Antoni's Wire Service

Date: Wed, 30 Jun 1999 16:50:55 -0300 (ADT)
From: Antoni Wysocki
To: Antoni's Wire Service
Subject: investment or no


In issue 10 of his 'Facts from the Fringe' series ("an irregular and irreverent serving of economic tidbits") Jim Stanford recounted his experience of being odd man out at a conference on free trade. In "The CEOs and I" Jim described his sense of the incongruousness of his presence at the recent McGill University symposium : apart from union economist Stanford, only lords of commerce were afforded the opportunity to air their views, and the audience was comprised of inveterate neoliberals.

I found myself thinking that I might be in for something of the same upon receiving an invitation from the Department of Foreign Affairs and International Trade (DFAIT) to participate in a colloquium on Canadian investment policy. An examination of the accompanying briefing paper only reinforced my misgivings as the material evinced a preoccupation with the promotion of investment to the exclusion of all other interests. When, in a supplementary telephone conversation, I was told that many of the invited participants were senior members of the Nova Scotian business community - and that my presence was desired to ensure that the discussion would not be flavorless - I concluded that I had been selected to provide some sport for the heavy hitters.

The enclosure sent with my invitation indicated that the Government of Canada was in the process of elaborating investment policies informed by the opinions of a broad cross-section of Canadians; these policies are to be propounded at the upcoming WTO (World Trade Organization) Ministerial in Seattle, and in future FTAA (Free Trade Area of the Americas) parleys. I have previously indicated my skepticism about the government's newfound interest in consulting the public about pending multilateral trade and investment negotiations but, in fairness, it is unclear what more Ottawa could have done, with the purest of intentions, to solicit citizens' input on these matters. One reflection of this unwonted transparency is the series of open hearings on the WTO and FTAA held by the Standing Committee on Foreign Affairs and International Trade, this past spring, in cities across Canada. This is in sharp contrast to the federal government's grudging decision, under intense pressure from public interest groups, to conduct a few days of public hearings - in Ottawa only - on the MAI (Multilateral Agreement on Investment).

Apparently though, the general call for submissions (including written depositions, to accomodate those unable to make a presentation viva voce at one of the public hearings) sent out earlier this year by DFAIT, was deemed insufficient; for the department has also organized a number of "focus groups," such as the one in which I participated last week. These colloquies, being closed, are inherently suspect. One might suggest that the intent of such sessions is to ensure that members of civil society - who, dismissing the public hearings as an exercise in crowd control, may have refrained from making depositions - do ultimately put forward their ideas. Charitably, this could be understood as an effort to elicit points of view other than those of business people; less kindly, it might be perceived as an attempt to co-opt potential critics.

Sensible of the pitfalls in posse I nonetheless found the prospect of having a go at leading executives too tempting to resist. Moreover, incorrigibly rasorial as I am, I could not lightly turn down the associated offer of a free meal...Less facetiously, I reasoned that my attendance offered scant propaganda value - representing, as I was, a defunct body (the NS MAI-Alert) - and that even if there was little hope that my views would materially shape Canadian policy, perhaps my comments might prove stimulating to one or other of my interlocutors at the meeting.

Wednesday, June 23 at 08h30 I reported to the Canada/Nova Scotia Trade Centre, which occupies the 5th floor of Halifax's grandiloquently titled and poshly appointed World Trade and Convention Centre. My initial impressions seemed to justify my suspicions : if Jim Stanford, in his one good suit, had felt sartorially challenged amidst the Armani/Gucci set at McGill, I - bald, bearded, and deshabille as usual - must have cut a still more curious figure beside my well-coiffed and nattily attired confreres at the Trade Centre.

For all that, when introductions were made the party turned out to be somewhat less corporate than vaticination had indicated. My fellow participants were revealed to be :

Our identities having been established, one of the DFAIT staff capitulated, swiftly and unceremoniously, the program for the day. Briefly, a number of questions about investment issues had been drafted by DFAIT; taken seriatim, these would lend structure to our discussion. The DFAIT people were to act principally as rapporteurs, leaving the task of deliberation to the "guests."

It took very little time for an interesting colloquy to develop, a striking feature of which was that there was no discernible correspondence between participants' sectoral affiliations and the way they lined up on a given issue. Thus the inquiry, "Should the federal government work to break down barriers to Canadian investment abroad, and to reduce domestic impediments to foreign direct investment (FDI)?" was answered substantially in the negative by businessman Gordon; but got the thumbs up from John, a trade union activist for 20 years. Similarly, Gordon was not persuaded that the Canadian government should accord the same standard of treatment to investors irrespective of nationality; but John was emphatic in his support for such a policy. Meanwhile, Greg and Bryan - both civil servants of some description - opined that government ought to discriminate between domestic and foreign the benefit of the latter!

For the most part, John, Greg and Darryl wanted to see Canada vigorously pursue enhanced investment protocols. John's interest in such an approach was in large part predicated on the belief that this would increase the public sector's ability to regulate private enterprise (the national origin of which he deems immaterial.) Greg and Darryl, though, advocated this course for the more orthodox reason that razing of obstructions to FDI and codification of multilateral investment rules would, they thought, encourage the efficient use of capital.

These divergent motivations led to John and Darryl taking different sides on the question of whether Canada ought to press for an investor-state dispute settlement mechanism (a la Chapter 11 of the North American Free Trade Agreement) in other fora. John, I was surprised to hear, supports the establishment of such tribunals; Darryl - likewise, contrary to my expectations - expressed opposition.

John argued for binding arbitration outside the ambit of the regular court system on the ground that commercial pleadings, being typically of a technical nature, place an unnecssary strain on our already overburdened judiciary. He added that there was no reason to fear that citizens would be injured by the decisions of dispute panels so long as governments passed equitable and transparent laws, rather than using legislation to advance the interests of domestic corporations controlled by friends of the Cabinet. Darryl, for his part, subscribes to the classical view that the sine qua non of capitalism is risk-taking, and that to provide capitalists with a dispute settlement mechanism was to invite them to become undiscriminating in their investments, to the detriment of the economy (a concept commonly termed "moral hazard").

Moira, Gordon and I were agreed that to bind elected officials to the decisions of secret and unaccountable panels offends democracy; accordingly, we joined Darryl in decrying Chapter 11 succedanea in any and all fora. Bryan (who had not previously heard of investor-state dispute settlement mechanisms) reserved judgement, and Greg was equivocal (he seemed to favor such measures in principle but regarded them as politically unfeasible at the present time.)

While on the topic of the politically possible, Moira wondered if it wasn't idle to discuss investment at all, since she understood that the Clinton administration had not advanced it as an agendum for the WTO Ministerial in Seattle. Reasonably enough, the DFAIT staff replied that other important entities, such as the European Union and Japan, were likely to raise the subject in Seattle; and that Canada had sufficient clout at the WTO that it could make proposals on its own account. Additionally, I noted that the US has a history of byzantine conduct in negotiations, so it would be inadvisable to place much store in communiques coming out of Washington.

However, though I defended the appropriateness of our deliberations at the Trade Centre, I voiced my decided opposition to Canada dealing with investment at the WTO Ministerial. I asserted that it was unjust for developed countries to pursue the issue when the majority of Third World polities had clearly indicated that they did not want investment to be dealt with at the WTO. I mentioned supplementarily that an inter-governmental expert group meeting (hosted in May/97 by UNCTAD, the United Nations Conference on Trade and Development), had concluded that investment treaties were only a minor determinant of FDI flows; access to markets and socio-political conditions were cited as the most significant factors.

Moira and I having registered our demurrals, the session proceeded on the plausible assumption that Ottawa would be apt to disregard the desiderata of developing countries, hence might make investment policy a priority at the WTO all the same. In this event, it was then asked, would multilateral negotiations with a view to producing a treaty be the best way to move forward, or would some other approach be more advisable?

John, Greg, Gordon and Darryl were all well-disposed towards some form of international concordat, though not for the same reasons. Greg and Darryl accepted the standard neoliberal line that government oversight of business has inherently distortionary effects; thus any instrument that restricts political intervention in the economy is good. John, while perhaps also viewing an investment treaty as a potential stimulus to industry, was more interested in the possibility it afforded of establishing a set of ethical guidelines that would be binding on all parties to the compact.

Moira evaluated John's suggestion sympathetically, but at the same time pointed out that the WTO does not inspire confidence as a guarantor of sterling labor and environmental standards. She posited UNCTAD as a superior choice on the basis of its record as an agency concerned with development issues; and a natural one given UNCTAD's longstanding commitment to designing a multilateral framework on investment (MFI). In keeping with UNCTAD's MFI concept, Moira further proposed that negotiations could be expanded to include such measures as the creation of a levy on international financial transactions (a "Tobin tax").

Gordon, who did not seem terribly keen on the idea of a global investment treaty, here observed that no new negotiations would be required to draft suitable environmental codes : annexing existing multilateral environmental agreements (e.g. the Kyoto Accord) would suffice. John concurred and added that the International Labour Organization has drawn up a complementary charter on workers' rights.

Greg was warm to the idea of multilateral negotiations on investment but chary of embarking on such a project given its unpopularity with developing countries and many non-governmental organizations. In consequence, he could see merit in the formula proposed by Moira and the others, provided that governments simultaneously undertook at least some investor-friendly reforms. I, however, spoke against the proposition.

I cautioned first of all that selecting an acceptable forum was likely to be a more intractable problem than was apparently supposed. If it was consentaneous that the WTO would not do because of its regressive operating creed and marginalization of the developing world, UNCTAD could hardly be thought better. For one, the very fact that historically it had been responsive to Third World concerns means that it is generally vilipended by the rich nations. For another, UNCTAD has increasingly acceded to the corporate agenda - including by making overt alliances with transnational firms through its "Partners for Development" program - and this has led to a deterioration of the agency's traditional support for developing countries; a trend likely to continue. I argued further that, under the current world order, no genuinely democratic college of states could exist because :

Following from the above considerations, I labelled as misguided or worse attempts to tame globalisation through the erection of worldwide labor and environmental standards. The rich countries, acting through multilateral agencies and transnational corporations, have captured the Third World in iron pincers of indebtedness, and as a result the developing countries have had to completely re-orient their societies to maximize exports, the source of the valuta necessary for the remittance of external debt payments.

The citizens of these countries have been doubly emiserated : first, through the "dollarization" of costs (i.e. the raising of prices - including those of basic necessities - to world levels, while remuneration remains static); second, by the slashing of social services by governments to free up monies for debt service. Likewise, this process has exacted a terrible toll on ecosystems : as e.g., when forests are felled to create rangeland for beef cattle, which are slaughtered and shipped to North America. At the same time, the US in particular has long sponsored brutal, right-wing military and paramilitary elements abroad, so as to keep populist leaders from actually trying to ameliorate conditions in these countries.

When it is the wealthy states and the international institutions they dominate - the WTO, the International Monetary Fund, and so on - that have brought the Third World to such a pass, surely, I said, we have no right to load developing countries with additional obligations. Before we indict poor nations for unethical labor practices or lax environmental regulation we should make sure that we have left them better alternatives. As a first move and an earnest of good will the Jubilee 2000 proposal to write off Third World debt could be implemented.

In the end, the Trade Centre meeting was a far cry from what I had anticipated. I was pleasantly surprised by the absence of doctrinaire neoliberalism and the general willingness to constructively engage with other participants. I am not at all convinced that the Canadian government will actually take any of our advice, but I feel the exchange of ideas was valuable nonetheless (and certainly stimulating.) Moreover, while Trade Minister Sergio Marchi will likely brush aside the musings of our group, it seemed to me that the DFAIT staff did take some of what we had to say to heart - and since one of their number will be amongst Canada's negotiating team in Seattle, perhaps there is a small chance that our deliberations may yet have some effect. If not...oh well, the sandwiches were tasty.