The Political Economy Of The Multilateral Agreement On Investment
Alan M. Rugman

The MAI at the OECD

The structure of the MAI follows that of NAFTA, and is built upon the following platform:-

• principle of national treatment, with lists of exempted sectors;
• transparency, i.e. all regulations on investment are identified as are all exemptions to the principle of national treatment;
• dispute settlement mechanisms, to permit individual investors (and companies) to appeal against government regulations and bureaucratic controls;
• movement towards harmonization of regulations, although in the areas of competition policy and tax policy not much progress can be expected in the MAI (and none was achieved in NAFTA).

In the draft MAI all of these four areas have been addressed and a reading of the draft shows that the structure of the MAI is based upon NAFTA's investment provisions, as was predictable. The aim of the MAI is to make domestic markets internationally contestable, by providing a basic set of rules for FDI, to which all member countries sign on. The OECD in Paris is the correct venue to negotiate the MAI as 98% of all the world's FDI is conducted by MNEs based in the 28 member countries of OECD, i.e. all of Western Europe, North America, Japan, Korea, Australia and New Zealand. There is some opposition to the MAI in a few third world countries, but until the World Trade Organization gets moving on investment issues, there is no practical alternative to the OECD as a venue for the MAI.

Another reason for the MAI being at the OECD is that it builds upon several existing OECD investment instruments, including a code of conduct for MNEs from 1975, Safarian (1993). The OECD has been a group working for the last quarter century to establish a binding set of legal rules for foreign investment and ensure market access for investment according to the principle of national treatment. Expert opinion has agreed that developing countries would benefit from an MAI as it would encourage long-term investment and support sustainable development, Fitzgerald (1998). This study did not find support for the concern that developing countries would lose economic sovereignty due to an MAI. Nor was there any question of an MAI leading to lower environmental and labour standards, as argued by NGOs.