TUESDAY 17 NOVEMBER 1998

MR RICHARD BATE

  52. Good morning, Mr Bate, and thank you for coming this morning. We realise that we are starting a wee bit late, but, as I said to you, hopefully we will be able to catch up because we are expecting single answers to our questions now. In some respects, we could be accused of coming to this rather late in the day in the sense that it is almost dead and buried, but the reasons why the MAI has faltered or has not come to complete fruition could well be attributed in part to the withdrawal of the French, but there were other concerns that people were expressing about shortcomings in the agreement. What is your view or the view of the International Chamber of Commerce? We have had a fairly negative evidence session prior to you appearing before us and are you as negative about this as our previous witnesses? What was the view of the ICC on the OECD proceedings as far as the MAI was concerned?
  (Mr Bate) Well, the international business community is anxious to see multilateral agreement on investment. We were disappointed that the negotiations broke down. We would like to feel that the negotiations can be restarted in some way. We did not want to see an agreement which had too many reservations, which was one of the problems we saw towards the end, but we were anxious to see an agreement because the international business community needs to have a level playing field, if you like, so that they can feel confident when they are going into a country to invest their funds that that investment will be protected.

  53. Given that the OECD is probably no longer the credible umbrella under which negotiations will take place, do you have any predilection for any other organisation, the WTO or UNCTAD, for instance?
  (Mr Bate) It was a pity maybe that the negotiations first started in the OECD because the OECD is only 29 countries. The WTO perhaps would have been a better forum, but at the time that these negotiations started, the WTO did not really exist, and I think it was when Peter Sutherland was temporary Chairman, so there was no structure there which could cope with this. One of the things which has happened over the last couple of years is that the OECD has actually built up a lot of experience and expertise in the MAI, they understand what it is about, they understand the pros and the cons of the issues which have been raised, and it would seem to us that it would be a pity to waste that experience and expertise which has been built up. Perhaps one way of overcoming the shortcomings of the OECD is perhaps that the OECD could have a sort of outreach programme whereby they could communicate more to the outside world, to the non-OECD countries. I think they did have observer countries, but that perhaps was not sufficient. I think if the OECD could have an outreach programme and involve other bodies, other countries more in the same way as this Committee is sitting here and seeing me, questioning me and others, if they had a programme like this whereby they could overcome some of the criticisms and difficulties of restricting it to OECD.

  54. Mr Bate, are UK firms losing out on foreign investment opportunities because of barriers that the MAI would remove? Could you give us some practical examples of where the MAI would bring down barriers to investment and thereby help UK companies?
  (Mr Bate) I cannot give any specific examples, but in general when trade barriers are lowered, that increases investment and increased investment around the world increases—well, you have seen since the GATT that since 1946 a breaking down of trade barriers has increased the general health of world trade over the years and countries, consumers and people have benefitted as a result of the increased trade, so from that point of view if there are trade barriers still which need breaking down, that is going to be a disadvantage to UK companies and to countries which may be losing out on investment possibilities.

  55. The fact that liberalisation in the OECD countries over the last 20 years has actually brought about a lower rate of growth than in the previous 20 years, does that worry the business community at all?
  (Mr Bate) Well, the business community wants to see growth of trade because that is what the business community is there to do, but I was not aware of that fact that you were explaining to me.

  56. Well, it is true, but let me perhaps move on. Was the MAI aimed principally at developing countries or is its real target the protectionist policies of some rich countries, like, for example, Japan and the United States?
  (Mr Bate) All countries. The whole idea of an MAI is to bring under one umbrella all these various bilateral investment treaties which have been made up. They are so complicated, there are so many of them that it would seem sensible for countries, for governments, for businesses to have one common agreement which enshrines the whole thing in one agreement so that everyone knows where they are. At the moment things are so complicated that there are just too many and various bilateral agreements around.

  57. If the MAI were negotiated within WTO, do you think it would end up resembling the GATS, the General Agreement on Tariffs and Services, where each country can sign up on a kind of pick-and-mix approach with specific liberalisation commitments in particular areas?
  (Mr Bate) Well, one of the reasons for the MAI was to try to reduce the number of pick and mixes and one of the objections or concerns that the business community had was that there were too many reservations. If there were going to be too many reservations from various countries around the world who just wanted to pick and mix, that would actually take away the point of the MAI. There was a point in the middle of last year when the business community were saying, "If there are too many reservations and too much picking and mixing going on, we are not interested", because it would do as you are implying, I think.

  58. In your memorandum, Mr Bate, you suggest that if "social, environmental, cultural, competition and even commercial issues" were introduced into the MAI, then "business would no longer be able to support it". If investors are given rights, is it not fair that they should assume responsibilities for labour, environmental, consumer and other standards?
  (Mr Bate) Under the MAI, investors would have to uphold national law. Investors are not looking for any rights which are not available to anybody else; they are looking for not to be discriminated against. They are not looking for lower environmental standards. If countries want higher environmental standards, absolutely fine by investors, provided the investors are not being discriminated against, so all investors are looking for are the same standards, whether it be labour or environmental or whatever, for themselves as for domestic companies.

  59. But is it not so that what they are often looking for is lower standards than they would find in their own home country and that is why they are investing abroad?
  (Mr Bate) I do not think it is up to companies, investors to write national laws. What companies are going to do, they are going to say, "We will abide by your laws. Now, if you want to improve your legislation or raise your standards, fine, providing those standards apply equally to domestic companies as to the investing companies".