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,



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