Global Policy Forum

Militarism and MAI


By Stephen Staples

Earth Island Journal
Winter/Spring 1999

The end of the Cold War changed the world: international diplomacy has been replaced with international marketing; nuclear weapons-free zones with free-trade zones; Third World debt with IMF bail-outs; peace delegations with trade missions, and disarmament summits with the latest free-trade deals. Even the United Nations has been superseded in influence by the World Trade Organization. The end of the arms race did not deliver the fabled peace dividend. Instead, it brought us the free market system: dozens of wars, the globalization of the arms trade, the reckless expansion of NATO and the increasing likelihood of nuclear war. As the beginning of the next century approaches, the world's richest countries, in league with the transnational corporations, are writing what the World Trade Organization's Director General has called "the constitution of a single global economy." This new social contract between trans-national corporations and the nation-state is called the Multilateral Agreement on Investment (MAI).

The purpose of the MAI is to remove virtually all barriers to the free flow of capital between "Investors" (i.e. corporations) and "Contracting Parties" (i.e. signatory countries). The effect of this agreement will be to threaten all public areas of the economy including social programs. At the same time, it will grant special protection for military spending and put new restrictions on the ability of governments to control the arms trade. The MAI will protect the interests of transnational corporations and the military, fusing them into the military-corporate complex - the modem successor to the military-industrial complex.

Guns Saved; Butter Lost

The MAI treaty is being negotiated by the Organization for Economic Cooperation and Development (OECD), made up of the world's 29 richest industrialized countries and all 16 members of NATO. The MAI negotiators are in complete agreement on one issue: Military spending and arms production must continue to enjoy unfettered government support. Actions or programs implemented in the interest of national security are explicitly excluded from the liberalizing demands of the MAI. Specifically, this includes government spending for the military, weapons development and production, and direct support for weapons corporations. MAI states:

Nothing in this agreement shall be construed: a. to prevent any Contracting Party from taking any action it considers necessary for the protection of its essential security interests: (i) taken in time of war, or armed conflict, or other emergency in international relations; (ii) relating to the implementation of national policies or international agreements respecting the non-proliferation of weapons of mass destruction; (iii) relating to the production of arms and ammunition.


Military spending is as much a government program as health care, so it would seem that opponents of "big government" would be unwilling to accord military spending special protection within the MAI. The contradiction can be better understood when one views military spending as direct support to weapons corporations. The neoliberal ideology that supports the MAI and reduced government spending on social programs does not object to public funding of corporations. Under the MAI, movements would lose much of their power to intervene in the economy to promote social goals.

Without the MAI, the Canadian government, for example, could decide to construct a multimillion-dollar fleet of high-speed ferries to promote economic development in a depressed area of the country. The contract could be awarded based on several performance requirements, including that the shipbuilder be Canadian-owned, create a certain minimum number of jobs using local labor, provide skills training for workers, subcontract to local suppliers, meet certain environmental standards, etc.

If Canada signed the MAI, such a project would be open to challenge by foreign states and investors. First, the MAI forbids governments from discriminating between domestic and foreign investors; thus the contract could not be limited to Canadian shipbuilders. Second, the MAI prohibits governments from placing performance requirements on investors, which could ban the job creation and training requirements.

The debilitating power of the MAI on national governments' ability to intervene in the economy will leave policymakers with few options to achieve social goals for their citizens. If the only way governments can create local jobs without fear of legal challenges is under the pretext of national security, the result could be that, in the future, social goals such as job creation, regional development, post-secondary education research and development, and economic stimulation will be pursued exclusively through military procurement and weapons-research funding.

If Canada built warships instead of ferries the government could avoid all of these court challenges because the MAI exempts programs related to the production of arms. Instead of a fleet of high-speed ferries that would continue to provide economic benefits, the country would be stuck with a fleet of warships whose subsequent economic contribution would be barely diminished if they were properly sailed out to sea and sunk.

While military contracts provide some short-term benefits to workers, the long-term result will be a more militarized economy that becomes dependent on domestic military procurement and increased military exports. It will mean a less productive economy and a paradoxical situation where military spending is used to achieve socially desirable goals.

Public Funds for Weapons

As the MAI limits public funding for nonmilitary research and development, R&D funding for economically and socially productive research will be funneled into military and weapons development. The trend has already begun. In 1996/97, the Canadian Department of National Defense's (DND) contracts for science and technology increased by $12 million to $70.9 million. By comparison, R&D spending by Environment Canada was cut from $12.4 million to $4.9 million, and Health Canada's from $21.5 million to $6.4 million. The MAI will accelerate this trend.

Like the US Pentagon, the DND's high degree of influence is largely a result of the agency's vast network of contacts within universities, research labs, the media, community associations and the corporations that profit from billions of dollars in military contracts. Together, this paramilitary civil society and the fusion of the interests of the military and corporations can be understood as the military-corporate complex.

The Military-Corporate Complex

The influence of the military-corporate complex must not be underestimated. Canada produces more than $3 billion a year in military goods, placing it among the top ten producers of arms and military products in the world. More than 80 percent of this $3 billion industry is produced by just 20 corporations, including General Motors, Pratt & Whitney, Bombardier, CAE Inc., SNC Lavalin Group and Bristol Aerospace.

Pratt & Whitney, a jet engine manufacturer that is a subsidiary of United Technologies Corporation of Hartford, Connecticut, has been one of the largest recipients of government funding. Pratt & Whitney received $869 million in government loans from 1980-1997. To date, only 11.4 percent of that amount has been repaid to the federal government.

Last August, Pratt & Whitney laid off 900 employees- about 10 percent of its workforce. Despite reporting an operating profit of $816 1 million for 1997, a $147 million interest-free | loan in 1997, and government approval to sell an undisclosed number of military helicopter engines to Indonesia in 1996, the corporation's chairman, David Caplan, blames the federal government for causing the layoffs.

Arms Exports

Since the end of the Cold War," Nobel Laureate lose Ramos-Horta has observed, "at least four million people have lost their lives in 30 conflicts around the world. No one can deny that the arms trade is the single most serious cause of so much destruction."

The MAl's protection of military spending and the production of arms will fuel the arms trade. The MAI would give weapons corporations protection from government interference in their arms dealings. The Canadian Department of Foreign Affairs currently requires permits for the export of arms to prevent weapons from being sold to countries at war or which violate human rights. If a future government attempted to stop an arms sale under the MAI, it could find itself required to compensate the weapons corporation for the value of the canceled contract.

Had the MAI existed in 1996 and Canada been a signatory, it could have been impossible for the federal government to prevent Bell Helicopter Textron from selling twelve Bell 212 helicopters to the Colombian armed forces - a deal worth $65 million. Canadian export guidelines specify that export permits should not be issued for countries at war or which violate human rights. This makes Colombia a prime candidate for denial. More than 10,000 people have died in its civil war and the government routinely uses torture and extra-judicial executions.

Under the MAI, Bell Helicopter Textron's parent, Bell Helicopter of Fort Worth, Texas, could have made a claim for compensation, saying that by preventing the arms deal, the government was expropriating Bell Helicopter's investment. Regardless of Canadian public opinion or the government's intentions to try to stop arms sales to war zones, Bell Helicopter could directly sue the Canadian government in domestic courts or before a special international tribunal. This investor-state suit would be conducted in secret and the ruling would be as binding as a ruling by the highest court in the land.

Sanctions were very effective in bringing about the end of apartheid in South Africa. The MAI, however, would effectively open any government to a host of legal challenges if it were to impose similar sanctions on companies doing business with countries such as Indonesia or Nigeria.

The Third World

Proponents of the MAI plan to adopt the agreement among the richest nations first, and then impose it on the rest of the world through the World Trade Organization (WTO). It is likely that the developed countries will encourage, cajole, and ultimately coerce Third World countries to join the MAI.

Third World investment is fraught with uncertainty and instability. In 1997, 37 armed conflicts raged in 32 countries. The most war-tom regions of the world are Asia and Africa, where one in four countries is involved in armed conflict. First World corporations are clearly concerned about the safety of their investments in regions where war can interfere with their economic productivity, or revolutions can result in the nationalization of their investments. To protect profits, the MAI includes several provisions to ensure that Third World governments take measures to prevent this interference.

The MAI requires signatory nations to guarantee all foreign investors "fair and equitable treatment and full and constant protection and security" including 'protection from strife" in times of war. Because MAI promises foreign corporations the same level of compensation that domestic corporations receive, this will likely lead to situations where governments - fearing lawsuits and having to pay damages to transnational corporations - will increase military spending to protect foreign investments in their countries. This will be at the expense of needed social programs. Little doubt remains that many governments will use the MAI to further suppress political dissent.

If a country does go to war and the government expropriates part or all of an investor's investment - or destroys the investment for reasons which were "not required by the necessity of the situation" - then the government must compensate the investor, ensuring that such restitution is "prompt, adequate, and effective." These provisions are essentially designed to protect investors from the messy and unprofitable characteristics of civil unrest and war.

Long-Term Effects of the MAI

Through this agreement, the industrialized countries are under the illusion that they are creating a world system to maximize corporate profits. Instead, they are creating a system that will result in tremendous instability and uncertainty.

The MAI reduces a nation's ability to meet the basic needs of its citizens and protect them from the inherently violent nature of free-market capitalism. This, combined with the MAl's protection of military production and uncontrolled arms proliferation, will fuel the insecurity of people whose environment is being ravaged and whose social fabric is being tom apart.

Martin Khor, Executive Director of the Malaysia-based Third World Network, has a sobering prediction. "The MAI will cost thousands of lives," he told a meeting in Ottawa in 1997, referring to the increased poverty, lowering of environmental, health and safety standards, and the lack of respect for human rights resulting from the MAI. "And getting rid of the MAI will cost thousands more," Khor added, raising the specter of civil unrest which could erupt because of these injustices.

Citizens need to act quickly to prevent their governments from signing this destructive agreement. Negotiations resumed last October at the OECD's headquarters in Paris and negotiators hope to complete the text in April 1999. Multilateral institutions need to acknowledge the causes of war and create international agreements that encourage the meeting of basic human needs, democracy and a respect for human rights.

What You Can Do

Contact your elected representatives and express your concerns about the MAl's hidden pro-military bias and its explicit threat to social, labor, environmental laws. Urge the US to reject the MAI at the critical negotiations in April.

Steven Staples is the BC Organizer for the Council of Canadians and the former Coordinator of End the Arms Race. Published courtesy of End the Arms Race, Suite 405, 825 Granville St., Vancouver, BC V6Z 1 K9, (604) 687-3223,fax -3277,

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FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.