Statement by Japanese Citizens and NGOs 

on the Multilateral Agreement on Investment

October 1997

　

We, Japanese citizens and NGOs, believe that there are a number of fundamental questions that need to be addressed regarding the Multilateral Agreement on Investment (MAI), which is currently under negotiation at the Organization of Economic Cooperation and Development (OECD). If these questions are not addressed adequately before the conclusion of the negotiations, we fear that investment liberalization will only contribute to the widening of existing gaps between the rich and the poor, both inside of countries, and between countries. This is because the liberalization will end up mainly benefiting the developed countries and the transnational corporations based in these countries.

　
The MAI must not undermine, but rather must promote efforts to bring about social and environmental sustainability and justice, through poverty eradication, environmental conservation, democratization and respect for human rights.

　
The followings are our major concerns and some concrete proposals for solutions:

　

1. Transparency and Participation

　

When the MAI negotiations were launched in May 1995, the contents were not opened to the public. There has been some progresses following the initial informal meeting between MAI negotiators and NGO representatives last July, and we welcome the change in the process and the fact that MAI negotiators have agreed to hold official consultations with NGOs this time.

However, we believe that there is a need for continuing information disclosure on all the contents of the negotiations,

since the investment liberalization being promoted under the MAI is not simply a concern for governments and the business community. This liberalization will affect every sector of the society. Therefore, the process of the MAI negotiations must be widely shared, and the opinions of various sectors of society around the world must be reflected through governments and NGO representatives.

　 Furthermore, if the MAI envisages investment liberalization at the global level, the process must be global and must allow the participation of all interested government and citizens from countries outside the 29 members of OECD.

　 We understand that the MAI negotiations started and have been negotiated in a manner consistent with official procedural principles, as information has been disclosed and ratification is required in some countries. However, we cannot accept the legitimacy of the MAI unless the voices of those who will bear its effects are adequately heard and reflected in the outcome.

　

2. The Need for an International Anti-Monopoly and Taxation Framework

　

The MAI consists of tree pillars: the protection of investment and investors, the liberalization of investment, and dispute settlement mechanisms. It envisages the prohibition of discrimination against foreign investors by Contracting Parties (CP) through the establishment of "national treatment" and the "most favored nation" principle. The rationale behind the need for investment liberalization is that the expected foreign direct investment (FDI) increase will "contribute to the efficient utilization of economic resource, the creation of employment opportunities
and the improvement of living standards" (from the Preamble of the MAI text). Although it is partially true that FDI contributes to GDP growth in recipient countries, given that 51 out of the 100 largest economies in the world are transnational corporations, further investment liberalization will bring about a further concentration of wealth and economic power to the transnationals. Thus, we fear that the MAI will promote the creationof monopolies on a global scale, threatening the jurisdiction of democratically elected national governments.

　
While the MAI prohibits monopolies at the national level, as a means to give better access to foreign investors, it fails to address the issue of monopolies at the international level. Even under free market principles, it is clear that any liberalization must be accompanied by rules to control and restrict the emergence of global monopolies.

　 Governments must, in principle, play a role in regulating speculative financial movements in order to secure stability in their financial markets. The recent financial crises in Thailand, Philippines and other Southeast
Asian markets have graphically demonstrated that national governments and international financial institutions are not playing this role adequately. Therefore, the MAI should be equipped with rules to control and regulate short-term and/or speculative financial transactions particularly in portfolio and foreign currency exchange markets.

　 In other words, MAI negotiators must, during the negotiations, consider and establish frameworks to assure fair taxation and prohibit monopolies by corporations at the global level, through, for instance, the Tobin tax and other international tax regimes to address tax evasion and avoidance, and international anti-monopoly or anti-trust rules. We believe that investment liberalization ought not be discussed and promoted unless there is an assurance of fair taxation and anti-monopoly rules.

　

3. The Importance of Performance Requirement and Obligations of Investors

　

The MAI significantly expands the rights of investors, since it not only requires recipient governments to compensate investors at the time of expropriation (Protection of Investment/Investors), but also prohibits governments from imposing any performance requirement on investment / investors (Investment Liberalization). However, it fails to impose any social responsibility and obligations onto the investors. The only description in the text which deals with these issues is the prohibition against the lowering of environmental and labor standards, and this is
not addressed toward investors but toward governments.

　 As stated above, FDI has negative as well as positive effects on the recipient countries. Some analyses have pointed out that national policies to control investment, such as policies for the balancing of foreign exchange, import / export restrictions, local content policies which aim to control the balance of payments (BOP), and policies which require foreign investors to list their assets, are indispensable in ensuring that the investment will play a positive role in national economic and social development. In the absence of such policies, FDI can create a financial outflow which in the long run can far exceed the initial inflow, and can ultimately invite a BOP deficit problem.

　 Investment liberalization which removes necessary regulations will only lead to the increasing unemployment and widening economic gaps that are already being seen in OECD countries, and will fail to sustain and promote
adequate environmental and labor regulations and policies. Furthermore, it will bring about social and environmental problems such as the over-exploitation of natural resources, environmental degradation, and the exploitation of workers.

　 In order to ensure that investments serve to improve living standards, increase employment opportunities, and are environmentally sound, governments must be able to independently implement policies on economic
development, environmental conservation, human rights and democratization.

　 Therefore, the MAI must not restrict the policy options of governments by prohibiting, performance requirement policies or similar measures. Instead, it ought to adopt the "OECD Guidelines for Multinational Enterprises" which

have been proposed as an annex, as a legally binding instrument regulating the activities of transnational corporations, and it ought also to include provisions specifying the social responsibilities and obligations of investors in terms of improving employment opportunities, social welfare, and environmental quality.

　 With respect to the relationship of the MAI with other international rules and declarations, the MAI should clearly recognize and specify within its text the importance of making its rules consistent with other internationally agreed rules and declarations on environmental protection as well as labor and human rights.

　

4. Dispute Settlement

　

Under the proposed MAI, investors will be able to issue complaints against recipient countries. More specifically, the MAI will be equipped with a dispute settlement system which enable investors to directly sue recipient country government for violations of the non-discriminatory principle.This is an unprecedented concept in international law, and thus needs to be widely shared and discussed before being introduced.

　 Particular asymmetry can be seen in the fact that while investors will be able to sue recipient countries, neither the national and local governments, nor citizens of the recipient countries, who will bear the negative effects of the investment, will be able to sue foreign investors. This system ignores the fact that foreign investment can have negative impacts, and that it allows corporations the authority to reverse policy and regulatory decisions enacted by democratically-elected national parliaments. It could thus overturn the very foundation of democracy.

　 Therefore, we absolutely oppose this type of dispute settlement mechanism.

Organizations:　

APEC Monitor NGO Network/ A Seed Japan / Ayus / Citizen's Diplomatic Centre for the Rights / Consumers Union of Japan / Earth Tree / Green Energy Network (G-NET) / Group KIKI / Hand of Peace / Institute for Alternative Community Development (IACOD) / Japan International Volunteer Center (JVC) / Japan NGO Network on Indonesia (JANNI) / Japan Tropical Forest Action Network (JATAN) / Kobe Student Youth Center / Natural Energy Promoting People's Forum / Pacific Asia Resource Center (PARC) / People's Action Network To Monitor Japanese TNC's / People's Forum 2001, Japan (PF2001) / POWER / The Society Against the Nagara River Estvary Dam Construction / Women's Space ON

　

Individuals:

ADACHI Jiro, Japan Center for a Sustainable Environment and Society (JACSES) / AKI Atsuko / AKIMOTO Tetsu, Institute for Alternative Community Development (IACOD) / AOYAGI Shinobu / ASUKA Jyusen, Associate Professor, Tohoku University / FURUSAWA Koyu, Professor, Kokugakuin University / HATA Naoyuki, KIKO Forum '97 / HIRAMOTO Minoru, Lecturer, Koei Human Walfare School / HONNDA Masakazu Michael, Journalist / IMAI Seiji, Lecturer, Shokei Women's Junior College / IMAMURA Kazuhiko, Secretary General, The Fukuoka NGO Forum on the Asian Development Bank / INOUE Yuichi, Associate Professor, Faculty of Law, Nara Sangyo University / IRIE Yukio, Associate Professor, Osaka University
/ ISOBE Koichi / ITO Michio, Secretary General, Japanese NGO Center for International Cooperation (JANIC) / KAKUTA Naoko, Executive Director, International Education Resource / Information Center (ERIC) / KAWAKAMI Toyoyuki, APEC Monitor NGO Network / KAWASHIMA Kaoru / KITAZAWA Yoko, Co-chair, Pacifc Asia Resource Center (PARC) / KUMAOKA Michiya, President, Japan International Volunteer Center (JVC) / MACHIDA Tomoo, MPhil student, Institute of Development Studies, UK / MATSUBARA Akira, Tokyo East Timor Association / MATSUMOTO Ikuko/ MATSUMOTO Jun / MATSUURA Goro / MORISHIMA Akio, Professor, Faculty of Law, Sophia University / MURAI Yoshinori, Professor, Sophia University / MURATA Minoru / NAKAJIMA Hideaki / NAKATSU Miwa / NIIKAWA Shihoko / NOMURA Osami, Peace Suitors at Tokyo / OGUMA Hiroya/ OGUMA Takehiko / OHTA Masakuni, Gendai Kikakushitu / OKA Naoko, AVC / ONODERA Yuri, Friends of the Earth Japan / OTAKE Yoshiaki / SAITOH Aya / SAITO Makoto, Japan Rainforest Protection Lawyer's League (JARPL) / SAITO Tomoyo, Japan Center for a Sustainable Environment and Society (JACSES) / SATO Keiko, Japan Center for a Sustainable Environment and Society (JACSES) / SHIMIZU Ryoko, Policy Organization for Citizen's Sector / SHIMIZU Yasuko, Institute for Alternative Community Development (IACOD) / SUMI Masanobu, Kansai NGO Council / SUMINO Setsuko, International Art Society, Tokyo / SUTO Nobuhiko, Inter Band / TAKAGI Rie / TANABE Kumi / TANAKA Masanao, Humankind Survival Research Group / TANAKA Masaru, Co-Chair, People's Forum 2001, Japan / TANAKA Takenori / TANAKA Tetsuji, Secretary General, Edogawa Grassroots Network on Climate Change / Dr. TASAKA Koa, Professor, Dept. of Chemistry, International Christian University (ICU) / TERANISHI Shunichi, Professor, Faculty of Economics, Hitotsubashi University / TERUOKA Shuzo, Professor, Post-Graduate Institute of University of East Asia / TOMINO Kiichiro, Professor, Shimane University / TSUCHIBUCHI Akira, Eco-Recyle Network, Saitama / TSUYUKI Yoko / URAMOTO Mihoko, Mekong Watch Network, Japan / YABE Hiroshi, Society of Study on Entropy / YAMAMOTO Chie / YAMAMOTO Hiroshi, Cooperative Research Institute / YAMANAKA Etsuko, People to People Aid / YAMASHITA Masaichi, Executive Director, The Asian Health Institute Foundation YANAGIDA Makoto, No Nukes Plaza Tampopo Sha / YASUKAWA Noriko, RICODA(Ryukoku Inter-civic Organization for Development Agenda) / YONEMOTO Shohei, Board Member, People's Forum 2001, Japan / YUKAWA Reiko