Turf battles slow investment pact Agreement: Just as there is a treaty governing international trade, 29 of the world's richest nations believe there should be one on foreign investments. But negotiations have not gone smoothly.

Sun Journal

June 04, 1998|By Bill Atkinson | Bill Atkinson,SUN STAFF

For the past three years, 29 of the world's richest countries have been at the negotiating table cajoling, coaxing and arguing with one another to create a set of common rules governing foreign investment.

It is a major undertaking. The goal is to hammer out a treaty, called the Multilateral Agreement on Investment (MAI), that would make it easier for an investor to buy or invest in a business in another country. Negotiations, held in Paris at the Organization for Economic Cooperation and Development, have not gone smoothly.

Canada, France and Belgium, fearful of losing cultural identity, are fighting to bar foreign ownership of radio and television stations and publishing companies. Countries in the European Union want the treaty to provide their members preferential treatment in some instances. The United States wants exemptions for state laws, such as statutes in Kentucky, Massachusetts and Alaska setting residency requirements for hair-dressing school operators, greyhound breeders and owners of coin-operated equipment.

These turf battles have slowed the progress of the MAI, but the participants keep coming back to the negotiating table. In a world of discordant laws, customs and language governing investing, they want to bring a harmonious regime that would put national and foreign investors on the same footing in every country. Just as there is a treaty governing international trade -- the General Agreement on Tariffs and Trade -- the group of 29 believes that there should be one governing investments.

If and when the treaty is signed, foreign investors, whether the H. J. Heinz Co. or Honda Motor Co., will be reading from the same rule book and all will be treated equally. So far, however, two deadlines have sailed by without signatures on the 145-page document.

Why is the MAI so important? Why not simply let it die?

Some critics would like that, but MAI backers note that investment across national lines has swollen to $8 trillion. As of 1996, it was growing at a rate of $350 billion a year, more than 14 times greater than in 1973.

Imagine if each U.S. state had its own set of rules for trade and commerce -- business might grind to a halt. But long ago, the 50 states adopted the Uniform Commercial Code to cut through the tangle. The MAI could function analogously in the world, replacing the 1,630 bilateral treaties that govern international investment with a single set of rules.

What will the MAI do?

Its goal is threefold. It would create international investing rules that would treat investors from Turkey to Texas equally. Second, it would have a mechanism for resolving disputes. Finally, it would expand foreign ownership of businesses ranging from advertising firms to automaking companies, from real-estate operations to financial-services companies. Relaxing the rules on foreign ownership has been one of the treaty's biggest hang-ups.

Who backs the MAI and why?

Groups such as the U.S. Council for International Business, which represents about 300 large U.S. companies, and the National Association of Manufacturers argue that the world needs this agreement because international investment is booming. Clear and consistent rules for international investing will benefit U.S. companies, they contend. Companies will become more efficient, profits will grow, exports will increase and employment will expand.

Countries that put restrictions on the operations of U.S. companies within their borders would no longer be able to treat them differently than indigenous companies. No longer could they require a U.S. company to export a certain percentage of its goods, for example, or prevent it from selling goods within the country.

"U.S. firms have to go global to compete today," says Stephen Canner, vice president for investment policy at the U.S. Council for International Business. "If there are barriers to their investing, it makes it much more difficult and expensive to compete."

The benefit runs both ways, supporters say. The treaty should make the United States an attractive market for foreign investment, creating more jobs.

If disputes arise between states and investors, the MAI would put in place rules for resolution, with the last stage being binding arbitration. But the treaty makes national governments vulnerable to lawsuits from investors.

Who doesn't like the treaty?

Global Trade Watch, an arm of Ralph Nader's Public Citizen consumer advocacy group, and the California Fair Trade Campaign say that the MAI will result in "corporate colonialism" by letting foreign corporations run roughshod over state laws and skirt environmental regulations. It could also bar states from embargoing business with countries known for human-rights abuses, they say.

Treaty backers, of course, deny these allegations.

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