the MAI negotiations will continue at the OECD, it is too early to say whether any Agreement will emerge. Should it fail at the OECD, then it would in all likelihood resurface at some point in another forum, probably the WTO. Some NGO groups are in favour of this, in that developing countries would be better represented in the negotiations. However, the chances of getting meaningful labour and environment provisions, let alone other trade union issues, addressed in a WTO context would be minimal. Progress has been stalled in the WTO Working Party on Investment, but a majority of developing countries have stated their opposition to including labour and environment as issues for discussion 

As regards labour and environment issues, the developments outlined above should be seen as a movement towards the trade union demand for a binding clause covering both domestic and core labour standards. While the majority of governments are said at this point to favour the former, there has been movement in support of core standards in the clause. For example, the Netherlands has proposed that domestic standards if used should be qualified to cover the objectives laid down in core standards, while Greece, Italy and Norway prefer core. Importantly, the US has opted for core in the case of labour standards, however this position has been nuanced. 

On other labour issues, it has now been accepted that the OECD Guidelines for Multinationals will be annexed to the MAI itself and not the Final Act. Furthermore, most governments accept that Parties to the agreement will be obliged to initiate National Contact Points, and that the Review of the OECD Guidelines must be effective. 

Privately, it is said that the hard-line oppositional governments are weakening their stance on labour matters, with the exception of Mexico. Korea for example has remained quiet in the discussions on the binding labour clause, instead calling for further clarification, while Australia and New Zealand are said to have been less vocal in their opposition to binding provisions, although this may merely reflect the pressure they are under at home. 

The developments on issues such as governments right to regulate, the relative nature of NT and MFN, the weakening of the expropriation clause and investor to state dispute settlement, plus the allowance of discriminating performance requirements, appear to reflect a reaction by governments to the criticism that the MAI should not be just 'a bill of rights for multinationals'. The acceptance of open ended national-level exemptions is a further recognition of this. 

It should not be inferred from this that the MAI has reached a stage where the trade union movement should support it. It is simply an indication that governments have been forced to move away from the pure liberalisation agenda that they themselves set for the MAI at the start of the negotiations. Similarly, now is not the time for complacency. The pressure needs to be maintained on governments to swing behind the trade union demands on labour and non-labour issues, both when the Negotiating Group meets in Paris, and more importantly in national capitals when the negotiating positions are agreed. 


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