The World Development Movement (WDM) welcomes this opportunity to submit evidence to the Trade and Industry Select Committee. WDM is a democratic membership organisation with around 30,000 supporters and 100 groups across the UK. WDM is an independent cross-Party organisation, aiming to change the policies of companies, governments and international agencies that affect the world's poor. Established in 1970, WDM has considerable experience in research, lobbying and campaigning for rights and a fair deal for the poor in developing countries.

  WDM has been closely involved in the MAI negotiations since late 1996, and played a leading role in informing members of the British public about some of the potential problems with the agreement. WDM's members and supporters have written an estimated 10,000 letters and cards to MPs and Ministers on the MAI and raised the issue frequently in meetings with constituency MPs. WDM has provided detailed analysis and recommendations to MAI negotiators through briefings, meetings with UK government Ministers and officials, and consultations with the EU and OECD. WDM considers that there is much that can be learned from the process of MAI negotiations and the deep flaws in the draft MAI agreement itself.

  We very much welcome the recent decision by the government not to pursue negotiations in the OECD or to transfer the MAI to the World Trade Organisation. At the Royal Institute for International Affairs on 29th October the Minister for Trade, Brian Wilson replied to a question from Barry Coates, Director of WDM:

"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 them on a 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".

  WDM considers that this statement provides the basis for an exciting new agenda on investment and international business. The government has the opportunity to demonstrate international leadership in defining the new rules that need to be introduced if the benefits of globalisation are to be distributed more widely and equitably in the next century.

  This submission seeks to draw out some of the most important lessons from the MAI negotiations. The MAI was to have been the world's first multilateral agreement on investment and can provide an insight into new thinking that is emerging on the process of international negotiations. Most importantly, the lessons from the MAI can assist in shaping the future direction of policy towards foreign investment and international business.

  This submission provides a background on the MAI negotiations and includes analysis and recommendations on four key issues:

1.  TRANSPARENCY AND CONSULTATION IN THE MAI NEGOTIATIONS PROCESS

  WDM recommends that the best practices used in international negotiations in the United Nations (such as negotiations on Climate Change) be used for future negotiations on trade and investment agreements, including greater transparency, consultation, joint working and willingness to respond to critical issues raised.

  WDM recommends that there be greater Parliamentary scrutiny over international agreements during the course of negotiations.

  WDM recommends the adoption of new procedures across Whitehall to ensure the more effective integration of social, development and environmental issues, including a change in the "lead Department" to a joint cross-Departmental team for negotiations, and regular discussion of important international agreements at Cabinet Committee level.

  WDM recommends that future trade and investment agreements integrate social, development and environmental issues into their core principles, rather than attempting to add provisions later in the negotiating process.

2.  ASSESSMENT OF THE MAI'S LIKELY IMPACTS ON THE UK AND DEVELOPING COUNTRIES

  WDM recommends that comprehensive and objective assessments be undertaken by independent bodies, with the participation of non-governmental organisations (NGOs), on the likely impacts of future trade and investment agreements on key government priorities, such as the eradication of absolute poverty, protection of the environment, promotion of human rights and promotion of ethical business practices.

3.  ANALYSIS OF THE RELATIONSHIP BETWEEN THE MAI AND THE GROWING NUMBER OF BRITISH COMPANIES ADOPTING ETHICAL BUSINESS STANDARDS

  WDM recommends that DTI actively seeks the input of those companies that have demonstrated leadership in the adoption of ethical practices to inform government policy on trade and investment.

  WDM recommends that DTI explicitly examines the effect that any proposals on international trade and investment would have on British companies adopting ethical practices, to ensure the proposals support, rather than undermine, ethical behaviour.

  WDM recommends that the government give priority to the consistent enforcement by all countries of existing internationally agreed standards (such as International Labour Organisation core conventions) in order to prevent ethical businesses being undercut by less scrupulous competitors.

4.  THE POLITICAL OPPORTUNITY FOR THE UK TO DEMONSTRATE INTERNATIONAL LEADERSHIP IN FUTURE INVESTMENT AGREEMENTS

  WDM recommends that the British government take the lead, working with OECD member countries, developing countries and civil society in a process of research and consensus-building towards a new framework for the consistent enforcement of rules on international investment, including:

—  enhanced scrutiny and regulation of short term and speculative capital flows;

—  regulation of restrictive business practices including prohibition of transfer pricing, tax havens, international monopolies, money laundering and corruption;

—  agreed limits on incentives provided for foreign investment;

—  internationally agreed standards on labour, consumer protection, human rights, local communities and the environment.

1.  TRANSPARENCY AND CONSULTATION IN THE MAI NEGOTIATIONS

  1.1  WDM's involvement with the MAI arose from discussions in late 1996 with NGOs based in developing countries (the "South") who were concerned about this agreement that would set the international standard for investment rules. WDM undertook several months of research and analysis of the draft text (which had, by then, been leaked to US and Canadian NGOs), before publishing a briefing paper titled Pulling up the Drawbridge in June 1997. WDM made an introduction on behalf of OECD NGOs at the meeting with OECD negotiators in October 1997 and signed the joint NGO statement that arose from that meeting. This statement called for the meaningful participation of non-OECD countries in any international agreement, a comprehensive and participative social and environmental assessment, and a balance of rights and responsibilities for investors.

  1.2  The failure of OECD negotiators to take NGO concerns seriously prompted WDM to bring the MAI to the attention of the British public. We recognised this would not be an easy task, given the complexity of the subject and the agreement itself. However, WDM's briefings have reached a wide audience and talks on the MAI have been well attended. WDM understands that MPs and Ministers have received thousands of letters and cards on the MAI (estimated to total 10,000). Most of these were responded to by civil servants in the form of a standard letter.

  1.3  In November 1997, WDM prepared a revised briefing, A Dangerous Leap into the Dark. This briefing provided an overview of concerns, not only for international environment and development issues, but also highlighted the likely impact on the UK. The briefing was circulated to all Chief Executives of UK local authorities and Local Agenda 21 co-ordinators. WDM members, supporters and groups wrote letters to constituency MPs and local Councillors.

  1.4  By the time of the February 1998 high-level meeting of negotiators, a number of Councils had passed resolutions expressing concern over the MAI, MPs had received letters from their constituents and local coalitions against the MAI had been established in regional centres such as Oxford, Brighton, Edinburgh and Reading. There was a spate of media coverage in February, starting with an Analysis feature article in the Guardian and concluding with a number of articles (The Times, Financial Times, Guardian and the Economist) stating that the MAI was dead. The source for this rumour appeared to be the US Trade Representatives office.

  1.5  Throughout this period, a strong relationship had been maintained between the main NGOs involved in expressing concern over the MAI: WDM, WWF, FOE, Oxfam, Consumers International (CI), Catholic Institute for International Relations (CIIR) and Save the Children Fund (SCF). Discussions with NGOs in other countries and with MPs, trade unions and local authority representatives resulted in the formation of a UK Coalition, including those organisations with concerns over the MAI.

  1.6  By the end of September, those expressing concern over the MAI included the largest trade unions, the major churches, the leading environment, development and human rights NGOs, leading academics, women's groups and farmers. In Parliament, over 200 MPs have signed one of the Early Day Motions on the MAI, resolutions have been passed by the Liberal Democrats, Scottish National Party, Scottish Labour Party, Plaid Cymru and the Green Party, and the European Parliament passed a highly critical resolution by 437 votes to 8. Those expressing concern have been joined by an increasing number of small business associations and ethical businesses. It is clear that concerns over the MAI have extended far beyond a few critics.

  1.7  WDM has frequently heard the government characterise the opposition to the MAI as coming from a few NGOs. However, the breadth and depth of the Coalition is testimony to the extent of the unease felt through much of society over the degree to which the MAI would have ceded democratic rights to foreign investors.

  1.8  By contrast, the support of business for the MAI appeared to weaken, particularly after it became clear that provisions on labour and environmental standards would be included (for example, the Business and Industry Advisory Group statement in February 1998 and the International Chamber of Commerce criticism of the MAI at their meeting in Geneva in September 1998). Given the lack of visible support for the MAI and the extent of the opposition, it appeared that the government was playing the role of advocate and adjudicator. In September 1998, the co-ordinator of the UK Coalition on the MAI asked EU member states for information on which groups were actually supporting the MAI. This information has not yet been provided.

  1.9  WDM has continued to keep its supporters informed since the April Ministerial, mainly through summary briefings, the latest of which is Beyond the MAI. In response to a report commissioned by the Department for International Development (DFID), WDM prepared and disseminated a paper focusing on the impact of the MAI on developing countries, The Development Implications of the MAI: WDM Critique of the Fitzgerald report to DFID.

  1.10  The public has expressed a surprising degree of concern over the MAI. In WDM's view, this has reflected deep unease over the policy embodied by the MAI, particularly the degree to which social and environmental policies were subordinated to the goal of investment liberalisation in the MAI.

  1.11  The public expected a high standard of transparency from the MAI negotiators for the following reasons:

—  The MAI would have been the world's first multilateral agreement on investment. It would potentially be as important to investment flows as GATT and the WTO have been to trade flows. It is therefore important that such important treaties be subject to scrutiny by Parliaments and members of the public;

—  Even though some elements of the MAI are included in some bilateral treaties, the draft MAI contained new provisions that would have set a precedent by their inclusion in a multilateral treaty. These included pre-establishment rights for foreign investors, the Investor-State dispute settlement mechanism and broadly defined National Treatment and Expropriation provisions. The MAI would have introduced important new legal concepts and mechanisms into international law and should therefore have been subject to careful analysis and Parliamentary oversight;

—  High standards of transparency have been set in international negotiations on environmental agreements (such as Agenda 21) and Conventions (notably on Climate Change and Biodiversity). By contrast, severe criticisms over a lack of transparency in negotiations and dispute settlements proceedings have been levelled at economic treaties, such as the MAI and GATT/WTO;

—  Countries that sign the MAI are bound to abide by its provisions for five years without review, and investment decisions made in that period would be binding for a further 15 years. The MAI would therefore bind the decisions of the British Parliament for four or five terms of government.

  1.12  When WDM first became involved in analysing the likely impacts of the MAI, there was limited information available. Negotiators report that OECD research and preparations for negotiations started in 1991, although negotiations were not actually launched until May 1995. The initial public documentation from the OECD included the main aims of the MAI and an indication of progress in negotiations, but included little detail of the content of the agreement. It was not until a draft was leaked to NGOs and made available through the Internet that WDM and other NGOs became aware of the broad scope of the provisions and its potential risks. This reluctance to inform members of the public about the real content of negotiations led to charges of secrecy levelled against the OECD and member States. Some months after the leaked copy had been disseminated, the OECD posted the text of the draft MAI on Internet.

  1.13  There are still many documents that have not been released to the public. For example, a full list of the exemptions lodged by each OECD member State would have been crucial to establish the likely impact of the MAI. OECD countries reportedly lodged over 1,000 pages of exemptions, many affecting the environment, developing countries and the competitive position of British businesses. The US alone has reportedly filed some 500 exemptions, some of which would have allowed the US to pass future laws that did not comply with the MAI. Such exemptions would have almost completely written the US out of the MAI, and were important for the public to understand the likely outcome of the agreement.

  1.14  Yet these exemptions were not made public, although the UK has released its list. The justification for not making all exemptions publicly available is that some countries do not want their exemptions released. WDM considers that this information is important, and should be in the public domain. There should be a presumption of disclosure applying to all documentation on trade and investment agreements, and all relevant documentation should be placed in the House of Commons library.

  1.15  After WDM and other NGOs had raised concerns over the MAI, there was an initial meeting with DTI civil servants. This was followed by a brief mention of the MAI at a meeting on international trade with the Minister, Lord Clinton-Davis. A subsequent meeting on the MAI, lasting for one hour, was held with the Minister prior to the target signing date in April 1998, attended by WDM, WWF, FOE, Oxfam, CI and CIIR. A further meeting with civil servants from DTI included officials from other government departments. Over the past four months, the civil servant leading in MAI negotiations has visited a number of NGOs to discuss concerns. In late September 1998, NGOs and business groups attended a meeting with the EU Presidency.

  1.16  Unlike the transparency and constructive consultations that have characterised international environment and development agreements within the UN, the MAI consultations did not allow a frank and open discussion of the issues or a problem-solving approach to resolving the serious deficiencies evident in the draft MAI. The meetings with the DTI, EU and OECD failed to establish the trust and close working relationship that would use the expertise of NGOs and academics to improve the agreement. NGOs consider that it is not acceptable to conduct negotiations on investment according to the standards that have previously applied to trade agreements. Future negotiations on trade and investment should be conducted with a greater degree of transparency and a process that includes the close and constructive involvement of NGOs. WDM welcomes the government's undertakings with regard to greater transparency and consultation in the WTO.

  1.17  There were some useful discussions with officials in the Department of Environment, Transport and the Regions (DETR) and with the Department for International Development (DFID), but WDM gained the impression that these departments have not played a major role in the policy formulation and negotiations process. The role of DETR and DFID has been evident in the framing of some provisions on the environment and in the recent attention paid to accession arrangements for non-OECD countries, but it appears that DTI has been in the driving seat over the core provisions of the MAI.

  1.18  WDM welcomes the government's commitment in the White Paper on International Development to adopt a consistent approach to development through government policy. DFID has been building its capacity to provide policy analysis and input into international agreements. Similarly, the Department for Environment, Transport and the Regions (DETR) has developed expertise and capacity on international economic agreements. In recent statements, the Minister for Trade has highlighted the degree to which the objectives for the MAI, established by the previous government, did not reflect the full range of objectives of the incoming government, particularly with regard to the environment and development. This highlights the need for more of a "joint team" approach to the establishment of objectives and the core provisions of international agreements, to involve all relevant Ministers and Whitehall departments, rather than the excessive dominance by a single lead Department.

  1.19  Consultations with Ministers and officials have been welcome, but it is difficult to assess whether the points raised by NGOs have resulted in changes to the British government's position. There appear to have been some changes to the agreed text, but WDM considers that deeper concerns have been ignored. Following the April Ministerial meeting, at which Ministers stated they "are committed to a transparent negotiating process and to active public discussion on the issues at stake in the negotiations", a joint letter was written by WDM, WWF and FOE, urging the Secretary of State for Trade and Industry to open up the process of negotiations and inform a wider public of the debates around the MAI.

  1.20  The letter called for parliamentary scrutiny of the MAI, noting that the only Parliament to analyse the MAI in depth, the European Parliament, passed a sharply critical resolution by 437 votes to 8. Two adjournment debates were held in the House of Commons and one in the Lords. These were initiated by backbench MPs with concerns over the MAI, rather than as a more comprehensive government debate.

  1.21  The short inquiries by the European Legislation Select Committee, the Environment Audit Committee and the Trade and Industry Select Committee are welcome. However, the MAI is a far-reaching agreement with important implications for the international environment. A more thorough inquiry by the Trade and Industry Committee into the principles and process for any future international investment agreement could draw on the lessons from the MAI negotiations.

  1.22  Concerns over the MAI, expressed by members of the public and MPs, suggest that existing parliamentary procedures do not provide for adequate scrutiny of international agreements. MPs have raised these concerns in several parliamentary meetings held by WDM on the MAI. There would have been an almost complete lack of Parliamentary scrutiny if the MAI had been signed in May 1997 or April 1998 as was anticipated. There would have been little information available to MPs and no opportunity for Parliamentary debate. In view of the wide ranging impact that international trade and investment agreements have on social and environmental issues, and their implications for the sovereignty of the UK's economic decision-making, Parliamentary scrutiny of future international agreements should be strengthened.

2.  ASSESSMENT OF THE MAI'S LIKELY IMPACT

  2.1  WDM's main focus of attention has been on the likely impacts of the MAI on poor and vulnerable people in developing countries, rather than on UK society. However, in the course of undertaking research on the MAI, WDM became concerned over many of the domestic impacts, including on local government, local economic development and domestic companies.