> > THE OTHER ECONOMIC SUMMIT > 777 United Nations Plaza, Suite 3C > New York, New York 10017 > Tel. (212) 972-9877 - Fax (212) 972-9878 > e-mail: [EMAIL PROTECTED] > > > January 7, ÿ 1998 > (Dictated December >27, 1997) > > >TO: TOES Listserve > >FROM: Ward Morehouse > > When I was in London in mid-December on my way back from India, I >spent a day with Colin Hines (Co-Author of, among other works, The New >Protectionism) trying to formulate alternatives to the Multilateral >Agreement on Investment (MAI). > > Enclosed is the result of that effort. Colin and I see it as the >beginning of a process of debate and exchange, certainly not as anything >remotely like a "finished product". Hence, critical feedback is >particularly welcome. > > > > > >WM/td > > >************************************** > >ALTERNATIVES TO THE MAI: >FIRST THOUGHTS FROM WARD MOREHOUSE & COLIN HINES > >Background > >The anti- MAI campaigns have published excellent papers on why the MAI >should be opposed, but less attention has been paid to what alternative >set of rules, for what end goal should replace the MAI as the subject for >international and intergovernmental debate. We have therefore tried to >pull together what we have found, plus some ideas of our own, to attempt >to start a debate about what alternative we might as a movement choose to >consider. Once we are within sight of beating the MAI, then we will >almost certainly be asked for our ideas on this matter. > >Finally, if we have missed doubtless the one thorough document which does >just this, then our apologies and please send it or e-mail. it to us. >Otherwise please send any comments or additions you might have which we >will incorporate and circulate. We hope you find this useful: > >Ward Morehouse, Program on Corporations, Law and Democracy, >Suite 3C, 777 United Nations Plaza, New York, New York 10017 tel (212) >972 9877 fax (212) 972 9878. e-mail [EMAIL PROTECTED] > >Colin Hines, 11 Park House Gardens, East Twickenham, Middlesex, TW1 2DF. >UK. >tel 44181 892 8672, fax 44181 892 5051. e-mail chines@dial .pipex .com > > >OVERARCHING INTERNATIONAL CONCEPT: THE ALTERNATIVE INVESTMENT CODE >(SUGGESTIONS FOR SEXIER TITLE WELCOME!) > > >The intention of such a code is NOT to ensure the unimpeded international >flow of capital and investment, but to have as its basic aim the >regrounding of capital locally to fund the diversification of local, >sustainable economies which have at their core the right to livelihood. >The right to livelihood is a key human rights goal in this alternative >investment code. Other rights such as private property rights are >contingent on fulfilment of this most basic human right. > >Tony Clarke and Maude Barlow in their groundbreaking book MAI and the >Threat to Canadian Sovereignty pointed out that: ...the UN Charter of >Economic Rights and Duties of States provided quite a different framework >for establishing a set of global investment rules. It was based on the >assumption that nation-states acting on behalf of all their citizens and >the public at large, had the political sovereignty to regulate foreign >investment. The Charter granted member nations the authority to supervise >the operations of transnational corporations in their territories by >establishing performance requirements. > >These performance requirements were to be based on the national >development needs of the people of each country. While nation states were >also granted the powers to nationalize, expropriate or transfer >ownership of foreign property, the charter called for the payment of >fair compensation for expropriation. > >Although changes in the global economy over the past twenty years or so >would require that modifications be made, the UN Charter on the Economic >Rights and Duties of States contains many of the elements for modern, >alternative approach to global investment rules. > >Bearing this in mind a fundamental rethink of the MAI could result in an >agreement along the lines of this: > > >ALTERNATIVE INVESTMENT CODE; KEY PROVISIONS > >PURPOSE; The Alternative Investment Code (AIC) seeks to strengthen >democratic control of capital and stimulate investments that benefit >local communities. > >NATIONAL TREATMENT: Investments that increase local employment with >decent wages, enhance protection of the environment and otherwise improve >the quality of life in communities and regions within states which are >parties to the AIC are encouraged. States are urged to give favourable >treatment to domestic investors who further these goals and are >prohibited from treating foreign investors as favourably as domestic >investors. > >MOST FAVOURED NATION STATUS: Provided it is not at the expense of >domestic investors, states shall give preferential treatment to investors >from other states which respect human rights, treat workers fairly, and >protect the environment. > >PERFORMANCE REQUIREMENTS: States may impose requirements on investors >which further the goals of this code such as the following: > >a) to achieve a given level or percentage of domestic content, whilst at >the same times ensuring that monopolies do not develop; > >b) to give preference to goods produced locally; > >c) to stipulate a minimum level of local equity participation; > >d) to hire a given level of local personnel and respect labour and >environmental standards; > >e) to protect enterprises which serve community needs from unfair foreign >competition; > >STANDSTILL AND ROLLBACK: No state party to the AIC can pass laws or >adopt regulations that diminish local control of capital or that divert >investors from giving priority to meeting local needs. > Existing laws and regulations that give preferential treatment to >foreign investors or encourage absentee ownership of community-based >enterprises must be rolled back over the next decade. > >DISPUTE RESOLUTION: Citizen groups and community institutions are given >standing to sue investors for violations of this investment code. All >judicial and quasi-judicial procedures such as arbitration shall be fully >transparent and open to public observation. > >INVESTMENT PROTECTION: Workers and communities play a vital role in the >creation of corporate assets, and that role must be recognised and >protected. Thus, expropriation of such assets to serve vital community >needs is permitted and must take into account the interest of workers >and communities in those assets. Similarly, restrictions may be placed >on excessive repatriation of profits by foreign investors, and capital >may not be transferred without indemnification of worker and community >interest in such capital. > >Central to this new set of controls on investments will be the >establishment of policies for the effective community and national >control of capital. > >Controlling Capital- Hands On Rather Than Hands Off > >What is required is the investment of the majority of funds in the >locality where they are generated and/or needed, i.e. an 'invest here to >prosper here' policy. Democratic control over capital must be seen as >the key to providing the money for governments and communities to improve >environmental and social conditions and job opportunities. > >The fear is that any one country, on its own, would immediately be >punished by the markets for even considering such an approach. However, a >regional grouping of states such as in the European Union or North >America would be a powerful, secure and lucrative enough market to ensure >that those that control money flows would not dare exit from the safety >of such a bloc. > >These policies must also incorporate an internationalist approach to make >certain that they do not merely benefit the rich countries at the expense >of the poor. Tax penalties will exist for foreign investment which does >not directly help the Third World or Eastern Europe to protect and >rediversify their own sustainable local economies. Aid and trade rules >must be changed to ensure a similar outcome and the transfer of >sustainable technologies must become the centre piece of new aid regimes. > >What is required on an economic bloc-wide scale is a check on the >destructive power of speculators through the introduction of a Tobin Tax >which taxes domestic and global foreign exchange speculation. A purchase >tax on stocks, bonds, derivatives etc. would be introduced. The present >easy credit that allows speculators to multiply the size of their bets >way beyond the cash required to cover them, should be replaced by an >insistence that those buying must put up 100% of the purchase price. >Governments also need to reassert control over fiscal policies (i.e. tax >and public expenditure) by re-regulating finance and banking and >reintroducing exchange controls. Central banks should lower interest >rates to achieve a new end goal of generating large numbers of new jobs >by investing locally. > >Once the threat of capital flight has been substantially lessened the >taxation system can be changed progressively to serve the needs of the >community in general. Higher taxation of capital gains, green taxes, >progressive taxes on income and lower taxes on labour all have a place in >this transformation. Strict and transparent accounting rules would enable >the phasing out of 'corporate welfare' for the undeserving rich.. Payback >periods need to be lengthened using penal short-term capital gains tax >for shareholders who take early profits, but tapering to near zero for >longer-term shareholders. At the end of perhaps 20 years however the >shareholder interest would revert to the workers and communities which >have played a critical role in generating company profits. Such >regulation of investment to impose some obligations towards affected >communities is key. > >Also vital is a bloc-wide Beat a Cheat campaign cracking down on >corporate tax evasion. This would require public disclosure of corporate >finances, especially global taxes paid or avoided and closing national >and global tax loopholes. It would also penalise and eventually eliminate >tax havens. Intra-corporate financial transfers, at present used to avoid >paying national taxes (e.g. transfer pricing), would also be monitored >and punitively taxed. After due warning to allow diversification of the >economies concerned, offshore banking centres should be closed down by >prohibiting domestic banking systems from honouring the transfers of >offshore capital. This would prevent capital evading banking and >securities laws and national taxes. > >To keep capital local the influence of local banks on central bank >policies must be strengthened to reinforce the significance of the local >banking structure. This would encourage the rebuilding of local economies >via smaller locally based banks, credit unions, LETS schemes etc. >Insurance, pension, building society and endowment funds should be >encouraged via legislative measures and tax breaks to invest in the >local. And those who contribute to such funding must in law become more >genuine owners by achieving greater control over their own savings and >deferred wages. > >The Present Global Economic Instability Comes To Our Aid > >Since the end goal of such an Alternative Investment Code is the exact >opposite of the MAIs raison dêtre and the neoliberal model, >justification for its plausibility is vital. This will be helped by >referring to the present Asian crisis and how the deflationary policies >that the IMF will enforce in that area will not only reduce demand there, >but also in the rest of the world by reducing export markets and >undercutting the products of other areas via Asias competitive currency >devaluation. Similar deflationary policies are occurring in Europe as it >prepares for it own structural adjustment policy of the Single Currency. >In short, the global system can still produce countless products and >services, the problem (which Business Week in a Special Report on >November 10th termed The Threat of Deflation) will be lack of adequate >consumer demand. The MAI with its emphasis on less protection for local >industries and services, and the orgy of global mergers and job losses >likely to result, will only make matters worse. > >WARD MOREHOUSE AND COLIN HINES, December 1997. > > >Essential reading: > >MAI-The Multilateral Agreement on Investment and the Threat to Canadian >Sovereignty Tony Clarke and Maude Barlow. Stoddart Publishing,Toronto, >1997. > >Other references: > > Control Capital, Create Jobs Colin Hines and Alan Simpson, Agenda For >A Second Term, London, November, 1997. > >Other methods for enhancing community self management Shann Turnbull, >in Building Sustainable Communities edited by Ward Morehouse, the >Bootstrap Press, John Carpenter Publishing, US and UK, 1997 > >Background Reading: >- Turning the Tide-Confronting the Money Traders John Dillon, Canadian >Centre for Policy Alternatives 1997. >- One World Ready or Not- The Manic Logic of Global Capitalism William >Greider, Simon and Schuster, 1997. >- The Corporate Planet: Ecology and Politics in the Age of >Globalisation Joshua Karliner, Sierra Club Books, Sa Francisco, 1997. >- The Global Trap: Globalisation and the Assault on Prosperity and >Democracy, Hans-Peter Martin and Harald Schumann, Zed Books, London, >1997. >- Does Free trade Create Good Jobs? David C Ranney and Robert R >Naiman, Institute for Policy Studies and Great Cities Institute, 1997. >- In Defence of Capital Controls James Crotty and Gerald Epstein in >Leo Panitch (ed) Socialist Register, 1996: Are There Alternatives? (New >York: Monthly Review Publishing Company, 1996 >- The Case Against the Global Economy Jerry Mander and Edward >Goldsmith, Sierra Club Books, 1997. >- When Corporations Rule the World David Korten, Kumarian Press 1995. >
