From: Bob Olsen <bobolsen@arcos.org>
Newsgroups: misc.activism.progressive
Subject: MAI Alternatives
Followup-To: alt.activism.d
Date: 13 Jan 1998 01:15:12 GMT
Originator: rich@pencil.math.missouri.edu
From: lerner@watserv1.uwaterloo.ca (S. Lerner)
Subject: FW/fw-l Proposed alternative to the MAI from Ward Morehouse - for
comment
THE OTHER ECONOMIC SUMMIT
777 United Nations Plaza, Suite 3C
New York, New York 10017
Tel. (212) 972-9877 - Fax (212) 972-9878
e-mail: cipany@igc.apc.org
January 7, 1998
(Dictated December 27, 1997)
TO: TOES Listserve
FROM: Ward Morehouse
When I was in London in mid-December on my way back from India, I
spent a day with Colin Hines (Co-Author of, among other works, The
New Protectionism) trying to formulate alternatives to the
Multilateral Agreement on Investment (MAI).
Enclosed is the result of that effort. Colin and I see it as the
beginning of a process of debate and exchange, certainly not as
anything remotely like a "finished product". Hence, critical
feedback is particularly welcome.
WM/td
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Alternatives To The MAI:
First Thoughts From Ward Morehouse & Colin Hines
Background
The anti-MAI campaigns have published excellent papers on why the
MAI should be opposed, but less attention has been paid to what
alternative set of rules, for what end goal should replace the MAI
as the subject for international and intergovernmental debate. We
have therefore tried to pull together what we have found, plus
some ideas of our own, to attempt to start a debate about what
alternative we might as a movement choose to consider. Once we are
within sight of beating the MAI, then we will almost certainly be
asked for our ideas on this matter.
Finally, if we have missed doubtless the one thorough document
which does just this, then our apologies and please send it or
e-mail. it to us. Otherwise please send any comments or additions
you might have which we will incorporate and circulate. We hope
you find this useful:
* Ward Morehouse, Program on Corporations, Law and Democracy,
Suite 3C, 777 United Nations Plaza, New York, New York 10017
tel (212) 972 9877
fax (212) 972 9878
e-mail cipany@igc.apc.org
* Colin Hines
11 Park House Gardens
East Twickenham
Middlesex, TW1 2DF.
UK.
tel 44181 892 8672
fax 44181 892 5051
e-mail hines@dial.pipex.com
Overarching International Concept: The Alternative Investment Code
(Suggestions For Sexier Title Welcome!)
The intention of such a code is NOT to ensure the unimpeded
international flow of capital and investment, but to have as its
basic aim the regrounding of capital locally to fund the
diversification of local, sustainable economies which have at
their core the right to livelihood. The right to livelihood is a
key human rights goal in this alternative investment code. Other
rights such as private property rights are contingent on
fulfilment of this most basic human right.
Tony Clarke and Maude Barlow in their groundbreaking book MAI and
the Threat to Canadian Sovereignty pointed out that: ...the UN
Charter of Economic Rights and Duties of States provided quite a
different framework for establishing a set of global investment
rules. It was based on the assumption that nation-states acting on
behalf of all their citizens and the public at large, had the
political sovereignty to regulate foreign investment. The Charter
granted member nations the authority to supervise the operations
of transnational corporations in their territories by establishing
performance requirements.
These performance requirements were to be based on the national
development needs of the people of each country. While nation
states were also granted the powers to nationalize, expropriate or
transfer ownership of foreign property, the charter called for the
payment of fair compensation for expropriation.
Although changes in the global economy over the past twenty years
or so would require that modifications be made, the UN Charter on
the Economic Rights and Duties of States contains many of the
elements for modern, alternative approach to global investment
rules.
Bearing this in mind a fundamental rethink of the MAI could result
in an agreement along the lines of this:
Alternative Investment Code; Key Provisions
Purpose : The Alternative Investment Code (AIC) seeks to
strengthen democratic control of capital and stimulate investments
that benefit local communities.
National Treatment : Investments that increase local employment
with decent wages, enhance protection of the environment and
otherwise improve the quality of life in communities and regions
within states which are parties to the AIC are encouraged. States
are urged to give favourable treatment to domestic investors who
further these goals and are prohibited from treating foreign
investors as favourably as domestic investors.
Most Favoured Nation Status : Provided it is not at the expense of
domestic investors, states shall give preferential treatment to
investors from other states which respect human rights, treat
workers fairly, and protect the environment.
Performance Requirements : States may impose requirements on
investors which further the goals of this code such as the
following:
a. to achieve a given level or percentage of domestic content,
whilst at the same times ensuring that monopolies do not
develop;
b. to give preference to goods produced locally;
c. to stipulate a minimum level of local equity participation;
d. to hire a given level of local personnel and respect labour
and environmental standards;
e. to protect enterprises which serve community needs from
unfair foreign competition;
Standstill And Rollback : No state party to the AIC can pass laws
or adopt regulations that diminish local control of capital or
that divert investors from giving priority to meeting local needs.
Existing laws and regulations that give preferential treatment to
foreign investors or encourage absentee ownership of
community-based enterprises must be rolled back over the next
decade.
Dispute Resolution : Citizen groups and community institutions are
given standing to sue investors for violations of this investment
code. All judicial and quasi-judicial procedures such as
arbitration shall be fully transparent and open to public
observation.
Investment Protection : Workers and communities play a vital role
in the creation of corporate assets, and that role must be
recognised and protected. Thus, expropriation of such assets to
serve vital community needs is permitted and must take into
account the interest of workers and communities in those assets.
Similarly, restrictions may be placed on excessive repatriation of
profits by foreign investors, and capital may not be transferred
without indemnification of worker and community interest in such
capital. Central to this new set of controls on investments will
be the establishment of policies for the effective community and
national control of capital.
Controlling Capital-Hands On Rather Than Hands Off
What is required is the investment of the majority of funds in the
locality where they are generated and/or needed, i.e. an 'invest
here to prosper here' policy. Democratic control over capital must
be seen as the key to providing the money for governments and
communities to improve environmental and social conditions and job
opportunities.
The fear is that any one country, on its own, would immediately be
punished by the markets for even considering such an approach.
However, a regional grouping of states such as in the European
Union or North America would be a powerful, secure and lucrative
enough market to ensure that those that control money flows would
not dare exit from the safety of such a bloc.
These policies must also incorporate an internationalist approach
to make certain that they do not merely benefit the rich countries
at the expense of the poor. Tax penalties will exist for foreign
investment which does not directly help the Third World or Eastern
Europe to protect and rediversify their own sustainable local
economies. Aid and trade rules must be changed to ensure a similar
outcome and the transfer of sustainable technologies must become
the centre piece of new aid regimes.
What is required on an economic bloc-wide scale is a check on the
destructive power of speculators through the introduction of a
Tobin Tax which taxes domestic and global foreign exchange
speculation. A purchase tax on stocks, bonds, derivatives etc.
would be introduced. The present easy credit that allows
speculators to multiply the size of their bets way beyond the cash
required to cover them, should be replaced by an insistence that
those buying must put up 100% of the purchase price. Governments
also need to reassert control over fiscal policies (i.e. tax and
public expenditure) by re-regulating finance and banking and
reintroducing exchange controls. Central banks should lower
interest rates to achieve a new end goal of generating large
numbers of new jobs by investing locally.
Once the threat of capital flight has been substantially lessened
the taxation system can be changed progressively to serve the
needs of the community in general. Higher taxation of capital
gains, green taxes, progressive taxes on income and lower taxes on
labour all have a place in this transformation. Strict and
transparent accounting rules would enable the phasing out of
'corporate welfare' for the undeserving rich.. Payback periods
need to be lengthened using penal short-term capital gains tax for
shareholders who take early profits, but tapering to near zero for
longer-term shareholders. At the end of perhaps 20 years however
the shareholder interest would revert to the workers and
communities which have played a critical role in generating
company profits. Such regulation of investment to impose some
obligations towards affected communities is key.
Also vital is a bloc-wide Beat a Cheat campaign cracking down on
corporate tax evasion. This would require public disclosure of
corporate finances, especially global taxes paid or avoided and
closing national and global tax loopholes. It would also penalise
and eventually eliminate tax havens. Intra-corporate financial
transfers, at present used to avoid paying national taxes (e.g.
transfer pricing), would also be monitored and punitively taxed.
After due warning to allow diversification of the economies
concerned, offshore banking centres should be closed down by
prohibiting domestic banking systems from honouring the transfers
of offshore capital. This would prevent capital evading banking
and securities laws and national taxes.
To keep capital local the influence of local banks on central bank
policies must be strengthened to reinforce the significance of the
local banking structure. This would encourage the rebuilding of
local economies via smaller locally based banks, credit unions,
LETS schemes etc. Insurance, pension, building society and
endowment funds should be encouraged via legislative measures and
tax breaks to invest in the local. And those who contribute to
such funding must in law become more genuine owners by achieving
greater control over their own savings and deferred wages.
The Present Global Economic Instability Comes To Our Aid
Since the end goal of such an Alternative Investment Code is the
exact opposite of the MAIs raison d=EAtre and the neoliberal
model, justification for its plausibility is vital. This will be
helped by referring to the present Asian crisis and how the
deflationary policies that the IMF will enforce in that area will
not only reduce demand there, but also in the rest of the world by
reducing export markets and undercutting the products of other
areas via Asias competitive currency devaluation. Similar
deflationary policies are occurring in Europe as it prepares for
it own structural adjustment policy of the Single Currency. In
short, the global system can still produce countless products and
services, the problem (which Business Week in a Special Report on
November 10th termed The Threat of Deflation) will be lack of
adequate consumer demand. The MAI with its emphasis on less
protection for local industries and services, and the orgy of
global mergers and job losses likely to result, will only make
matters worse.
WARD MOREHOUSE AND COLIN HINES, December 1997.
--------------
Essential reading:
* MAI-The Multilateral Agreement on Investment and the Threat
to Canadian Sovereignty, Tony Clarke and Maude Barlow.
Stoddart Publishing,Toronto, 1997.
Other references:
* Control Capital, Create Jobs, Colin Hines and Alan Simpson,
Agenda For A Second Term, London, November, 1997.
Other methods for enhancing community self management Shann
Turnbull, in Building Sustainable Communities edited by Ward
Morehouse, the Bootstrap Press, John Carpenter Publishing, US and
UK, 1997
Background Reading:
* Turning the Tide-Confronting the Money Traders, John Dillon,
Canadian Centre for Policy Alternatives 1997.
* One World Ready or Not--The Manic Logic of Global Capitalism,
William Greider, Simon and Schuster, 1997.
* The Corporate Planet: Ecology and Politics in the Age of
Globalisation, Joshua Karliner, Sierra Club Books, Sa
Francisco, 1997.
* The Global Trap: Globalisation and the Assault on Prosperity
and Democracy, Hans-Peter Martin and Harald Schumann, Zed
Books, London, 1997.
* Does Free trade Create Good Jobs?, David C Ranney and Robert
R Naiman, Institute for Policy Studies and Great Cities
Institute, 1997.
* In Defence of Capital Controls, James Crotty and Gerald
Epstein in Leo Panitch (ed) Socialist Register, 1996: Are
There Alternatives? (New York: Monthly Review Publishing
Company, 1996
* The Case Against the Global Economy, Jerry Mander and Edward
Goldsmith, Sierra Club Books, 1997.
* When Corporations Rule the World, David Korten, Kumarian
Press 1995.
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Bob Olsen adds: The last book on the list, by David Korten, is
great!
Bob Olsen Toronto bobolsen@arcos.org (:-)