ABOUT CONSUMERS INTERNATIONAL

  1.  Founded in 1960, Consumers International (formerly the International Organisation of Consumers Unions) is a federation of consumers' organisations dedicated to the protection and promotion of consumers' interests world-wide through institution building, education, research and lobbying at international decision-making bodies. It has 243 member organisations in 110 countries world-wide. Its members in the UK include Consumers Association and the National Consumer Council.

CONSUMERS AND FOREIGN DIRECT INVESTMENT

  2.  Consumer groups around the world recognise that foreign direct investment can stimulate economic growth which may, in turn, lead to more jobs, higher purchasing power, a wider range of products and improved and better value-for-money goods and services. A predictable and safer environment for foreign investors may therefore be good if it encourages further investment.

  3.  But the benefits of foreign direct investment (FDI) will only be realised if countries can harness it for their sustainable economic development and there are safgeguards to prevent any negative impacts on economies and people. Without these safeguards, foreign companies may damage local producers and consumers by engaging in anti-competitive practices; they may lower consumer, environment, labour and other standards as countries compete to attract investors to their territory; or they may behave unethically by, for example, artificially avoiding taxes or using bribes.

  4.  There is an urgent need to create balancing mechanisms for overseeing and regulating investment to ensure that the gains of liberalisation are dispersed to consumers and not monopolised by a few producers. Consumer protection is included in several instruments such as the OECD Guidelines for Multinational Enterprises, but more specifically in the International Code of Marketing of Breast-milk Substitutes, the UN Guidelines for the Consumer Protection and CI's Consumer Charter for Global Business. If there is a need for an agreement to oversee and ensure investor rights, then that same agreement should oversee and regulate investor obligations.

CONSUMERS INTERNATIONAL'S RECOMMENDATIONS FOR CHANGES TO THE PROPOSED MULTILATERAL AGREEMENT ON INVESTMENT

  5.  Nations must retain the ability to choose their development strategy, manage their economy and accord differential treatment to investors if necessary to produce balanced, equitable and sustainable development.

  6.  Key elements of the MAI severely limit the sovereign ability of government to effectively manage the economy. These elements include the application of the MAI to both pre and post establishment. Thus even the actions of government which can limit the future profit of a potential investor are disallowed.

  7.  The non-discrimination clause allows for discrimination in favour of foreign investors but not domestic. The inclusion of "indirect" discrimination leaves it open to speculation as to what constitutes "indirect" favouring of local companies.

  8.  The MAI locks countries into its provisions for 15 years no matter what unforeseen circumstances may occur.

  9.  The definition of investment is so broad as to include portfolio investment and financial flows. As has been amply demonstrated recently, it may on occasion be necessary to control these types of investment to ensure economic stability. This would not be possible under the MAI.

  10.  The extent of investor protection vis-a"-vis state control is clear through the use of terms such as "complete and constant protection" under general treatment. In addition the fact that "measures with effect equivalent" to nationalisation or expropriation leaves the gate wide open as to what a firm may define as "equivalent".

  11.  The MAI dispute settlement mechanism must be open and transparent to all. Citizens and NGOs should be given standing to make statements to the tribunal. In respect of competitive deregulation, or non-enforcement of national laws, citizens and NGOs should have the right to bring a dispute against a contracting State to the MAI.

  12.  Incorporating an investor-state dispute settlement mechanism into the MAI increases corporate power in relation to other constituencies. Allowing the intervention of NGOs and experts with the requisite specialist knowledge and with the commitment to values other than those dedicated to the furtherance of free market principles, will aid fair judgements of state measures. Third-party rights of access to the dispute settlement mechanism could enhance the impartiality of the body and give weight to its decisions. This is one way of balancing the inequity of an investor-state dispute mechanism.

  13.  All signatories to the MAI should commit themselves to adopt and/or effectively apply national competition laws along the lines of UNCTAD's Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices.

  14.  Without ensuring that competition policy is in place and enforced, investment liberalisation will not deliver the benefits of increased growth through the increased efficiency of the allocation of capital. Opening weak domestic markets to the activities of sophisticated multinational enterprises may improve investor's profits, but will do little to improve consumer welfare and local sustainable economic growth. Consumer choice can be reduced rather than increased with foreign investment without effective national competition legislation.

  15.  Measures encouraging co-operation between national competition authorities should be incorporated into the MAI as well as a reference to the need to develop an international competition framework.

  The MAI should encourage governments to target investment incentives and to avoid competitive bidding for investment through the provision of excessive incentives.

  16.  As recognised by the WTO Agreement, any global investment liberalisation must be accompanied by the establishment of an international competition framework to allow national competition authorities to collaborate and share information. Without measures to ensure this, global markets will be dominated by two or three producers as is beginning to be the case in some sectors. International competition policy could also regulate the use of investment incentives.

  17.  A prerequisite to accession to the MAI must be the existence and enforcement of consumer protection legislation. The MAI should make specific reference to obligations on corporations and governments to comply with principles enshrined in key internationally recognised statements of good practices. Reference should therefore be made to the OECD Guidelines for Multinational Enterprises and UN Guidelines for Consumer Protection.

  The MAI must incorporate a requirement that corporations abide by internationally-accepted consumer protection and environmental protection standards.

  In addition to upholding minimum international standards, binding provisions must be made, to ensure that domestic health, safety, labour and environmental standards will not be lowered in order to attract or retain foreign direct investment.

  18.  The impact of investment liberalisation can be so profound as to affect many constituents within a country. Any liberalisation agreement must minimise the possible negative effects of liberalisation on citizens and communities. Companies have a responsibility to act on behalf of the range of their stakeholders including consumers. For consumers the key issues of foreign direct investment are the regulation of anti-competitive practices, the use of international standards to avoid a pull to lower product and environmental standards, the avoidance of inappropriate and unethical marketing practices, and the provision of information to consumers. A system of regulation must be either incorporated into the MAI or tied to its entry into force.

CONCLUSION

  19.  Without these crucial amendments, the MAI stands to confer benefits and protections on foreign investors to the detriment of all other stake holders in the economy including host governments, consumers and workers. For everyone to benefit from investment liberalisation, certain safeguards are needed. Without these safeguards, even narrow economic efficiency gains may be lost let alone improvements in sustainable development. Consumers International's recommendations aim to ensure that the MAI supports national economic development, promotes consumer protection, safeguards standards and encourages good corporate practice.

  20.  Whilst recently OECD governments have sought to assure us that the MAI can be reformed to take into account civil society concerns, little has been proposed to ensure that rights are matched with responsibilities. Donald Johnston in his opening statement at the 20 October OECD Consultations on the MAI said, "Patient capital" as opposed to short-term "hot money" is what the world needs. Consumers International could not agree more. However, the MAI positively prohibits the making of a distinction between short-term and long-term investment and bans measures seeking to improve the quality of investment rather than simpy the quantity.

2 November 1998