The attempt to draft a Multilateralmultiple countries working together to on a specific issue Agreement on Investment (MAl) was one of the most controversial chapters in the era of globalization, and the failure of the effort taught many lessons about the sensitivities of investment issues.
As noted earlier, the great majority of foreign direct and portfolio investment originates in developed countries, and is invested in other developed countries. Organization for Economic Cooperation and Development (OECDA group of the world’s most advanced and wealthiest economies that is both a forum for and an active participant in debates about international economic policies. It was established in 1961 and now has 34 members, including the United States, Canada, Mexico, Japan, South Korea, and most members of the European Union.) trade ministers recognized that controversies about foreign investment policy occur most frequently in developing countries. Therefore, an initial effort to draft a MAI was initiated by governments of the OECDA group of the world’s most advanced and wealthiest economies that is both a forum for and an active participant in debates about international economic policies. It was established in 1961 and now has 34 members, including the United States, Canada, Mexico, Japan, South Korea, and most members of the European Union. nations in the hope they might be like-minded and would readily agree on terms for investor protection. However, after several years of discussion, the negotiations ended without a draft agreement.
The negotiators found that there was relatively little will within their member countries to address several significant elements of cross-border investment policies such as taxation, for example. Every nation wanted to carve out a list of exceptions to protect domestic industries or domestic regulatory practices. As a result, the draft that emerged, rather than removing barriers to foreign investment, seemed to do little more than preserve the status quo.
The foundering of the MAI also demonstrated the new-found power that non-governmental organizations (NGOs) now wield in the era of globalization. More than 600 NGOs from around the world—from consumer rights groups such as Public Citizen, to environmental groups such as Friends of the Earth and the Sierra Club, to major American labor unions—joined the effort to derail the MAI negotiations. Among NGOs, the provisions of the MAI that dealt with expropriation, modeled on those that appeared in NAFTAa treaty between the U.S., Canada and Mexico, which eliminated tariffs on many products traded between the three countries. It also protects intellectual propertyIntellectual property refers to the creations of the mind, such as inventions, literary or artistic works, and the symbols, names, and designs used in commerce. and outlines the removal of investment restriction amongst the three countries.’s Chapter 11, were the most controversial.
Critics believed that the MAI would restrict government ability to curb the participation of foreign corporations in critical areas, and any bans on specific investment procedures preexistent would not be able to function under the MAI. Additionally, foreign corporations might take precedent over domestic companies in terms of international investment. Some critics, such as Mark Vallianatos of Friends of the Earth, argue that accountability and appropriate responsibilities in exchange for rights should be arranged and made clear (Vallianatos, 1997).
The effective opposition of NGOs underscored the new reality that negotiations on agreements on international trade and investment will benefit from input from citizen groups, many of which are transnational themselves.
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