TUESDAY 17 NOVEMBER 1998

MS MARIA ELENA HURTADO, MS JAYANTI DURAI AND MS JILL JOHNSTONE

  1. Good morning. I wonder if you could introduce your colleagues and yourself.
  (Ms Hurtado) Good morning. We are very pleased to have been invited to give evidence to this Committee. We are, as you know, Consumers International, the international organisation of consumer associations. It is truly international. It has regional offices in all the continents of the world and over 200 members in 110 countries and we have been working on trade and industry issues for many, many years. We were quite involved in the run-up to the Uruguay Round. Our organisation also played a really important part in the discussions for the code of conduct of transnational corporations. Obviously, more recently, we have been working on the MAI. We have a three-woman team here and I want to introduce them to you. On my right is Jill Johnstone. She is the Policy Director of the National Consumer Council. The National Consumer Council is one of our member organisations. She is also a member of the Global Policy and Campaigns Committee of Trade on Consumers International, which includes members from all over the world. I am Maria Elena Hurtado, the Director of Policy and Campaigns of Consumers International. Jayanti Durai is the Economic Affairs Officer of Consumers International and was the person who has done all the groundwork on the MAI. We will take it in turns depending on the question.

  2. That is fine. Perhaps I can start and thank you both for your written evidence and for coming along; a three-person delegation, may I say. We are very pleased you could be here. In some respects this issue, which we are looking at in the context of ethical trading in general terms, is like the other issues we will be looking at. We looked at armaments. We are going to look at this agreement, and we are looking at other matters later. However, on the question of (you might say) the failure so far of the MAI. From your evidence, one would imagine that a small cheer went up as a consequence of the collapse of the talks. It would appear that the door is closed but it is not necessarily locked. Therefore, we could be returning to this issue again because this is something which I do not think is going to go away. Could you give us your view as to what were the main failings of the multilateral agreement on investment that was presented at the OECD. Could you explain to us why you think it ultimately collapsed.
  (Ms Hurtado) We think that the MAI did not succeed: first, because I do not think it was a multilateral agreement on investment. In fact, the main target was having access to the economies of the developing countries and it was being negotiated in the OECD forum, which normally covers 29 developed countries. It was also, in our view, too narrowly focused on the rights of investors. It did not balance it out with responsibilities. Also, it was very technically negotiated by investment specialists of the OECD, who really had no sense of the political dimension or political impact that this agreement might have. It is very important for the economies and for people. Therefore, it is not really just a technical agreement but it was treated as such. Then, again, the way it was handled within the OECD was not very conductive to success. This is because there was no real internal consultation between the different OECD committees as is the normal practice. Also, we want to emphasise this: there were no external consultations either of any kind, which again meant that negotiators were not aware of the negative impacts that it would have on consumers, on workers, on the environment. So basically it very soon got into deep political difficulties once the NGOs found out about it. The other main failure was that such an important agreement was really being negotiated very much behind closed doors with no involvement of anybody. No involvement of Parliament. No involvement of people. No involvement of concerned groups. Obviously that was a major problem with the agreement. I think this was what finally led to its demise.

  3. That is helpful. Perhaps I can direct the question to Miss Johnstone because I think you might be the appropriate person to answer. If you are not, anyone else come in. As a body, the National Consumer Council enjoys a national status. You are a wee bit more than just a NGO, if I can put it that way. What involvement do you have with the DTI in this? One would have thought, in a fairly open transparent system like our own, that you would have been consulted at a very early stage. Was that the case in the United Kingdom or not?
  (Ms Johnstone) We were not consulted. If we had gone knocking on the door, demanding to be consulted, probably the DTI would have consulted us. This is because we were certainly involved in detailed discussions during the Uruguay Round on trade negotiations including, of course, the TRIMs Agreement which is, in a sense, where all this has come from. We were not directly consulted as an organisation although my Chairman sits on the consultative committee, which has not met for a very long time. This is a committee of businesses with one consumer representative when my Chairman, David Hatch, meets with the Minister to discuss trade and international issues like investment.

  4. There was a change of government during the period. Was there any difference in approach after 1 May 1997?
  (Ms Johnstone) We did not get any invitation to make particular comments on the MAI before or after the election.

  5. So it is really only since it has got into the public domain that you have been speaking out about it. At that time, and at any stage at all, have you been consulted by the DTI?
  (Ms Johnstone) No, we have not, but I think it is fair to say that we have channelled all our work on the MAI through Consumers International because we felt that was the appropriate body. We are members of Consumers International so on international issues we work very closely with them rather than ourselves. The same with the European issue. We would work with our colleagues in the Bureau Europen des Unions de Consommateurs rather than work individually on the Common Agricultural Policy, for example. So we pushed our work in that direction.
  (Ms Hurtado) May we turn to Jayanti Durai. She has been involved.

  6. In relation to the OECD, did they take steps to consult you?
  (Ms Durai) The initiative, in terms of consultation, both from the United Kingdom side as well as at the OECD, has been very much from the NGO public interest groups side. We have had to demand consultations and then there has been some level of consultation. But both from the United Kingdom as well as from the OECD, that was not going to happen without us demanding consultations. At the OECD level, the first meeting that they had with NGOs was in December 1996, which was as a result of a seminar we had had primarily in October of that year in Geneva with OECD government negotiators and a range of NGOs. That was one of the first times we interfaced with the others concerned with MAI, and broadening it out from just discussions of what they would like over multilateral agreements.

  7. I said at the beginning that probably a small cheer went up. It was probably a large cheer from your organisations, but by the same token this is not going to go away. It is going to return. These people, whoever the sponsors of the villains may be, are likely to be persistent and they will return to it. Do you think that it could re-emerge and, if it does, it has been suggested that the WTO and even UNCTAD could be a possible forum. How do you feel about that? Do you think that having gone through the first stage of it, that you would be in a position to give due consideration to it again and that you would be better equipped to handle it, or do you want to see it dead and buried?
  (Ms Hurtado) We think it is important to have international provisions relating to the conditions under which transnational companies invest in other countries, but we think that those provisions must include responsibilities in areas such as consumer protection, workers' rights, social justice, health and safety, which for consumers are very important areas. These conditions should be met in the first place whatever the fora. In terms of where it could go next if these conditions are met, we have been thinking about this and we want to say what are the characteristics of the fora where it should be negotiated, which we would want to see. It should be a fora where transparency should be a major thing, where all nations participate. Where there is consultation of all stakeholders at the national and international level. That it is able to deal with investment-related factors. We have not taken it and discussed it very recently under what would be the fora, but we think that these conditions can be met within the United Nations system. This, for example, provided a framework and support for international negotiations such as the climate change negotiations, so it could be a good fora. We have not arrived at a position of all CI members on this, on what would be the merits or demerits of the WTO. Some members would support that but many others from the developing countries, which is the majority of our membership, mainly would not agree with taking the agreement into the WTO.

  8. Leaving aside all the conditions that you would like to see on the agreement, do you still agree that there should be an agreement because the purpose of the agreement, as far as I can see, is to liberalise the international regime with regard to investment. Is that an objective that you share?
  (Ms Hurtado) This is why I said that the responsibilities must be matched with rights. We think it is very confusing now with so many bilateral investment treaties. There should be clear rules which are agreed because that would strengthen (I suppose) the hand of the weaker countries, but we would start afresh so it would have nothing to do with the agreement which was currently being negotiated, which was just about liberalisation. It was creating a real straitjacket for governments and not allowing any flexibility to deal with economic development policy.
  (Ms Durai) I think that is a summary of it. Liberalisation can bring benefits which you need to have and, at the same time, can bring costs.

  9. But you would agree that there is a need for liberalisation?
  (Ms Durai) If there is corresponding regulation.
  (Ms Johnstone) We have never been against the idea of having a multilateral agreement on investment. We want to see a balanced agreement with rights and responsibilities. We want to see it negotiated in a truly multilateral forum. The National Consumer Council does not have any difficulty with the idea of it being negotiated in WTO. We already have a TRIMs Agreement, although we would like to see the WTO reformed to make it more transparent and have some recognition of the international NGO community.

  10. So you would like to see the replacement of the hundreds of bilateral agreements with a single agreement bearing in mind, as you say, the rights and responsibilities and the balance. Could I ask a pretty basic question. If an MAI of the form that you want were to come into operation, how would consumers in the United Kingdom notice? What would be the initial benefits or costs to them? What would be the first thing that we would all observe as consumers and say, "Whoopee, that was a really good MAI."
  (Ms Johnstone) I rather suspect consumers in the United Kingdom would not notice much difference at all. As part of the European Union we already have, I suppose, a strong negotiating position in dealing with multilateral investment. The main differences would be noticed in other countries.
  (Ms Durai) I think one of the problems of this agreement—and certainly how it started—is that it is very difficult to envisage the impact of it. This is because of its very broad terms with the investor-state dispute mechanism at multilateral level. It seems that the impact on consumers, to some extent, may be less in the United Kingdom. This is because the nature of its national regime would be that you can yield benefits in maybe increasing investment or different types of investment, but there is also the issue of health and safety standards which in this agreement can be undermined through certain provisions—on expropriation, for example—and on the investor-state dispute mechanism. This is because by having those clauses in there, even if they are not being used, they reduce the ability for governments effectively to introduce regulations that may be in the consumer interests—or maintaining interests for that matter.

  11. What evidence have you of investors, either here or abroad, actually damaging consumer interests or producer interests in other countries?
  (Ms Durai) There has been a number of instances where companies have found that regulations which are currently in place do not suit their production processes. This has led to their governments being forced to change that. There have been specific cases, for example, where levels of MSG in food have had to be increased because of particularly strong big multinationals.

  12. So that was a specific thing, that health orientated issue. Talking about health and safety issues, how many of these would be having an impact on consumers or be having an impact on labour or perhaps the environment? What sort of balance and how does that work out? Can you give me some examples of these problems.
  (Ms Hurtado) I think it depends on what sort of investment it is. If it is investment in consumer goods the impact would be great. If it is investment in a mine it would be much more remote. So one would have to look at what type of investment it is. Especially in investment, which goes directly to consumers, of course, the companies producing them have a lot of say about health and safety issues. For example, about the information which is provided to consumers. Therefore, this is one of the reasons why we were suggesting in our submission that in any international agreement on investment, consumer rights, such as those enshrined in the United Nations Guidelines for Consumer Protection, should be incorporated. Those deal with all these things: economic rights of consumers, advertising, marketing, consumer safety, safety of the product, and so on. Again, I think the main problem is in the developing countries, where maybe many of these regulations will not be in place or the government will not be able to enforce them. Therefore, companies can damage consumers that way.

  13. You have examples in developing countries of occasions when there are good practice guidances that we would perhaps expect, which are actually broken by investors.
  (Ms Durai) Yes. Many, at many levels.

  14. What range of areas are we covering? What is the size of the picture of this in your experience?
  (Ms Hurtado) It varies. For example, in areas like misleading consumers through advertising or bad information that is very, very widespread. There are some sectors like the pharmaceutical industry where one could document a catalogue of problems there. The other important industry is obviously the food industry. There we have been working on things like the advertising of baby milk products to mothers. That is an important area. As you know, there have been big transnationals which have not obeyed the international marketing code on breast feeding substitutes.

  15. So you are saying that things, in some cases, are very considerable in their impact?
  (Ms Hurtado) Yes, of course. In some cases very considerable. As I said, the pharmaceutical industry. There are horror stories there. In West Africa, for example, about how products are distributed.
  (Ms Durai) Which they would not operate in the same way elsewhere in their home countries, in the north. That is the point.

  16. Have you examples of the investors behaving unethically, perhaps by artificially avoiding taxes or using bribes in countries?
  (Ms Durai) One of the problems of this agreement is that it does not even try to address those issues. As most national governments and national treasuries have found, it is very difficult to regulate transnational companies and their avoidance of tax, which they can do by pricing internally. That makes it very difficult. This is why you are finding more and more bilateral competition agreements and bilateral taxation agreements. But those issues of regulation were not being dealt with in this agreement. I think it is interesting that the agreement only looked at liberalisation and did not look at how governments and countries' economies can benefit from investment, such as through taxation, and let big holes remain where transnational companies could avoid paying taxation, (whereas obviously domestic companies cannot), so there is an unfair advantage over domestic companies.

  17. Further to that, because this is a most important point, can we have practical examples that you have identified with the artificial avoidance of tax; and even more importantly, because it would be illegal whereas the artificial avoidance of tax might not be, the use of bribes. These are very serious charges to make. It is not good enough, if I may say so, to defend the argument in the abstract or the general. One does need specific examples.
  (Ms Durai) Even the OECD, to a certain extent, is looking at this. Nobody is denying it exists. If you would like the evidence we can supply that to you, if possible, immediately. We can gather it from our other resources. That is not a problem at all. But it has been agreed that the problem does exist of bribery and corruption, as well as the avoidance of taxation.

  18. May I say, before Mr Bercow returns, the impression I get from what you are saying is that these excesses, these breaches of standards, are taking place at the moment. The MAI was not going to address these problems. Surely the answer is that the individual countries themselves have a responsibility through their legislatures or through their civil servants to address these difficulties? What is the difficulty here? Why should an international agreement deal with the problem which in many respects is essentially national in character?
  (Ms Durai) So why should an international agreement protect the rights of investors if those rights are elsewhere?

  19. We can look at the rights of investors. We are talking here about the rights of consumers. You are saying that because national governments are unwilling or incapable, for whatever reason, to put in place the appropriate legal arrangements—or, alternatively, the regulatory systems to back up such arrangements—we should have an international agreement which simply recognises the status quo.
  (Ms Durai) I think the problem is that, for example, within the MAI there were provisions which would undermine the ability of governments to regulate on a national basis. On the expropriation we have seen this. You were asking about the use of national regulation being undermined by multinational companies. We have seen this beginning to happen with NAFTA and the Ethyl Corporation case in Canada, whereby the enactment of the law or regulation on a national basis happened to affect the value of the foreign company's assets—and then combine that with expropriation clauses and the investor-state dispute mechanism—this will effectively inhibit the ability of governments to implement regulations and also for them to enforce regulations. It is true that you could argue for national regulation. However, in practice, what we are seeing is that not all interests are equally balanced within all countries. There tends to be, because of the economic power, a greater precedence given to the rights of the private sector compared to the public interest and citizens at large.