MAI: Corporations As World Power

by Mark K. Anderson

Have you lost interest yet?

There are plenty of people who hope you have, because if so, there's a good chance you won't stick around long enough to hear terms like "dismantling democracy," "unwriting the Constitution" and "corporate feudalism." The latter phrases are a loud bunch, and they're more sensational than informative. All the same, they're relevant to any informed discussion about the final phrase on the first list.

The Multilateral Agreement on Investment is an (as-yet) unratified international trade treaty that a vast majority of Americans haven't heard of.

For the past three years, the treaty has been written and rewritten behind closed doors -- almost exclusively by representatives from transnational corporations and unelected trade bureaucrats. In the process, they've created a trade agreement that would bind its 29 signatory countries (the richest nations in the world) to terms that give multinational corporations unprecedented power in shaping not only global trade but also environmental, human rights and labor regulations around the world.

The treaty -- which has enjoyed relatively little press to date -- would need to be ratified by its host governments before going into effect. In the U.S., that means a signature by the President -- who is strongly in favor of MAI -- and a 2/3 majority in the Senate. When the treaty is finally presented to the public, which is now projected to be October, the Senate vote will most likely be the key American battleground.

The terms and language surrounding MAI can be complex and even misleading, but in one phrase, consumer advocate Ralph Nader has come closest to capturing the essence of the treaty. He's called it, simply, "NAFTA on steroids." And that's probably the best place to start when attempting to make sense of what advocates and opponents both say is nothing less than a proposed Constitution for the global economy.

NAFTA, the three-country agreement that Ross Perot made famous with his "giant sucking sound" quip, is beginning to work its talons into American, Mexican and Canadian political and economic life. The effects of the North American Free Trade Agreement, of course, are subjects of entire books and could hardly be covered in their entirety in this article. But most relevant for discussion of the MAI is a provision in NAFTA's Chapter 11 on investor-state relations. That section allows corporations to sue any of the three NAFTA signatory governments for real or projected profit losses resulting from regulation.

The American-based Ethyl corporation is the first to test such measures for further corporate ownership of democratic processes. Last year, Canada outlawed a controversial gasoline additive manufactured by Ethyl on the grounds that it is suspected of being poisonous to both humans and the environment. However, armed by NAFTA, Ethyl sued the Canadian government for $251 million on the grounds, in part, that merely debating the safety of Ethyl's product in Parliament constituted an "expropriation" of the company's profits. If Ethyl wins, Canadian taxpayers will pay the American corporation a quarter of a billion dollars for trying to protect themselves from a potentially toxic substance.

NAFTA's "ban a poison; pay the poisoners" provision -- as Friends of the Earth has called it -- is a centerpiece of MAI. But, as Nader's characterization implies, if you think NAFTA's bad, just wait till its pumped up big brother comes to town. As Friends of the Earth President Brent Blackwelder put it, "The MAI would give corporations unprecedented power to directly challenge governments' environmental, health, labor and other safeguards. The MAI would be a dagger through the heart of democracy."

Indeed, some assert that the MAI runs contrary to the principles on which this country was founded. "When we look at the history of our states, we learn that citizens intentionally defined corporations through charters -- the certificates of incorporation," historian Richard Grossman writes in Taking Care of Business: Citizenship and the Charter of Incorporation. "In exchange for the charter, a corporation was obligated to obey all law, to serve the common good, and to cause no harm. Early state legislators wrote charter laws and actual charters to limit corporate authority and to ensure that when a corporation caused harm, they could revoke its charter.

"The colonists did not make a revolution over a tax on tea," Grossman adds. "Americans fought the Revolutionary War chiefly to create a nation where citizens were the government and ruled corporations."

Curiously, the U.S. Constitution does not even mention corporations. However, according to former Supreme Court Justice Felix Frankfurter, one could summarize the history of American constitutional law as "the history of the impact of the modern corporation upon the American scene."

In the beginning of the 19th century, only 200 corporate charters had been granted in the United States -- for the purpose of building such publicly shared assets as roads, bridges and canals. By the end of the same century, the power of unchecked profit-taking was already beginning to worry some governmental observers. As the Nebraska Supreme Court wrote at the time in its ruling on the case Richardson v. Buhl: "Indeed, it is doubtful if free government can long exist in a country where such enormous amounts of money are 'accumulated in the vaults of corporations, to be used at discretion in controlling the property and business of the country against the interest of the public and that of the people for the personal gain and aggrandizement of a few individuals."

Until last year, only a select few people and organizations around the world even knew of the existence of MAI. It took a leaked version of the MAI text a year ago to draw public scrutiny to the treaty. Public Citizen, the organization that first publicly distributed a draft of MAI, now is at the forefront of activism to defeat the treaty that has been called everything from a "Magna Carta for absentee ownership" to "a slow motion coup d'etat against democratic governance." (Public Citizen has posted a version of the "confidential" MAI text on the worldwide web at www.citizen.org/gtw/.)

Chantell Taylor is Public Citizen's Global Trade Watch coordinator on MAI. She's been working to raise public awareness about MAI since shortly after the organization learned about the treaty. "This treaty threatens the basic principles of democracy," she said in a recent interview. "Take the systems that they've set up for dispute resolution, for example. When there's a dispute between one country and another or a corporation and a country, it's resolved behind closed doors with no public transparency or public participation. A citizen can't lobby the international tribunal that decides that case. And there's no room for citizens to participate in the decision-making process. So dispute resolution is one example."

"Another is simply who's drafting these agreements. It's not local municipal governments. It's not you and me. And when you and me do hear about it, it's very reluctant, it's forced by the outside. It's not volunteered from the inside. So the structure by which they negotiate these agreements totally eliminates citizens and non-governmental organizations and local small governments. And there's a very small participatory role for even state and federal governments. They're brought into the picture much later when it comes up for a vote. And then maybe they debate it."

If the MAI had been around during the 1980s, Public Citizen points out, the worldwide sanctions that eventually brought down South Africa's apartheid regime would have been prohibited. One harbinger of future MAI-related action may be found in the storm brewing over a Massachusetts law preventing state agencies from doing business with Myanmar -- the country formerly known as Burma. Thailand, the European Union and Japan have threatened to challenge the statute in front of the World Trade Organization as a "trade sanction." The National Foreign Trade Council has also sued in federal district court in Boston in an attempt to remove the same law from the books.

The treaty's barrier-breaking doesn't end with nixing sanctions either -- although many potential signatory countries are now filing exceptions to the no-sanctions rule. (The U.S., for instance, has filed an exception to allow for Helms-Burton Act sanctions against Cuba to continue.) The MAI would effectively eliminate all borders for capital, requiring all governments -- federal, state and local -- to provide the same incentives and broker the same deals for transnational corporations as they would for locally owned businesses.

"Countries will no longer be able to limit the migration of capital, although they will retain the right to limit the migration of people," notes David Morris, vice-president of the Institute for Local Self-Reliance in the January issue of Law & Politics. "A corporation such as Nike will be able to sue a Vietnamese city to overturn an ordinance that requires it to buy part of its supplies locally, but Nike's workers will be unable to sue the company if it overworks or underpays them."

The treaty would also ban all "performance requirements," or those measures countries impose to ensure that investments are made with the public interest in mind. Thus, governments could not set standards regarding local hiring, local re-investment, environmental practices, employment levels, joint ventures or location of headquarters. For instance, the MAI could be used to overturn the Community Reinvestment Act -- which encourages banks to invest in impoverished areas around the country.

In fact, Wallach notes, "MAI's ban on performance requirements would also abolish the very policy tools that countries need more than ever to counter currency attacks and stabilize national stock markets. ... The MAI would undercut countries' authority to regulate capital flow. This would prevent countries from imposing conditions on portfolio investment such as 'speed bumps' which are requirements that investors hold onto financial instruments for a certain length of time. Such mechanisms have helped some countries to avert disasters like the Mexican peso crisis. Indeed, when the Mexican currency collapsed in 1995, it was Chile with its investment 'speed bumps' that alone avoided the so-called 'tequila effect' of regional economic turmoil."

With so many of its provisions benefiting corporate interests at the expense of governments and citizens, MAI will be a tough sell when it's unveiled for public consideration -- most likely later in the year. That will be one spin cycle worth watching.

As Taylor has found, all that is needed to raise public opposition to MAI is to raise public awareness. "This thing kills itself," she said. "When people read the text or they hear about it 'in a substantive, impartial way, they say, 'Why would we expand corporate rights in such a profound way? Why would we strip governments of so many regulatory rights? This doesn't make sense.'"

That may be the primary reason why MAI has been a stealth treaty for as long as it has. While Taylor and Public Citizen take their case to the American public -- and Maude Barlow and Tony Clarke's book MAI And The Threat to American Freedom (Stoddart Publishing) brings it to bookstands -- they have found a concomitant reluctance on the other side even to broach the subject.

"We've been putting on conferences all over the country, trying to get local working groups on this issue and balanced debates. Two pro-and two con-MAI speakers," Taylor noted. "Of course, we couldn't find any proponents. There's this really sharp and clear, across-the-board lack of proponents. And the ones that we would find refused to come out and talk about it. The [Office of] U.S. Trade Representative sent a speaker to one leg of our tour -- to four different cities -- and then wouldn't go again after that. Because they got opposition everywhere they went. People just thought they were insane. 'What are you doing? What are you negotiating on our behalf? This isn't on our behalf. This is on corporate behalf.'"

She pointed out that, although they take a tough stand against the MAI, Public Citizen and its allied anti-MAI organizations are not -- as they're sometimes accused of doing -- fighting against the forces of international commerce. "Not that we think there should be no global trade," she said. "We're not being protectionist. It's just the rules by which you move toward a global economy that we're contesting. The corporate lobbies have set up a paradigm which follows the failed status quo of 'free trade.' And these rules disproportionately favor corporations at the expense of local governments, small business and democracy."

Given the victory labor unions, grassroots organizations and citizens around the country were able to achieve last year by defeating "fast track" trade legislation -- proposing to give President Clinton unprecedented power to authorize trade agreements -- Taylor is optimistic about the prospects for the anti-MAI movement. "I'd like to say that the [non-governmental organization] community and labor unions and citizen movements are going to stop it. And I do have some hope that we will, because of the signs of progress so far."

"Eventually, it will be pushed in some form or another," she added. "The problem is -- and this is where it gets more complicated and brings you to a 100-page paper and not one nice, little article -- they're pushing this agenda in other forums. They're trying to get MAI-like agreements in the World Trade Organization. They've committed to launch those negotiations this summer. ... Meanwhile, they're also trying to impose MAI-rules in the International Monetary Fund. So all the members of the IMF would be obligated to MAI rules. And they can do that simply by changing their charter. That's something that's already been proposed. It's something that's going on in the House right now."

"It's a shell game. They've got this rotten pea, and it's the MAI. They're trying to shove it under different shells and keep us guessing where to find it. What we're finding out is that the rotten MAI pea is under every shell. So it's not that hard of a guess."

While Public Citizen and other organizations with active MAI programs remain on the watch for the MAI in all its forms, they also note that the treaty has some powerful and well-funded proponents. And it still has plenty of opportunities to sneak through, even with the increased public awareness around the world. As Noam Chomsky wrote in a MAI-related article in Z Magazine last year, "The rich and powerful rarely submit to outside authority. But such effects can be anticipated as decision-making is transferred steadily to unaccountable private power, with the intended effect of eroding democracy beyond increasingly empty forms and 'locking in' the general population to investor rights agreements mislabeled 'free trade.'"