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Foreign Policy
Fall 1998
The MAI and the Clash of Globalizations *
By Stephen J. Kobrin **
The Multilateral Agreement on Investment (MAI) would not appear to be the stuff of which revolutions are made. For three years, the 29 wealthy nations comprising the Organization for Economic Cooperation and Development have been negotiating the terms of this treaty, in the modest hope that it would facilitate international investment by ensuring that host governments treat foreign and domestic firms similarly. Yet, the MAI has sparked a global firestorm of opposition from a coalition of 600 organizations in nearly 70 countries that includes Amnesty International, AFL–CIO, Sierra Club, the Malaysia-based Third World Network, United Steelworkers of America, and Western Governors’ Association.
In large part due to a global grassroots campaign that has made use of World Wide Web sites, newspaper ads, bumper stickers, letter-writing campaigns, and even street protests, the MAI negotiations screeched to a halt in late April. Negotiators called a time-out to allow for consultation among the parties and “with interested parts of their societies” including nongovernmental organizations (NGOs), business, and labor.
On one level, the MAI story is a cautionary tale about the impact of an electronically networked global civil society on international negotiations: The days of negotiating treaties “behind closed doors” are gone. The virulent opposition to the MAI, however, is concerned with much more than the provisions of one treaty. It reflects a widespread and deep-seated anxiety over the pace and scope of globalization.
Much of the public concern about the MAI focuses on five provisions: the treatment of foreign corporations as national firms; the extension of benefits given to foreign investors from any country to all (MFN); the ban on performance requirements; the expropriation clause; and the right of investors to sue governments. The expropriation clause, for example, bars both direct nationalization of assets and “any other measure or measures having equivalent effect.…”
The clause has been widely interpreted as barring any law or regulation that impedes, or will impede, an investor’s right to make a profit. Thus, opponents argue that environmental, health, or workers’ rights legislation that could threaten profits would be interpreted as “expropriation” and prohibited by the treaty. The Sierra Club, for instance, argues that the MAI might prohibit bans on exports of raw (unprocessed) logs from some national forests.
Another widespread concern is that the MFN clause would prohibit boycotts against countries that violate human rights or the environment. The assumption, which is hard to square with 50 years of experience with the General Agreement on Tariffs and Trade, known as GATT, is that since MFN requires treating all investing countries alike, it would bar “discrimination” against any of them. In other words, if the MAI had been in force, apartheid would still be with us, Nelson Mandela would still be in jail; MAI will make it impossible to single out future South Africas for sanction.
Many of the opponents’ arguments stretch concepts such as national treatment and MFN to the breaking point; they begin with worst-case scenarios and argue from there. Anti–MAI activists claim that the essence of the democratic process will be violated and any action that interferes with the profits of foreign investors will be taboo.
These fears have been given form on the World Wide Web, a medium where the most extreme statements attract attention, and where an argument scrolling down a computer screen may garner authority it may not deserve. Whatever strikes a chord gets picked up and repeated.
There are important lessons to be learned from MAI by both sides–by national governments and international organizations concerned with economic governance in a global age and by organizations and activists concerned with globalization’s impact on individuals, communities, and the environment.
For starters, the opponents of the MAI and more broadly speaking, of globalization, cannot stem the tide by yelling at the surf, by wishing for a counterfactual world where globalization does not exist. They cannot pick and choose, selecting the electronic global village–the emergence of global civil society–as a good thing and increased economic integration or a loss of local control as a bad thing to be unambiguously opposed.
But proponents of economic globalization must learn that globalization cannot be a top-down or élite-driven project. Policymakers cannot assume that all reasonable people share their assumptions and values. Not everyone believes that a constitution for a new global economy or a new international economic order is desirable. Not everyone believes that an open international economy, with free flows of trade, capital, and direct investment promote the general welfare.
There will be a continuous public referendum of sorts on these issues. Much more thought has to be given to how debates and agreements will be interpreted by nonparticipants.
But will the process remain adversarial or will it become more collaborative? The two extremes are not viable. It will be increasingly difficult to conduct international negotiations in private, much less in secret, or to impose=globalization as an élite-driven project. Yet conducting an “electronic” public referendum on every issue simply will not work. In a global economy, all politics cannot be local. A middle ground must emerge that allows for both broader public involvement and some semblance of efficient and effective global governance. An electronically integrated global civil society and a global economy are two sides of the same coin.
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References
Manuel Castells’ three-volume work, The Information Age: Economy, Society and Culture (Oxford: Blackwell Publishers); the last volume, End of Millennium (1998), is particularly relevant.
Jessica Mathews’ “Power Shift” (Foreign Affairs, January/February 1997)
David Rothkopf’s “Cyberpolitik: The Changing Nature of Power In the Information Age” (Journal of International Affairs, Spring 1998)
Endnotes
*: The abstract is adapted from Professor Kobrin’s article, originally published in the Fall 1998 issue of FOREIGN POLICY. All rights reserved. Back.
**: Stephen J. Kobrin is the director of the Lauder Institute of Management and International Studies and the William Wurster professor of multinational management at the Wharton School. John Muir MacPherson helped with the research for this article. Back.