The Following Was Prepared by THE PREAMBLE COLLABORATIVE
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What is the Multilateral Agreement on Investment (MAI)?

The MAI is a new international economic agreement being negotiated within the Organization for Economic Cooperation and Development (OECD), an international body comprised of 29 rich countries. The MAI consists of a set of rules restricting what governments can do to regulate international investment and corporate behavior. These rules are designed to protect and expand the power of corporations and other large international investors – guaranteeing them a stable investment climate, easy repatriation of profits, open market access, and freedom from any obligation to serve local economic needs – wherever they choose to invest. The United States and the European Union, who are the primary backers of the agreement, intend to extend the agreement to developing countries after it is approved by the OECD.

The proposed agreement could have an array of negative effects. As drafted, the MAI could:

Make it easier for investors to move assets (whether financial instruments or production facilities) across international borders. This could hasten job flight from industrialized countries and increase the pressure on all nations to compete for investment capital by lowering wages and labor, environmental and consumer-safety standards.

Prevent countries from limiting what foreign investors can own (whether agricultural land or strategic industries) or from imposing any obligations on foreign investors (like hiring local managers or sharing technological know-how). These provisions would be particularly burdensome for developing countries, preventing them from wresting local benefits from foreign investment.

Prohibit restrictions on the movement of capital, like the "speeds bumps" some countries put in place to require that certain types of investment are held for a set period of time. This would make it more difficult for governments to stabilize international fi nancial markets to avoid future meltdowns like the Mexican peso crisis. It could also prevent countries from placing any restrictions on the ability of corporations to close or move production facilities. Restrict efforts by governments in all signatory countries to condition receipt of public benefits on a corporation's behavior. This provision could undermine a variety of important corporate accountability laws.

Allow corporations a direct role in enforcing the agreement's terms against countries. This could invite widespread challenges to existing and future regulations that corporations view as a violation of their "rights" as investors.

The MAI incorporates a variety of legal mechanisms to achieve its purposes. These include:

National Treatment, which requires countries to treat foreign investors at least as well as domestic firms (whether or not this is in the interest of the local economy).

Most Favored Nation (MFN), which requires countries to treat foreign investors from all countries as well as it treats investors from its most favored investment partner (even if one of the countries is, for example, a gross violator of human rights).

Banning performance requirements, which are any laws that require investors to invest in the local economy or to behave responsibly in exchange for market access.

Banning any restriction on repatriation of profits and the movement of capital, thus ensuring that corporations and individuals can pick up their money or their factories and move, whenever they want, with no limitations.

Private legal standing, whereby corporations themselves will have the right to sue countries to overturn laws they believe violate the agreement.

What will be the MAI's practical effects?

In addition to promoting further job flight from industrial countries and speeding the inter- national "race-to-the-bottom" in terms of living standards and environmental safeguards, the MAI could undermine a variety of key regulations in both developed and developing nations.

Key laws governments use to hold corporations accountable to their employees and the broader community could be challenged. Living wage laws that require public contractors or companies that receive government subsidies to pay workers a decent income could be struck down under the MAI as performance requirements. Laws requiring that recipients of government subsidies commit to creating a certain number of jobs could be barred. Laws providing tax and regulatory incentives to responsible corporations could be prohibited.

Measures to promote economic development in underserved communities could be barred or weakened. Programs earmarking economic development funds for local businesses could be banned. Community reinvestment laws requiring banks to invest in economically deprived areas could be prohibited. Set-asides for minority- and women-owned businesses could be deemed an unacceptable attempt to favor domestic firms at the expense of foreign-based firms.

Countries could be prevented from limiting foreign ownership of key assets and resources. Foreign corporations would be allowed to acquire domestic businesses in almost every economic sector. Laws restricting foreign ownership real estate could be banned.

Laws designed to protect public health and safety and public resources could be challenged as discriminatory against foreign-based businesses. Marketing restrictions on dangerous products (like cigarettes or alcohol) could be attacked on the grounds that they prevent a foreign company from competing with a well-recognized domestic brand. Laws designed to conserve valuable resources or land could be accused of blocking foreign access and unfairly protecting domestic companies from competition. Contract preferences for environmentally responsible firms could be eliminated on the grounds that these favor investment in certain industries, like recycling, that some countries like the U.S. have developed at the expense of others. The MAI does not include many of the exceptions usually included in trade agreements that subordinate some corporate rights to certain key public health and safety concerns.

Local economic development programs could be restricted. State and municipal programs earmarking loans and subsidies to home-grown businesses could be prohibited as discriminatory against foreign investors. Rules promoting the investment of public pension funds in local businesses and/or in socially responsible businesses could be barred as performance requirements.

Protections and assistance for small businesses could restricted. Set-asides and special loan and grant programs for small businesses may be ruled to discriminate against foreign investors, who, given the high costs of entering a foreign market, are most likely large corporations,. Regulatory relief for small businesses could be challenged on the grounds that it discriminates against larger, transnational corporations who want the same advantage.

Unilateral sanctions against oppressive regimes or irresponsible corporations could be banned. Laws that block investment by companies based in countries that routinely violate labor, worker safety or environmental norms could be struck down. Laws prohibiting U.S. firms from investing in countries with poor records on human rights, labor rights and the environment could be prohibited. Laws that require a review of the human rights records of national governments before businesses based in those countries are allowed to invest could be struck down.

Laws discouraging capital flight, directly or indirectly, could be prohibited. Laws requiring corporations that move jobs out of the country to pay tax penalties could be banned as an unacceptable restriction on the movement of capital. Any future attempt to place outright limits on the ability of investors to move assets, including production facilities, could be pre-empted.

The MAI could override laws at the local, state and national levels. The MAI targets laws at every level of government. Thus, every existing and future federal, state and local laws would be required to comport with MAI terms.

The MAI does nothing to protect workers, consumers, small businesses or the environment. The MAI will allow corporations to sue governments to overturn laws that they argue are a violation of their rights. Unlike the NAFTA, where corporate right of action applies to a narrow set of provisions within the agreement, the MAI will enable corporations to sue to enforce any and every MAI provision. No binding statement of corporate responsibilities concerning working conditions, neutrality with respect to union organizing, product safety, human rights, or fair business practices has been incorporated into the MAI. The MAI does not establish a forum for governments, communities or individuals to sue transnational corporate violators of local environmental, labor or other standards.

What is the status of the MAI?

Confidential negotiations have been underway since May 1995 within the OECD. Business and industry groups represented by the US Council for International Business (USCIB), among other lobbies, convinced the Office of the US Trade Representative (USTR) and the State Department to initiate negotiations. Industry groups have an ongoing role in crafting the agreement, and unlike other interest groups, are regularly briefed by U.S. negotiators. Until recently, the target date for the completion of negotiations was May 1997; in late March 1997, the OECD announced the MAI deadline would be pushed back several months. Upon completion, the agreement will be introduced in the U.S. Congress in one of two ways: as a treaty, requiring 2/3 Senate ratification, or as an executive agreement, requiring a simple majority vote in the House and Senate. Other OECD countries, and ultimately developing nations, will be asked to sign.