Dear Mr. Donald J. Johnston

I am very concerned that the Multilateral Agreement on Investment (MAI), which is currently being negotiated in the OECD severely undermines prerogatives of democratically-elected governments, as well as the international efforts being made towards sustainable development.

In particular, I believe the provision to allow foreign corporations to sue governments under the Dispute Settlement Mechanism is an unprecedented concept in international law, and should not be allowed. Although I believe it is necessary to formulate international rules to regulate the activities of multinational corporations, MAI as it stands will not fulfill that rule, but indeed will give immense privileges to these firms.

I oppose to the further continuation of the negotiations of the MAI, and will oppose any attempt to ratify it at the national level. I believe that, in order to achieve sustainable development and social justice, the OECD shouid immediately stop these negotiations and instead reconsider its role and possible contribution in creating universal rules to regulate the activities of multinational corporations.

name & address

Dear X,

The Secretary-General has asked me to respond to your recent card concerning the Multilateral Agreement on Investment (MAI) and to thank you for communicating your concerns. Your correspondence is part of an important public debate about the MAI, which the Secretary-General welcomes.

Your card suggests an underlying concern about foreign investment as a whole, quite apart from the MAI itself. The O.E.C.D. and its 20 member countries take the view that free capital flows including foreign direct investment represent a positive force in economic development producing jobs and raising standards of living in all countries. Similarly, Agenda 21, the product of the United Nations Conference on Environment and Development (the 1992 Rio Summit), advocates higher levels of foreign investment as a means of achieving the goal of sustainable development.

The O.E.C.D. countries collectively account for a large part of foreign direct investment flows worldwide: some 85% of outflows and 65% of inflows. Accordingly, these countries have a major stake in the rules that govern international investment. The decision in 1995 of O.E.C.D. Ministers to launch the MAI negotiation was also a logical step to consolidate and complete the existing O.E.C.D. instruments -- in particular, the 1961 Codes of Liberalisation and the 1976 Declaration and Decisions on International Investment and Multinational Enterprises -- which have helped promote international investment and economic co-operation for many years. The O.E.C.D.'s activities in other fields (such as development assistance, the environment and combating bribery and corruption) complement the MAI negotiations.

The principle which is at the heart of the MAI is non-discrimination as between domestic and foreign investors. Applying this national treatment principle, the MAI will not interfere with the freedom of governments to implement their own policies concerning labour or environment standards, for example, as long as these standards are not more stringent for foreign investors than for domestic investors. In other words, the MAI will require fair and non-discriminatory treatment of foreign investors, not deregulation. Furthermore , the MAI is likely to include explicit provisions against lowering such domestic standards as a means of attracting foreign investment. Other possible provisions relating to the environment and to labour are under consideration. Associating the O.E.C.D. Guidelines for Multinational Enterprises, which encourage responsible corporate behavior, is also likely (contrary to your card, investor-to-state dispute settlement has been for in international investment treatment for many years without abuse by foreign investors). Also, special concerns of individual countries joining the MAI can be the subject of country-specific reservations.

The MAI will be a free-standing international treaty to which any country will be able to adhere if willing and able to meet its requirements. A prospective new member will have the opportunity to negotiate the terms of its entry into the MAI. These are continuing efforts to advise and inform non-O.E.C.D. countries of the state of the negotiations. Many countries from all parts of the world are expressing serious interest. Similarly, there is a continuing consultation with environmental and other nongovernmental organizations, with labour and with business groups. For example, a special meeting was held last fall with representatives of approximately 50 Egos to review the progress of the negotiations and their concerns. We have had numerous communications as a follow-up to that session. Many O.E.C.D.countries, including your own, hold similar consultations domestically.

I enclose for your information a copy of the recent O.E.C.D. Policy Brief on the MAI which summarises its background, objectives and features in greater detail. For additional information, including a copy of the current MAI negotiating text, you may also wish to consult the O.E.C.D.'s MAI International site: http://wow.okayed.or/deaf/cmis/ma/maindex.htm.

Yours truly,

Donald J. Johnston, Secretary General
William Witherell, Director, Directorate for Financial, Fiscal, and
Enterprise Affairs
Organization for Economic Co-operation and Development
2 rue Andre Pascal 75775 Paris CEDEX 16
Tel: 33 1 45 24 81 81
Fax: 33 1 45 24 19 50


April 24, 1998


Dear Mr. Donald J.Johnston and Mr. William Witherell,


I would like to begin by offering my great appreciation for your response to my card on the MAI. I am very happy you for taking the time to address public concerns over the issue.

Having read your letter, however, I have to ask that I feel the points you made in your letter do not reflect my understanding of the issues. The OECD overview of the literatures on 'FDI and the Environment' now being prepared by the secretariat recognizes, for example that not all types of Foreign Direct Investment necessarily contribute to sustainable development. In fact, the liberalization of capital movement will create a situation where increasing numbers of foreign investors will move their operations outside of countries without observing national laws and regulations based on the polluter-pays principle, which are intended to counter pollution and/or the over-exploitation of natural resource. Since transnational corporations can readily move across borders, it is quite likely that they will not take long-term environmental sustainability into account when they operate, although this is widely recognized as vital for sustained national economic development.

With respect to your comment on job creation and high standards of living resulting from free capital flows, there are strong cases which argue against the assumption. There is at least one case of a transnational corporation fleeing a country immediately after a trade union was formed in its factory, as it had invested to exploit cheap and non-organized labor. Transnational corporations seeking a share of the domestic market of the recipient countries tend to import intermediate goods and transfer out the returns. This type of investment can thus cause a current account deficit in the recipient country unless appropriate policies are in place.

On the other hand, traditional industries and local small-medium scale industries often find it difficult to compete with transnational corporations who are often larger and more capital intensive. Traditional industries not only maintain cultural diversity, but often have technologies and know-how on the sustainable use of local resources, that in many cases have developed over the centuries. As the capital intensive industry of large-scale transnationals is known to create less jobs than labor intensive traditional industries, the unemployment resulting from the collapse of traditional and local industry cannot be absorbed by the transnational corporations. It is also true that they require different skills.

Given these facts, I would like to re-emphasize the importance of creating a international framework to regulate, instead of liberalize, transnational capital movement, and to recognize that each country has the sovereign right to decide the type of development it seeks, and to implement policies which are designed for that purpose. If these national policies are to be dismantled by the MAI, I think it amounts to nothing but a de facto deregulation.

Moreover, statistics show that economic growth measured by the GDP indicator doesn't necessarily contribute to higher living standards nor to the public welfare. This is true even in a developed country like the United States. GDP is merely an indicator of the total amount being spent in a country and has nothing to do with actual wealth created for the nationals, as in many case, large part of the GDP is dominated by a handful of corporations and often transferred out by transnationals. Therefore, we must re-examine the terms of economic development or growth by asking ourselves what type of economic development we want, and for whom? In this connection, I am deeply concerned that persons like you who represent the OECD and OECD/DAFFE simply ignore the facts and empirical research and take a position of not setting conditions that FDI should produce jobs and raise standards of living.

As for the investor-state dispute settlement mechanism, contrary to your comment, the DSM which is being created under the MAI is different from existing systems on dispute settlement for Bilateral Investment Treaties, as the MAI is an unprecedented multilateral investment treaty. My concern is that the DSM will be applied to the problematic MAI provisions. It is not suitable, therefore, to simply refer to the previous cases under BITs. However, the Ethyl case under NAFTA against the Canadian government is already alarming citizens around the world.

Although you kindly informed me of the considerations being taken to integrate some of the concerns of civil society into the MAI text , I think it is far from enough to just annex the OECD Guidelines for Multinational Enterprises as a non-binding document, or to insert some lines on the environment and labor into the preamble. While I think 'not-lowering environmental and labor standards' is a national obligation, there is still a big question on whether raising standards or the establishment of new environmental / social laws and regulations may not be taken as violations of the MAI. If the MAI takes a GATT-like stance of only allowing such changes when the are based on scientific evidence, and not to accept the precautionary principle, it will substantially limit the ability and rights of a country to set laws and regulations to protect its environment and society when social and environmental protection hasn't reached the appropriate level and thus improvement is necessary.

Having written some of my reasons for not supporting the current state of the MAI, I would like to conclude by repeating my demand for an immediate halt to the MAI negotiations, so long as the agreement only contributes to transnational corporations, does not allow non-OECD members to sit at the negotiation table, and does not integrate NGO demands but just highlights the mere existence of a consultation process.



Sincerely,



name

address