Rationale for an MAI

(a)  A persuasive case has by no means been made for a multilateral investment agreement. We recommend that, before embarking on any new negotiations of a multilateral investment agreement, the Government state clearly the rationale for an MAI, particularly in relation to the benefits it might bring to UK businesses and consumers and to the developing world (paragraph 15).

Environmental, Labour and Other Standards

(b)  We are dissatisfied with the treatment of environmental, labour, health, safety and other standards by the negotiators of the draft MAI at the OECD. The protection of such standards should have been on the negotiators' agenda from the beginning of their deliberations. Instead, it appears to have been proposed rather late in the day and by means of preambular and footnoted text of doubtful legal weight. We share the view expressed by many that any multilateral agreement on investment must not drive down standards or open the door to the driving down of standards. We recommend that in any future negotiations of a multilateral investment agreement the protection of existing regulatory standards be of central concern (paragraph 39).

(b)  The Government should recognise that, in pursuit of its laudable objective to eliminate world poverty, all foreign investment by UK firms should be of high quality (paragraph 41). British firms investing in countries which have signed up to international standards should at least respect those standards, even if the host country fails adequately to enforce them (paragraph 42).

(c)  Increasing competition for foreign investment must not encourage an international "race to the bottom" where standards are continually reduced or derogated from in order to appeal to investors in developed countries. However, the complex questions concerning the relationship between investment, international labour, environmental and other standards and sustainable development are not necessarily best addressed in the negotiation of a multilateral investment agreement (paragraph 42).

(d)  We believe that the UK Government should be at the forefront of efforts to ensure that core international standards, to which many countries have signed up, become legally enforceable binding commitments on signatory countries; and that it should make regular reports to Parliament on progress in this area (paragraph 43).

(e)  We recommend that the DTI study the extent to which UK firms follow, or are even aware of, the OECD Guidelines on Multinational Enterprises, so that the quality of foreign investment by UK firms can be assessed and policies formulated to resolve any problems thereby revealed (paragraph 47).

The draft MAI

(f)  The potential for conflict between the provisions of an MAI and Government policy, or its effects, in a wide range of areas is real. Coordination between Government departments is essential to avoid an international agreement negotiated by one department undermining initiatives promoted by another (paragraph 60).

(g)  We recommend that the already entrenched principles of national treatment and most favoured nation treatment form the centrepiece of any future multilateral agreement on investment (paragraph 18).

(g)  We recommend that the Government consider mechanisms by which internationally endorsed boycotts and sanctions policies can be accommodated within any future multilateral investment agreement. (Paragraph 20).

(h)  We recommend that, in any future negotiation of a multilateral agreement on investment, the Government seek ways to accommodate measures which could protect economies from financial instability caused by short-term financial flows, such as the one-year unremunerated reserve requirement on foreign loans recently introduced by Chile (paragraph 29).

(i)  In the absence of appropriate case law it is impossible to judge how claims for indirect expropriation might be decided by dispute settlement mechanisms of the sort proposed by the draft MAI. Evidence from NAFTA and from the UK's existing bilateral treaties provides no basis to suppose that, contrary to the impression conveyed, a flood of litigation against governments' regulatory actions will result from an MAI (paragraph 33).

(j)  We believe that the difficulties encountered with the draft MAI in Canada and elsewhere as a result of the complex and changing relationships between central government and other executive bodies will require careful consideration by the Government in advance of any new negotiations of a multilateral investment agreement. It will be essential to ensure that all executive bodies are clear about what policies would infringe such an agreement, and how the central government would respond to a legal challenge by an investor as a result of policies pursued at other levels (paragraph 52).

(k)  We are content that the DTI's strategy in respect of country specific exceptions has been appropriate (paragraph 58).

(l)  The DTI is satisfied that Government assistance schemes which involve requirements being placed on business would not contravene the draft MAI and we support their assessment (paragraph 61).

(m)  It is vital that, in any future negotiation of a multilateral agreement on investment, UK policies which discriminate on grounds of nationality for legitimate reasons — as the EU's Common Fisheries Policy does — should be excepted permanently from the agreement; and that a full dialogue is maintained with those immediately affected by the proposed exception (paragraph 63).

The Way Ahead

(n)  A rules-based multinational investment agreement should be based upon strong, non-discriminatory domestic regulatory systems, to maintain and improve environmental, labour, consumer protection, health and safety and other standards (paragraph 65).

(o)  We endorse the Minister for Trade's call for a greater role for developing countries in international trade negotiations; this should also extend to any future international investment negotiations (paragraph 14). The challenges posed by weak regulatory regimes, poorly specified domestic laws, the dominance of a small number of firms in particular economic sectors and related factors must be candidly acknowledged and overcome (paragraph 65).

(p)  We welcome the Minister's approach to a fresh set of negotiations (paragraph 66).

While the WTO is probably best placed to act as the forum for the negotiation of a new multinational investment agreement, due weight should be given to reform of the Organisation's procedures and structures to ensure that developing countries have an effective voice within it (paragraph 68).