Global Policy Forum

By Luke Eric Peterson *

Exactly when is a victory a "victory" in the campaign against unfettered economic globalization? As protesters gather next week in Montreal at a meeting of world trade ministers, they can be forgiven for feeling more than a vague sense of déjí  vu. Front and center on the World Trade Organization's agenda will be a proposal for a new Multilateral Agreement on Investment (or MAI).

An earlier incarnation of the MAI was aborted in 1998 thanks to concerted global protests. The MAI would have set out a series of rights and protections for global businesses operating beyond their borders, without imposing any corresponding social or environmental responsibilities. And Naomi Klein, in her influential book No Logo, hailed the defeat of the MAI as the first "major victory" of an emerging global movement.

But five years later, the MAI is back on the global agenda and is now being touted by some proponents as a potential boon for poor developing countries. More puzzling, it's not even clear that the MAI ever went away. When the MAI talks collapsed in 1998, Western governments simply went on to negotiate mini versions of the MAI on a bilateral basis. In many respects these treaties look just like the investment rules in the notorious Chapter 11 of NAFTA, which permit foreign firms to sue governments when regulations squeeze their bottom line. U.N. figures show that a staggering 450 of these bilateral investment treaties were quietly signed after the MAI was declared dead in 1998.

Viewed in hindsight, crafty governments seem to have mounted an end run around anti-MAI forces. Increasingly, this is how economic globalization works these days. When liberalization runs into stiff public opposition, proponents simply shift venues — switching from the Paris-based OECD to the Geneva-based WTO, as MAI advocates are now proposing, or from the spot-lit multilateral arena to quieter bilateral pathways. Major trading powers like Canada, the U.S., Japan and Europe now pursue economic agreements on several stages simultaneously. One effect has been to sap strength from multilateral efforts under the aegis of the World Trade Organization — which is part of the reason why the Doha round of trade negotiations is faltering.

While the WTO's ill health may sound like good news to activists gathering in Montreal — some of whom have vowed to "bring the organization to its knees" — they might want to think twice about their objective. In fact, they might want to consider a lesson from the first battle against an MAI: Even if you stop negotiations at one venue, the liberalization beat goes on — it simply switches channels.

A complete collapse of the WTO would simply occasion a wholesale shift to less visible bilateral byways, where hundreds of deals on trade, investment and intellectual property rights would proliferate. And typically these deals are even more lopsided in favor of the major trading powers that dominate one-on-one negotiations. Mind you, even if we should think twice before wishing the WTO out of existence, this is no argument for writing the organization a blank negotiating mandate, particularly on the topic of investment.

Claims made by our federal government that a global investment treaty would be to the benefit of the poorer developing countries — many of whom do yearn for foreign direct investment — are deeply disingenuous. One need only glance at the new MAI's suspiciously well-heeled group of boosters. Our government, along with Japan, Europe and a handful of global business lobbies, are some of its most vocal cheerleaders.

Meanwhile, most developing countries are either opposed to an MAI or remain highly suspicious. And with good reason. A recent World Bank report confirms what many of them already knew — the rafts of bilateral investment treaties already signed rarely translate into new flows of investment for the poorest nations. As things stand, the bulk of foreign investment into the developing world is concentrated in a tiny number of countries — large ones like China and Brazil, or those rich in natural resources — while bypassing dozens of the poorest countries. And a new set of WTO investment rules — binding on more than 140 countries — would do little to change this pattern of investment flows.

If the big trading powers were genuinely preoccupied with the needs of developing countries, they wouldn't be forcing them into time-consuming negotiations on a futile new MAI. Nor would they be pushing similarly flawed templates at the bilateral level.

The developing world craves new foreign investment; it represents a crucial source of capital for building its economies. But as the recent U.N. Human Development Report has made clear, many of the world's poorest nations first require massive assistance to finance basic public goods — such as clean water, hunger alleviation and disease eradication — before they will ever be candidates for serious private sector investment.

The only MAI that these countries really need is a Massive Aid Influx — serious new flows of public monies from the West to support basic public goods in the developing world. Only when these basic needs — as spelled out in the United Nations' Millennium Development Goals — are met, should we consider further international rules on foreign investment.

About the Author: Luke Eric Peterson is a Canadian writer and researcher on international affairs. He is based in Boston.

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