French threat to talks on investment rules

Date: 15/10/1998

By Simon Taylor

HOPES of relaunching negotiations on new international rules for investment at the end of this month have suffered a severe setback, with France refusing to take part in the talks in their present form.

French Prime Minister Lionel Jospin told the national assembly this week that the government would not participate in the negotiations which are scheduled to restart at the Organisation for Economic Cooperation and Development next Tuesday (20 October).

Instead, it will table its own suggestions on how world investment rules should be reformed and will propose that negotiations should take place at the World Trade Organisation.

“France wants and will propose to its partners that negotiations start on a totally new basis and in a framework including all the players, notably developing countries. This framework should, in our eyes, be the WTO,” said Jospin.

The French premier's move is a further blow to efforts by the 29-member OECD to agree a Multinational Agreement on Investment (MAI), laying down rules to ensure that governments do not discriminate against foreign investment.

However, if France succeeds in moving the negotiations to the WTO, this would strengthen the European Commission's role in future decisions. France has the power to block the resumption of the MAI talks because individual EU member states have negotiating rights in the OECD as well as the Commission. In other international rule-making bodies such as the WTO, the Commission has sole authority to negotiate on behalf of the Union.

Trade ministers agreed to interrupt the OECD talks for six months in April after running into opposition from environmental and consumer rights groups. Critics claimed the MAI was a 'charter for multinational firms' which would allow them to undermine democratically elected governments and exploit lower labour and environmental standards around the world.

Opposition to the MAI in its current form extends beyond the traditional enemies of liberalisation in French politics, because the agreement would boost companies' ability to take legal action against governments.

The aim of the MAI negotiations is to establish internationally agreed rules for investment, in the same way that the WTO lays down rules for international trade in goods and services.

One of the key goals is to try to stop governments offering different investment concessions to domestic and foreign firms. The accord would also set out common rules for compensating companies when they lost money because of changes in national laws such as tax regulations or deals designed to attract foreign investment.

Belgian Green MEP Paul Lannoye, who has led opposition to the agreement in the European Parliament, claims the MAI would “improve security for investors at the expense of governments and politicians”.

He maintains that multinationals would be able to use its provisions to put pressure on governments over social, fiscal and environmental legislation. For example, he argues, firms would be entitled to sue governments for compensation if they changed laws on taxation or withdrew subsidies. But an OECD spokeswoman rejected his claims. “Companies will still have to obey domestic laws,” she said, pointing out that the text would prevent lower labour or 'green' standards being used to attract foreign investment. “The MAI will not prevent governments legislating as they see fit.”