The purpose of this note is to update the Committees on the developments that have taken place since DTI submitted its initial memorandum to the TIC, since DTI and DETR jointly submitted their initial memorandum to the EAC and since the Parliamentary Under-Secretary of State for Trade and Industry (Mrs Roche) gave evidence to the European Select Committee.

MAI: RECENT DEVELOPMENTS

  2.  On 14 October, the French Prime Minister announced that France would be withdrawing from MAI negotiations. In the view of the French Government, the concerns raised by French civil society with regard to the MAI could not be met by any reform or adjustment of the MAI negotiating process. France remained committed to the development of international rules on investment, but considered that the place to do this was the World Trade Organisation (WTO).

  3.  Prior to France's withdrawal, the OECD Secretariat had already announced that the first meeting of the MAI Negotiating Group since the April Ministerial meeting—scheduled for 20 October—would instead take the form of informal consultations between negotiating parties. This meeting duly took place. All negotiating parties agreed that, in the light of French withdrawal and other views expressed around the table following consultations between national governments and their "civil society", negotiations could not continue as before. The OECD Secretariat was tasked in the first instance with producing a report setting out areas of agreement and disagreement between MAI negotiating parties, for consideration by negotiators at further informal consultations in Paris at the beginning of December.

  4.  On 21 October, the Minister for Trade issued a statement, concluding that it now looked most unlikely that an MAI would be signed at the May 1999 Ministerial meeting, as had originally been planned. Our understanding, from the very clear statement made by the French Government of their position, is that there is no prospect of France rejoining negotiations. As the MAI would be a "mixed competence agreement" (in other words, containing some provisions falling within the competence of Member States and some falling within EU competence), it is in our view not practicable for any EU member state to sign unless all are prepared to sign. Technically, the mandate from OECD Ministers to negotiate an MAI remains and is unlikely to be revoked by them before the next Ministerial meeting. But HM Government's view is that there is no prospect of further negotiations based on the current MAI text.

PROSPECTS FOR FUTURE INVESTMENT NEGOTIATIONS

  5.  On 29 October, during a conference on Trade, Investment and the Environment at Chatham House, the Minister for Trade issued the following statement:

    "Sometimes it makes sense to draw a line and start again. I think this is an opportunity to start with a blank piece of paper, to define our objectives afresh and then seek to pursue them on an open and consensual basis.

    It would be wrong to give the appearance of all the MAI baggage simply being transported from one organisation to another, in an attempt to create the same rose—or thorn—by another name.

    All the positive aspects of the discussions which have taken place on MAI can be retained and built on. The WTO is probably the place to do that but in my view it should certainly be on the basis of a fresh agenda with clearly defined objectives which take full account of social and environmental concerns."

  6.  There is no prospect of "the MAI negotiations being moved to the WTO". It has always been HMG's position—as well as the agreed position of the EU—that investment should be one of the issues looked at in any future "round" of WTO negotiations. But it has always been recognised that this would be a new negotiation with different negotiating parties at the table, leading to an agreement with substantively different content.

  7.  In the short term, the Government will continue to participate in the work of the WTO Trade and Investment Group. This was set up by the 1996 WTO Ministerial Conference "to examine the relationship between trade and investment", on the explicit understanding that the work should not prejudge whether negotiations would be initiated in the future. The final meeting of this group is scheduled to take place in Geneva on 25-26 November. However, there is a proposal on the table—and likely to be carried—that the General Council of the WTO should be asked to extend the remit of the group for six months. At the end of this further six-month period, the group may be in a position to make recommendations on whether or not a mandate should be given for negotiations. We expect final decisions to be taken on the issues for inclusion in a future round of negotiations at the 1999 WTO Ministerial meeting.

  8.  We expect that other organisations, in the meantime, will continue to look at international investment issues. The OECD has been working on international investment issues since the 1970s and will continue to do so in some form. In particular, it will continue the review that it has set in train of the OECD Guidelines for Multinational Enterprises. Investment experts will also continue to meet in the UNCTAD and ASEM fora. At the same time, the UN Council on Sustainable Development will be considering trade and investment as part of its work programme in the year 2000.

November 1998