§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Betts.]
9.34 am§ Mr. David Chaytor (Bury, North)Thank you, Madam Speaker, for enabling this debate to take place this morning. I am pleased that so many hon. Members have chosen to attend, because it has to be said that the Organisation for Economic Co-operation and Development multilateral agreement on investment is not the stuff of soundbite politics, nor a topic that preoccupies many people. Nevertheless, it is a matter that has profound implications for millions of people in this country and throughout the world, so it is important that we now start a wider public debate on the subject.
I do not claim any specialist knowledge of the MAI—far from it—but I have concerns about the process by which the MAI has been negotiated and progressed so far. That process has been largely shrouded in secrecy, which is reflected in the references to the agreement made in the House over the past few months: no major debate, a small memorandum to a Select Committee, and only a handful of parliamentary questions. It is also reflected in the complete lack of understanding of the agreement and its implications among the public at large and the limited press coverage of the subject over the past 18 months.
I sought today's debate to ensure that understanding of the MAI is more widely disseminated and to enable a serious public debate to be started. In its current draft form, the agreement—negotiated largely in secret, originally due for completion two months ago but now postponed until 1998 and little understood by anyone in any of the countries to which it relates—is capable of having the most profound effects on the lives of men and women in every country.
The MAI is a free-standing international treaty on the protection and liberalisation of international investment, including direct equity and portfolio investment. It has been negotiated solely by the 29 OECD countries, but will be open to non-members. I understand that Argentina, Chile, Slovakia and Hong Kong are scheduled to be invited to join in the first wave. Negotiations on the MAI started in 1995 and were the culmination of many years of discussion about establishing an agreement on international investment. They were scheduled to finish in May 1997; however, the complexity of the treaty and the number of exemptions that countries have now started to file mean that the date for signature has been put back until May 1998.
870 The MAI aims to promote a non-discriminatory system of global investment regulation. Each party to the agreement commits itself to certain conditions: first, not to treat foreign investors worse than domestic investors or exclude them from any sector not covered by a specific exemption. That means, however, that foreign investors may be treated better than local investors. Secondly, the parties agree to extend any advantage given to one country's investor to all countries in the MAI. Thirdly, they agree not to expropriate investments, either directly or by changes in taxation or regulation, including environmental regulations, without full market-rate convertible currency compensation. Fourthly, countries promise not to restrict profit repatriation, even when experiencing severe balance of payments problems. Fifthly, they agree not to apply any restrictions on incoming investors in respect of technology transfer, joint ownership, local employment, local purchasing, export levels, production into local markets and employment of personnel.
The aim of the MAI is to roll back existing legislation, so that all sectors are open to inward investment. Parties will agree not to introduce any new discriminatory laws, and will then register a list of exemptions for national laws. That process of registering exemptions has been one of the main reasons why the completion of the negotiations has now been deferred for another 12 months. I understand that 500 pages of exemptions have now been registered, covering sectors such as air and maritime transport, natural resources and fishing, forestry, mining, oil and gas, toxic waste disposal and competition laws.
Finally, the rules will be enforced by binding international arbitration. Disputes can be initiated not only by states but by private investors, and they will apply both to existing investments and to attempts to enter a country. The international tribunal will be able to order states to reform their laws so as to be in compliance with the MAI; and to pay compensation to the affected investor. States cannot, however, use the tribunal to enforce reciprocal duties on investors under the MAI.
Those negotiations must be seen in a context in which foreign investment increased by 800 per cent. between 1983 and 1990, and in a single year, 1994–95, by a staggering 46 per cent. Significantly, however, most of that investment is concentrated in the three major economic powers—Europe, Japan and north America. Over the past 10 years, 70 per cent. of all foreign direct investment has gone to just 10 countries. By contrast, the 48 least well-developed countries, with a combined population of 570 million, have received a mere 3 per cent. of global investment in the past two decades.
Of the $100 billion invested in developing countries, two thirds goes to south-east Asia, with China being the principal beneficiary. In recent years, investment in sub-Saharan Africa amounted to less than 1 per cent. of its gross domestic product. The potential, therefore, for rapid expansion of foreign direct investment in the poorest countries is enormous; and it is partly to prepare the ground for it that the MAI is being negotiated.
The anxiety is that with that enormous growth in foreign direct investment, and the explosive growth in currency markets—they are now trading $1 trillion a day—the fear of losing investment will force Governments to lower environmental and social standards. That is a serious issue for countries already 871 receiving investment. It is an even more dramatic dilemma for countries desperately trying to get on the first rung of the ladder of international investment. The costs of that race to the bottom—the race to lower standards—will be borne by workers, whose health, standards of living and security of employment will be put at risk. They will also be borne by future generations, as Governments use short-term gain to strip out the natural resources of the world today.
There can be no disagreement about the fact that an international treaty on investment is necessary. The current patchwork quilt of bilateral agreements is unsatisfactory and arguably leads to investment being concentrated in so-called safe countries. The issue therefore is: what should such an international investment agreement contain? A major concern is that the current draft agreement, although arguably non-contentious for a limited number of broadly similar western economies, contains serious limitations when it is extended, as is the intention, to developing countries. There are always likely to be conflicts between transnational corporations investing in developing countries and the objectives of the host countries. Those, however, can be resolved by careful framing of regulations.
The MAI will effectively transfer a new area of national development policy from national Governments to unelected multinational corporations, which will remain free to act in their own interests—without obligations to observe any form of minimum standards with regard to public welfare, the environment or fair business practices.
The fundamental principles of the MAI are in clear conflict with existing non-binding agreements signed by Governments at the Earth summit and subsequently at more recent summits. Contrary to those agreements, the MAI promotes liberalisation of capital as an end in itself, instead of attaching priority to combating poverty and protecting the environment, and protecting workers, consumers, indigenous cultures and other vulnerable groups.
Compounding that tendency, the MAI establishes a one-way dispute mechanism that extends economic powers into the political arena, including the right of foreign investors to take Governments and local authorities to an international tribunal, where they can challenge host country laws. Here again, there is no corresponding right of Governments or their citizens to take action against investing multinationals that breach international agreements.
The scale of the operations of the world's 40,000 multinational corporations is staggering. The top 500 multinationals, 95 per cent. of which are located in OECD countries, account for 80 per cent of foreign investment and 70 per cent. of world trade. Annual sales of the eight largest multinationals exceed the GDP of the 50 poorest countries, which contain more than half the world's population.
The priority for international regulation must be to harness the power of those transnational corporations for the sustainable and equitable development of host countries. Agreement on their responsibilities should precede any further strengthening of their rights.
Another concern is that non-OECD countries—a majority of the world's countries—have not been involved in the current negotiations, but will be invited to accede 872 to the final agreement. The MAI is already being promoted as a stamp of approval for foreign investors. For most of the developing world, with few options for economic development, the pressures to sign will be irresistible. The MAI will take international economic liberalisation to its next stage. The world's poorest countries have already been persuaded to lower their tariff barriers under the general agreement on tariffs and trade Uruguay round and to concentrate on export-oriented commodities, under various structural adjustment programmes.
The outcome for many of the poorest countries has been disastrous. In the first half of the 1990s, people in 19 of the world's 51 poorest countries have watched their living standards fall as commodity prices have fallen, because of over-supply. Meanwhile, employment in the formal sector has declined in the face of international competition and International Monetary Fund-enforced cuts in Government spending. As a result, the number of people living in poverty throughout the world has reached unprecedented heights.
The MAI will take away further powers of Government over economic policy making. Those powers have been important in the development of most OECD countries, to protect the public from the negative impact of foreign investment, and to stsengthen links between foreign investment and local economies. Ironically, the OECD countries that have benefited from those powers in the past now seek to deny them to today's developing countries.
In recent months, many organisations have expressed concern about the progress of the MAI; I should like to refer to two of them. Christian Aid has produced a statement identifying the weaknesses in the agreement. It says that rights should go with responsibilities and calls for corporations to apply the same high standards wherever they do business in the world, using clean and appropriate technologies and respecting local development needs. Christian Aid says that investment should be long term and productive, and calls for new mechanisms to be developed to restrain speculative investment. Under the MAI, it says, host Governments should be permitted and encouraged to develop policies to meet those goals. Finally, the organisation calls for the development of mechanisms that will encourage investment to reach the poorest countries and, inside those countries, ensure that investment is available to small-scale entrepreneurs and businesses, via micro-credit schemes.
Oxfam has also criticised the current draft agreement. In its view, the MAI needs to be amended to promote forms of international investment that benefit communities and the environment. First, there should be greater transparency and consultation in the negotiation process. Secondly, investment decisions should be made democratically accountable: citizens and communities should have the right to bring claims directly against investors who breach international agreements. Thirdly, investor rights should be balanced with obligations to comply with international labour, environmental and consumer standards. Fourthly, there should be regulation of anti-competitive behaviour and restrictive business practice and there should be common rules for financial incentives and taxation.
873 Many alternative recommendations for inclusion in the MAI have been considered. Some people have argued that there should be regulations positively to prevent the weakening of environmental standards, to ensure that none of the provisions of the MAI conflicts with existing international agreements, to include references to public information on companies' activities, to take steps to prevent corruption of public authorities in the award of contracts to foreign investors and, most important, to prevent the use of transfer pricing as a means of avoiding local taxation.
At the heart of the issue lies globalisation. What type of future do we want for the planet? Do we believe that unrestrained free-market capitalism alone can achieve the social, environmental and economic objectives that are increasingly shared by the peoples of the world—good housing, good education, decent health care and freedom from the fear of unemployment and from environmental degradation?
I suspect that many people are coming to believe that our love affair with the idea of globalisation is entering a difficult period, as more and more voices warn of the dangers of the limitations of the free market in serving social purposes, and of the social and environmental limits to economic growth. Do we really believe that simply exporting all the features of western civilisation to countries with a markedly different history and culture represents the ideal way forward for the world in the 21st century?
The problem with the MAI as it stands is that it provides for an unprecedented shift in power from national Governments—and sometimes loose federations of national Governments—pursuing a range of social, environmental and economic objectives, to transnational corporations with one objective only. It creates new rights for transnational corporations, but says nothing about their responsibilities. It leaves responsibility with national Governments, but takes away their rights.
In the past few weeks, we have had a new Government in the United Kingdom, who have made welcome statements about many aspects of our overseas relationships. My right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs has made a statement, outlining an ethical foreign policy. A new Department of International Development has been established, which has promised a new approach to development issues.
Many people want the Department of Trade and Industry to follow those leads. Many people want the DTI to integrate its policy making with that of the Department of International Development. In addition to an ethical foreign policy, we should develop an ethical investment policy.
The current draft of the MAI gives enormous additional powers to the transnational corporations, 95 per cent. of which are housed in OECD countries. It enables them to sustain their operations and further entrench their power with minimal reference to the working conditions of the indigenous labour forces that they employ, the long-term impact on the environment in which they operate and their impact on the local economies of the countries into which they relocate.
We are proud to say that the new Labour Government have placed at the heart of their policy making the importance of the balance between rights and 874 responsibilities. During the next few months, as negotiations on the MAI continue, there will be an opportunity to propose amendments containing powerful and effective conditions, to protect against the exploitation of labour and the destruction of the natural environment, to prevent the destabilisation of local economies throughout the world as a result of speculative investment and to endorse the principles of sustainable development.
We have a unique opportunity to establish a balance between rights and responsibilities in a way that will benefit the lives of millions of people for many years to come.
§ Mr. Denis MacShane (Rotherham)I congratulate my hon. Friend the Member for Bury, North (Mr. Chaytor) on initiating the debate and advancing his arguments compellingly. I regret the absence of any Conservative Member who is prepared to make a contribution to the debate—after all, the Conservative party is supposedly the party of globalisation and the free market. I suppose that the Tories are all getting ready for their grouse shooting or fox hunting, or whatever they now do in their spare time.
I have considerable personal interest in the subject of the debate because I spent a goodly part of my life tramping around bits of the world and witnessing the effect of multinational companies on local economies and societies. That experience may have caused me to adopt a slightly different perspective from that of my hon. Friend the Member for Bury, North. On the whole, I found that trade, the freer the better, is a good thing because, as the eminent socialist economist Joan Robinson once said, if there is one thing worse than being exploited by a multinational, it is not being exploited by a multinational.
Multinational companies are one of the most powerful vectors of the so-called north-south dialogue. I caution speakers in the debate before they counterpoise the all-puissant multinational and the robust democratic national Government because, in many parts of the world in which I worked, it was the national Government who were corrupt and dictatorial, creaming off as much money as possible and imposing labour and environmental standards that did immense damage to their people.
§ Mr. Alan Clark (Kensington and Chelsea)Hear, hear.
§ Mr. MacShaneI wish that Conservative Members would go off fox hunting and leave the debate to Labour Members, as we are the only ones who are interested.
Multinationals suffer far more public opprobrium and pressure than some third-world dictatorships. Just ask the chairmen of Shell, British Petroleum, or Nike in America, who find their annual general meetings invaded by campaigners on these issues. I wish that one could bring as much pressure to bear on some of the national Governments who are host to multinational companies.
We should not forget that multinational companies and the overseas flows of foreign direct investment largely represent our money—our pension fund money, our savings, our investments, local authority workers' savings and miners' savings. If we want to control the way in which that money is used, we should ask ourselves why, 875 given that it is our money, we do not in our own countries effect sufficient controls to ensure that it is guided to proper and decent uses.
I believe that the multilateral agreement on investment comes down to a simple premise, "Do as you would be done by." In other words, to use another bit of trade jargon, it erects most-favoured nation status as a rule for investment, so that Governments must treat any company entering their country exactly as they would treat indigenous or national companies. If there is a problem concerning environmental and labour rights, which there is—my hon. Friend the Member for Bury, North spoke about it and I know that other hon. Friends will speak about it, because they are passionately concerned—the answer is to insist that national Governments impose appropriate laws, regulations and inspection systems, on the green front, on the front of child labour and so on.
What must not be permitted under the MAI, however, is for a Government—perhaps I do not want to name any specific Governments, but there are ones where the first families are known as Mr. and Mrs. Ten per cent.—
§ Mr. MacShaneThey are called that because that is the percentage that they take for their Swiss bank accounts—something on which the right hon. Member for Kensington and Chelsea (Mr. Clark) is an expert.
§ Mr. ClarkThe hon. Gentleman should elaborate on that remark. He is making an interesting speech, to which I am paying great attention. He started it by saying that there were no Conservatives in the Chamber because they had all gone fox hunting, which is a slightly bizarre exhortation in the month of July, but we shall pass that by. He then said that he wished that Conservatives on the Opposition Benches would go off fox hunting. Does he want us here or not? Are we to have a proper debate, or does he wish to banish us to our field sports, of which, as he well knows, I have long been a consistent opponent?
§ Mr. MacShaneI am glad that there is one month a year in which the poor foxes are allowed to live. However, I welcome the contribution that I am sure the right hon. Gentleman will make to the debate in due course.
Let me return to the fundamental point: it is important and necessary for countries across the world to accept fair treatment of all investments coming into them, whether national or foreign direct. That is the core essence of the MAI. Many groups are rightly worried that they are being excluded from the negotiations and that their point of view is not being heard. However, the underlying principle, which we are now seeing in many different spheres of economic and environmental activity, of seeking to secure international regulations for problems that are no longer resolvable within the national framework, is good.
I very much welcome the new tone of the Government, who are stressing the importance of eliminating child labour, in stark contrast to the previous Government, who refused to join the United States and other allies in ensuring that issues such as child labour were placed on the agenda at the World Trade Organisation summit in 876 Singapore last December. That was a shaming moment for our country, and the new approach of the Labour Government is to be welcomed. The need for wider international agreement will continue to have to engage Government Departments—both the Department of Trade and Industry and other Departments such as the Foreign Office and the new Department of International Development.
I hope that the new mandate given to our negotiators in Paris will acknowledge the consistent hard work being done by non-governmental organisations representing green and employee interests, to put their concerns before the MAI negotiators and to insist that binding agreements covering those issues are included in the new agreement when it is finally settled. Let us not be too optimistic, however, because in addition to the 500 exemptions that my hon. Friend the Member for Bury, North mentioned, I understand that the United States is demanding that the MAI should apply to none of the 50 states within the US. That makes a complete mockery of it—one rule for American multinationals in Latin America, but another for those in Wisconsin or Colorado, which can take no notice of the MAI in respect of British or Korean firms that enter their arena.
The French are demanding that culture be exempted. That is what the French are there for, but they are right to insist that their culture is not totally taken over by Hollywood, McDonald's or others who would reduce all national cultures to an American homogenised sludge.
I am therefore not convinced that all the grand international negotiations about which people get very excited and worked up will leave us next May faced with a new straitjacket or iron maiden, which will clamp around us and cause the terrible things that are being threatened.
I urge hon. Members not to counterpoise the green agenda with what I might call the human agenda. Most of the lobbying on that has been done by extremely energetic organisations representing different aspects of the new green movement, whether it is on nature itself or on animal rights. I am more concerned about the massive growth in child labour and the massive denial of workers organising and representing themselves in different countries. The worst kind of protectionism is not the unacceptable protectionism based around tariffs and quotas, but the protectionism of national Governments who seek to protect their own firms and foreign firms coming in from their own citizens' right to set up organisations to negotiate on their behalf, so that they earn a fair share of the value that they add to the products and services that they produce.
The OECD already has useful guidelines on multinational companies. They were set up in 1976 under the leadership of a Labour Government, but alas remained, if not a dead, a somewhat somnolent letter, particularly during the dark years of ideological free trade of the 1980s. Now that we have new Governments in America, France and this country, and democratic Governments in far more parts of the world, who seek to reflect and satisfy the needs of all of society, not just the needs of special interests, the OECD guidelines could be brought back into play. There is on the table in Paris a proposal for clauses that would ensure that existing standards on environmental or labour issues were not lowered under the new MAI. The countries involved, however, are split: 11 of them in the debate at the 877 beginning of this month favoured the inclusion of a binding clause on environmental and labour issues, while 11 favoured simply leaving that at a voluntary level. Even a voluntary level, which does not satisfy me, is a step in the right direction, and I hope that my hon. Friend the Minister will assure us that the British representatives will be among the 11 who want a binding clause. That is the way forward. We should not set national Governments in competition or opposition against multinational companies. That is not so much tilting at windmills; it is rather like the Polish cavalry charging at Panzer battalions.
I am afraid that there are definitely new economic developments that flow round the powers of the nation state. That tide will not be turned back. Our task for the 21st century is to create at international level the rules and regulations that reflect the needs of democracy, humankind and full respect for the environment.
Let us not simply say no to the MAI, because the world will just ignore that appeal. As my hon. Friend the Member for Bury, North argued, and as I hope the Minister will argue, let us work to ensure an alliance with other countries, so that the MAI and other international trade and investment agreements that will be debated in forthcoming years place at their forefront, on a par with the economic rights of companies, the rights of human beings and the environment.
§ 10.7 am
§ Mr. Eric Forth (Bromley and Chislehurst)The intriguing feature of these occasions is that if we are not careful there is a danger that a small number of hon. Members come along clutching briefs prepared by well-meaning organisations and deliver them to an empty House. That is always to be regretted. These are proper debates, properly held in this House, and they should therefore carry all the weight that goes with that phenomenon.
It will embarrass the hon. Member for Rotherham (Mr. MacShane) if I say that I agreed with the measured tone of his speech. I hope that it will set a framework for this debate because he tried to strike a proper balance between what are often wrongly seen as competing interests rather than as interests which should naturally go together.
I shall make two or three brief points as a contribution to the debate. First, there is a danger that we tend to bring a latter-day imperialism to such a debate. We have a view of the world that is well meaning and informed by the sort of groups mentioned earlier, but which may or may not be relevant to the countries that those groups and hon. Members are seeking to help.
I have always been suspicious of the proposition that we in wealthy western Europe, mollycoddled by our international organisations and protected by the European Union and our membership of the OECD, have something that is necessarily relevant to say about different cultures, different traditions and very different stages of economic development. We should be careful to guard against such an assumption.
That leads directly to a second problem, to which the hon. Member for Rotherham referred. A glib assumption is often made that Governments in what we rather patronisingly call underdeveloped, developing or third-world countries are sufficiently pure and 878 knowledgeable that they know what is good for their own people, and that if we involve them or leave matters to them, all will be well.
Experience in all too many countries suggests just the opposite. It is possible, as the hon. Member for Rotherham pointed out, that the involvement of even a transnational or a multinational company in a developing country might be a greater force for the good or the better of the people of that country than their Government would be in providing investment and employment. It must be a matter for those Governments to make a judgment about the basis on which they would welcome—or not—investment into their own countries.
One of the great dangers of debates such as this is that we succumb to a rather easily patronising or latter-day imperialistic view of the world, believing that we know what is good for everyone else and that we should set about telling them that, at the risk of undermining aspects of their economic development—the very thing that we say that we want to improve.
The third issue is the assumption underlying the opening speech of the hon. Member for Bury, North (Mr. Chaytor) that we, or—worse still—bureaucrats and politicians combined, know better where investment should go than those who are making the investment. I have been in the political business long enough to have more than a touch of suspicion about the knowledge and wisdom of politicians and occasionally, dare I say it, of officials and bureaucrats.
I do not have a starry-eyed view of the world of business and commerce. Of course they have their priorities, but what benefits businesses and their shareholders and employees often tends to benefit the wider community within which they operate, perhaps more so than the judgment of politicians and bureaucrats, whether in Paris, Geneva or the capital cities of the countries receiving the investment.
We should be careful before uttering a string of good-sounding clichés to solve all the problems. If we examine the speeches that have already been made and, I would not mind betting, those still to be made, we shall find an extremely high cliché content. They will contain words such as environmental protection, partnership, co-operation and all the other things to which we are supposed to pay lip service, which sound good but which, when subjected to detailed analysis, mean precious little.
I hesitate to keep quoting, but as the hon. Member for Rotherham suggested, we must find a sensible way of bringing together business interests, shareholder interests, employee interests, international development and global flows of money and investment, to meet the aims and aspirations of countries that are highly developed and those that have yet to enjoy economic development. That is surely the way ahead.
From the description of the international agreement that we heard, it sounds to me as though it provides a good basis from which to start. We should try to move it this way or that, rather than to tear it down. I hope that the tone of the debate will continue in the way that it is developing, and that contributors will offer specific suggestions about how the agreement could be made to work better, rather than a string of meaningless clichés.
§ Mr. Jeremy Corbyn (Islington, North)I welcome the opportunity for this debate, and I congratulate my hon. Friend the Member for Bury, North (Mr. Chaytor) on gaining it and on his opening remarks.
It is strange that a major development such as the multilateral agreement on investment, which has enormous implications for every citizen of the planet, should have to be debated in an Adjournment debate in the House and, I suspect, is not being debated at all in many other Parliaments, although its implications go far and wide.
The MAI proposal is a charter for multinational corporations, unaccountable and unelected, to behave as they wish around the world, to the destruction of the environment, the damaging of living standards and the aggrandisement of their own profits, all of which will eventually be repatriated to the OECD countries where those companies originate.
We must take seriously the issues of democracy and accountability around the world. Fifteen or 20 years ago a number of countries tried hard to curtail or control the power of multinational corporations. The Governments who tried to do that found themselves facing the wrath of the International Monetary Fund and the international bankers and were unable to proceed.
I well remember the way in which the Government of Jamaica were removed in 1979 by the IMF because they opposed the power of multinational corporations. I remember the coup in Chile in 1973, which occurred for the same reason—because the Government opposed multinational corporations. I remember the Government of Guatemala being removed in 1954 because they opposed the power of the United Fruit Company. The list is endless.
It is sad that the United Nations, having aimed to be a democratic institution and to promote such good agreements as the Rio agreement and, more recently, the New York summit on the environment, has turned its back on the issues of economic democracy. After the Rio summit the UN closed down the multinational corporations office and has sought to hand over its economic thinking to the World bank and the IMF.
The right hon. Member for Bromley and Chislehurst (Mr. Forth) complained—strangely, for a Conservative—about the northern European imperialistic view of the world, which I do not share or recognise. He was concerned about well-meaning organisations in the north, as he so charmingly put it, which try to advise the rest of the world. I was not aware that he was an active supporter of Oxfam, the World Wide Fund for Nature or other such organisations.
§ Mr. CorbynThat is okay, then—I was slightly worried for a moment.
So as not to be accused of taking part in some northern neo-colonial attempt to control the rest of the world, I will quote from a document produced by the Third World Network, an interesting organisation based in Penang, Malaysia, which seeks to bring together nongovernmental organisations within what we choose to call third-world countries to examine the impact of 880 multinational corporations and their operations on the environment, living standards, labour conditions, child labour and so on around the world.
The Third World Network summarises the aims of the MAI as follows:
The right of entry and establishment of foreign companies in almost all sectors, except security"—which means that Governments lose authority to determine what a foreign investor can do—The right to full equity ownership"—which means that Governments would not be allowed to impose a condition that foreign companies should allow a portion of their equity to be owned locally or form joint ventures with local firms. With reference to national treatment, the foreign company must be treated on exactly equal terms with local companies.
§ Mr. MacShaneI do not know whether my hon. Friend has been in Penang, but I have. German multinational companies there would like to give trade union recognition to their employees, as they do in Germany, but are forbidden to do so by the Government. Oddly, under the MAI that Government rule could not apply.
Is my hon. Friend further aware that women workers in Penang who are employed by Bosch and Siemens escaped from the patriarchal oppression of village life, where they are treated little better than slaves? Does he agree that there are times when multinationals can help to liberate people from the difficulties and oppression to which they would otherwise be condemned?
§ Mr. CorbynI must admit that I have never noticed the charitable nature of multinational corporations in their activities around the world, to which my hon. Friend refers. I am concerned that multinational corporations behave in a manner that is unaccountable to national Governments of any country. They have the power to control the destiny of whole economies and entire peoples. If all national Governments are told that they must treat multinational corporations in the same way as they treat local companies, they cannot provide for local initiatives or promote the development of local co-ops at the expense of multinationals. The MAI would also protect the rights of foreign investors as to intellectual property, physical property speculation and land ownership. National Governments simply cannot enter the argument about developing economies for the benefit of local people rather than of transnational corporations if they are forced to join the MAI.
The notion that improving foreign investment in the third world will put everything right flies in the face of reality in many countries. In 1995, the deputy Finance Minister of Malaysia said:
The rise in the trade deficit is mainly due to an increase in the import of capital goods brought in by foreign investors. If not for foreign investments in 1995, Malaysia would have recorded a large excess in the trade account.He, and many others, are concerned that multinational companies pay little regard to developing the local economy: they are interested only in their own global development and improvement.
§ Mr. ForthI am fascinated by the hon. Gentleman's comments. He seems to believe that a temporary trade surplus is a more desirable objective for developing 881 Governments than the benefits of long-term investment, which may flow from the temporary importing of capital goods. That is a rather odd set of priorities for the hon. Gentleman, of all people, to espouse.
§ Mr. CorbynThe hon. Gentleman will be aware that long-term investment can disappear after three years. Governments have no control over what happens to such investment or over the repatriation of profits. My point is that the involvement of multinational corporations in Malaysia is not necessarily wholly beneficial to the local economy, as its Finance Minister pointed out. He is particularly concerned about those companies' purchasing practices, but there is nothing that he or any other Finance Minister in any developing country can do about it if they sign the MAI.
As to poverty in the world's poorest countries, the World Development Movement has highlighted an interesting quotation from the Ugandan Finance Minister, Basoga Nsadhu. He pointed out that African countries were put under enormous pressure to introduce democracy, structural adjustment programmes, liberalisation and privatisation. They were told that if that happened they would receive the investment and the advantages that they needed, but they have not received those benefits: instead, they are under constant pressure to repay a debt that is unpayable because of the way in which it was incurred and because they have no control over interest rates or oil and commodity prices.
In this debate, I would prefer to see hon. Members addressing the problems of environmental stability and poverty on the planet and the need for an inclusive economic strategy involving the poorest people in the poorest countries. I do not believe that the MAI will address any of those problems because the multinational corporations are not of that ilk.
My hon. Friend the Member for Rotherham (Mr. MacShane) referred to labour rights and conditions, and I agree with him, but why do the MAI and the World Trade Organisation not insist upon every country's implementing the absolute minimum of International Labour Organisation conditions? They do not propose to do that. Multinational corporations tend to operate to the lowest common denominator in every country. The MAI will make illegal any attempt to impose trade union rights as the basis for investment by multinational companies. That would have many repercussions.
In the latter part of the 20th century, we should address issues of poverty and accountability around the world and the need for technology transfer. All countries were represented at the Rio conference in 1992 because the world recognised that there were limits to growth and to exploitation of the natural environment, which had climatic implications. Five years on, the overseas aid has not been provided and the technology transfers that could have helped to lower pollution in poorer countries have not occurred. Liberalisation of trade has increased air and sea pollution and the dumping of toxic and other waste in poorer countries, where disposal is cheaper than in northern countries.
The New York environment summit almost collapsed because of the intellectual property rights issue. Northern countries, acting on behalf of multinational corporations, refused to agree to transfer the necessary technology to poorer countries to enable them to introduce refrigeration 882 systems and vehicles that are less polluting. The OECD countries are absolutely determined that the only model that matters is the power of multinational corporations to go where they will, invest where they will and produce what they will—indeed, to run the world's economy.
Surely to God, at the end of this century, we should look for some form of global arrangement that provides for democracy and the transfer of wealth from the richest to the poorest rather than vice versa. We should surely not sign a charter that gives multinational corporations everything they want and diminishes the power of democratically elected Governments to take action to control the activities of those companies in exploiting and damaging the environment.
Ultimately, the agreement may be signed. However, many people around the world simply do not accept the global economic argument. Those in the rain forests of Latin America do not accept that multinationals have the right to destroy their rivers and forests, and they are fighting back. People in India are determined to fight the World Trade Organisation. We close our eyes to opposition to the idea of the global free market because we do not want to know about it, but such opposition is growing fast.
I hope that the House will at least recognise that the MAI is not a step forwards, but a step backwards and a step away from any form of regulation. It is a step towards giving multinational corporations everything they want, and, at the end of the day, we shall pay the price—just like the people of the poorest countries in the world.
§ Mr. Tony Colman (Putney)I must declare an interest as chair of the United Kingdom Standing Committee on Local Authority Pension Funds and of Church, Charity and Local Authority Fund Managers Ltd. In that context, I am a former manager of a multinational. I congratulate my hon. Friend the Member for Bury, North (Mr. Chaytor) on securing the debate, on a subject which is extremely important not only in this country but throughout the world.
I begin by complimenting the right hon. Member for Suffolk, Coastal (Mr. Gummer), who is not in the Chamber, who made a very interesting speech at Earth summit 2 last month, a copy of which I believe should be placed in the Library. He referred to the multilateral agreement on investment and the World Trade Organisation, and pointed out clearly that the issues relating to the Rio treaty and process and sustainable development had moved away from the United Nations to the World Trade Organisation and the Organisation for Economic Co-operation and Development. He expressed concern on behalf of all hon. Members—it is interesting that, in the spirit of a new Labour Government, the right hon. Gentleman was a member of that delegation—about the somewhat secret treaty that is being negotiated behind closed doors. He said that it should be brought into the open and become part of the United Nations process.
I support the idea of an international treaty covering the matters that the MAI should be discussing—market access, legal security and those dealing with corruption—but it must be on the essence of sustainable development. The language of Rio, which has been so strongly negotiated around the world, should be within any agreement on investment worldwide.
883 As has been said by my hon. Friend the Member for Islington, North (Mr. Corbyn), there were real problems at Earth summit 2 in New York. There was particular concern not only about the basis of the transfer of intellectual property rights, but about transfers of investment. I remind the House that the public sector flows that were committed to at Rio have not been achieved. In fact, there has been a dramatic reduction, and the only basis on which this could be made up is through the private sector flows which have increased dramatically, as my hon. Friend the Member for Bury, North pointed out. If we are looking to a combination of public-private partnership in terms of sustainable development, it must be within terms that are acceptable to the United Nations and to the families of nations on this earth.
One of my opponents at the last general election was Sir James Goldsmith, who died last Saturday. I am sure that the condolences of the House go to his family. I owe a great deal to my hon. Friend the Member for Rotherham (Mr. MacShane), who pointed out the differences in "The Trap", a book written by Sir James, in terms of his views on the European Union. The one thing to which he devoted the last 10 years of his life was very much pointing out the effect on the environment, on world issues, of allowing multinationals to do what they will, untrammelled, across the world. I pay tribute to his brother, Edward Goldsmith, who perhaps woke up to this rather earlier than he did. I wish that more people would speak out on this. The chairman of BP made a very impressive speech in June on the same subject.
One of the outcomes of the social summit in 1995 was that the World bank was required to have environmental and social impact assessments. I believe that the MAI should take that on board, as that proposal would have the support of the International Chamber of Commerce, which represents most multinationals across the world. My experience of UK multinationals—I declare my interest as a former manager for Unilever in Africa—is good. We would wish the House to ensure that the DTI, in its new spirit of working with UK multinationals, will perhaps take them on board in discussing how the MAI should be changed.
I shall pick up two points that are in the MAI, the first of which is about prohibiting the hiring of local personnel. One of the great successes of Unilever in the 1960s and 1970s was the movement to local personnel, so that people were not being flown in from the north, from Europe, with cultural standards and interests that did not reflect local concerns. I shall be very concerned if the final MAI has restrictions on the hiring of local personnel.
My second point is about prohibiting any restrictions in terms of local content in the manufacture of products. Again, it is very important that we support incipient industries and build up industries in the developing world. I commend the work of UK pension funds on investing. I suggest that the right hon. Member for Bromley and Chislehurst (Mr. Forth), who has now left the Chamber, remembers that a number of shareholders are members of the pension funds that I represent. I am concerned that he should understand that people today do not wish to see exploitation and environmental degradation as the basis on which they achieve a pension fund in the future. It is quite possible—the Methodist Church has shown this over 884 the past 15 years—to achieve a high rate of return, which is important for future pensions, by ensuring that the social and environmental risks are dealt with and adjusting the investment to take account of that.
I ask my hon. Friend the Minister to place in the Library a copy of the MAI in its draft form, and further copies as new drafts come forward. Will my hon. Friend, or other Ministers, be able to report to the House regularly on the progress of the negotiations? Finally, I ask her to seek to move the whole negotiation away from the OECD to the United Nations to ensure that this is a UN agreement based on sustainable development and agenda 21.
§ Mr. Alan Simpson (Nottingham, South)I realise that we are running out of time, so I shall try to condense my remarks.
I do not support—and would not want to be associated in any way with—the sentiments that welcome the introduction of the multilateral agreement on investment. It is one of the most unprincipled and disgraceful documents that I have come across. I shall try to highlight the profound and threatening consequences that would follow from it.
The agreement is genuinely revolutionary in the sense that it would for the first time place the rights of companies above those of countries and the rights of shareholders above those of citizens. No reciprocal rights are built into the agreement. It would give companies the right to sue countries and shareholders the right to sue citizens, but not the reverse. A surrender of national sovereignty has been written into the agreement, which has truly frightening implications. It is a crooks charter of an agreement. I shall identify just four of the points that really alarm me.
One of the conditions written into the MAI is a charter for rogue employers. The MAI says that a country that joins cannot
impose, enforce or maintain any of the following requirements, or enforce any commitment or undertaking in connection with the establishment, acquisition, expansion, management, operation, or conductof a foreign investment.What goes out of the window are obligations a country may impose that require local labour agreements, minimum wage agreements, technology transfer obligations, joint ventures such as those my hon. Friend the Member for Islington, North (Mr. Corbyn) mentioned, and all commitments to equal opportunities obligations that are incumbent on a foreign investor moving into a country.
The agreement also scuppers the basis for environmental constraints, because it is a polluters charter. It says:
A contracting Party shall not expropriate or nationalize directly or indirectly an investment … or take any measure or measures having equivalent effect … except for a purpose which is in the public interest … accompanied by payment of prompt, adequate and effective compensation".I should point out that an American company is already threatening to sue Canada for placing environmental constraints on its parent company, which produces a toxic chemical in Canada. The environmental constraints are seen as a form of indirect expropriation of shareholders' rights. 885 The panoply of environmental protection that has been built up around the world would be removed. Taiwan has restrictions on highly polluting industries. Colombia places restrictions on the processing and disposal of toxic or radioactive waste. The Philippines, Thailand, Malaysia, Indonesia and Venezuela place restrictions on banking, insurance and publishing or culturally sensitive industries. A panoply of nationally imposed restrictions on industrial investment would no longer be legal national rights of democratically elected Governments.The agreement is also a speculators charter. Another clause says:
Each contracting Party shall ensure that all payments relating to an investment in its territory of an investor of another Contracting Party may be freely transferred into and out of its territory without delay.Hon. Members may recall the monetary crisis in Mexico, which was fuelled by the ability to move money out quickly. It appears that, under the MAI, such rights will be enshrined and made international in ways that are clearly not reciprocal.Another part of the agreement makes it clear that any country that signs up must give five years' notice before coming out and will continue for 15 years to have legal obligations to the companies that have invested in it. Speculators can take their money out overnight, but countries cannot reclaim their right to national self-determination within what may turn out to be the truncated life of a generation.
The fourth part of my indictment of the agreement is that it is clearly an exploiters charter. It states that a country cannot impose sanctions or deny benefits
because of investments an investor of another contracting party makes, owns or controls, directly or indirectly, in a third country".What that really means is, "If you object to the use of slave labour elsewhere, tough. If you object to the use of child labour, hard luck. If you object to the use of convict labour by a corporation, hard luck again." No such considerations can be taken into account in the determination or imposition of constraints on the investment package.That puts us on the spot, as a Labour Government picking up the strands of what was constructed by what could almost be described as a monetary fundamentalist Conservative Government. It would make a mockery of Labour's commitments to a principled, ethical framework for our foreign policy if we had to say, "You will get child labour under the Labour party. You will get slave labour under the Labour party. And you will get convict labour under the Labour party," because we had signed an agreement giving nations no ability to take action to exclude such investors and investments. That is the real threat, not just to the northern hemisphere but, massively, to the developing world.
When I was at school, kids used to say to each other, "Do you know what the second sign of madness is? Hairs on the palms of your hands." The unsuspecting would look at the palms of their hands, breathe a sigh of relief and ask, "What is the first sign?" They would be told, "Looking for them." Before this Government also go "nuts in MAI" on the agreement, we ought to acknowledge that our first sign of madness would be our being party to negotiation of such an agreement and that the second, ultimate, sign would be our signing up to it. I ask my hon. Friend the Minister to assure us that we 886 will not sign the MAI before the House has had a chance to discuss the full agreement as it is offered and that we will not sign without the full ratification and approval of the House.
§ The Minister for Small Firms, Trade and Industry (Mrs. Barbara Roche)I congratulate my hon. Friend the Member for Bury, North (Mr. Chaytor) on choosing such an important subject. The debate is both timely and welcome—timely because the negotiations on the MAI will shortly reach a critical phase as we approach the target date for completion, April 1998, and welcome because it enables me, on behalf of the Government, to clarify the current position, to offer some reassurances and, I hope, to correct some misapprehensions about the agreement.
We have had a good debate and we have heard well-balanced speeches from my hon. Friends the Members for Rotherham (Mr. MacShane) and for Putney (Mr. Colman). My hon. Friends the Members for Islington, North (Mr. Corbyn) and for Nottingham, South (Mr. Simpson) expressed what I know to be genuine anxieties, which I hope to be able to allay.
The OECD has long been active in international investment flows and has had in place general rules to encourage member countries to maintain an open and non-discriminatory stance on inward investment. Those rules, however, are neither binding nor effectively enforceable. After prolonged discussion in the early 1990s, OECD Ministers decided unanimously to launch the negotiations, calling for an agreement that would provide a broad multilateral framework for international investment. Such an agreement would impose high standards for the liberalisation of investment regimes and for investment protection, along with effective dispute settlement procedures. It was to be a free-standing international treaty open to all OECD members and the European Communities that would allow accession by non-OECD countries, which would be consulted as the negotiations progressed.
The underlying objective of the agreement is to contribute to jobs, prosperity and—most important—sustainable development by facilitating as free as possible a flow of foreign direct investments across national boundaries. Freedom of movement for foreign investments, subject to the appropriate governmental controls—like freedom of trade under the world trade rules—has a big part to play in the global market system. It channels capital to where it can be used most effectively and can contribute most to economic growth. The economy of the United Kingdom, both as a host country and as a source of outward investment, has always been a major participant.
The key principle of the MAI will be a basic obligation to allow foreign investors to make investments on terms that are at least as favourable as those offered to domestic and other foreign investors. That should reassure my hon. Friends, because what it means is non-discriminatory behaviour. The agreement will also provide certain protections for foreign investors—for example, protection from expropriation without compensation. That is part of a non-discriminatory framework. It does not offer foreign companies or multinationals any additional protection that is not available to indigenous companies. Let me stress, 887 in reply to my hon. Friends the Members for Islington, North and for Nottingham, South, that it does not mean—as some observers have suggested—that parties to the agreement will be prevented from regulating multinationals operating in their countries. It is merely that any regulation must not discriminate against foreign investors. The agreement will also provide for certain exceptions even to the non-discrimination rule. It is important to keep a sense of proportion.
The agreement does not prohibit the hiring of local labour; what it means is that Governments cannot insist on it, just as they may well not be able to insist on it for their own companies. It is the non-discrimination rule that is important.
The MAI will require its members to limit their freedom of action in some respects, but that self-denial will be quite restricted in scope. It will be the first binding multilateral investment agreement with provisions for dispute settlement, which will be an essential element in making the agreement effective. We do not expect that recourse to binding dispute settlement procedures will often be necessary, but the fact that the provisions are there will encourage signatories to take their obligations seriously.
The MAI will break new ground by providing both state-to-state and investor-to-state dispute settlements. That will enable disputes to be resolved without always raising the political considerations that inevitably arise in a state-to-state dispute settlement. We believe that that will significantly increase the effectiveness of the agreement.
In the time available to me, I should like to deal with some of the concerns expressed by hon. Members, one of which is that the MAI could shift the balance of power between smaller countries and large multinational companies considering where to locate their investments. The fear is that it would provoke a competitive spiral of deregulation designed to lure attractive projects. I understand that concern, and it would be foolish to say that there is nothing in it, but I doubt whether it will happen in practice. Evidence suggests that special exemptions from regulations are not effective in attracting investments. Predictability and transparency in regulation are far more important and we believe that this agreement will facilitate that.
I am well aware that a number of organisations and individuals, some of whom carry considerable weight and are well known to hon. Members, are concerned about the possible impact of the MAI on environmental and labour standards worldwide. I am also aware that some are concerned about the possibility of the MAI overriding obligations agreed in previously signed multilateral agreements. The new Government have made a clear commitment to safeguarding the international environment and to promoting sustainable development in both developing and industrialised countries. We would not sign an agreement that might damage those commitments. My hon. Friend the Member for Bury, North made an important point about possible legislation on environmental regulation. I reassure him that so long as environmental legislation is non-discriminatory it should be safe from the legal challenge that he described.
888 The Government—unlike their predecessors—have taken a strong line on these issues in the negotiations. In particular, we have called for an unambiguous reaffirmation of our commitment to the Rio declaration in the preamble. I am sure that that will be a source of some reassurance for my hon. Friend the Member for Putney, who rightly raised the matter. We want a clear reaffirmation in the MAI of the OECD "Guidelines for Multinational Enterprises". That important issue was raised by my hon. Friend the Member for Rotherham, who rightly referred to the 1976 date.
Those guidelines encourage multinationals to be good corporate citizens. We also want a strong and binding provision to prevent their lowering environmental or labour standards to attract investments. That issue was rightly raised by my hon. Friends the Members for Rotherham and for Islington, North, who referred to child labour. As he will know, the Government are firmly committed to ending abusive labour practices, including child and forced labour, worldwide. We are already pursuing that objective in the International Labour Organisation and in other international forums. We are also exploring how that work can be taken forward in the World Trade Organisation. I am sure that my hon. Friend will agree that our efforts are in marked contrast to the record of the Conservative party when it was in power.
In short, we are looking for clear language to ensure that there is no possibility of the MAI damaging progress towards better environmental protection and labour standards. We are also prepared to consider other proposals to tackle the problem. For example, we understand that some countries may see a role for a broad assessment of the impact of the MAI on the environment or on sustainable development across the world. Provided that we are sure that any such proposal will be effective and not just an additional bureaucratic burden, we will be willing to support it.
As my right hon. Friend the Prime Minister said, the Government do not want an MAI that could damage progress towards stronger national and international standards of environmental protection. Nor do we want an MAI that could threaten our commitment to sustainable development, core labour standards and the proper regulation of business. The Government would not support an MAI that was inimical to those objectives.
§ Mr. CorbynWhat discussions on the MAI have the Government had either with multinational corporations or through the OECD? What amendments are they tabling to it? When will they be brought before the House?
§ Mrs. RocheDiscussions are taking place. I shall today place in the House of Commons Library the report that was presented to Ministers on the progress of those discussions. I hope that that will provide some reassurance and some information.
§ Mr. CorbynI thank my hon. Friend for that and for giving way a second time on this point. I welcome the fact that that document will be placed in the Library, but will she ensure that, at an appropriate date, there will be a debate in Government time on the MAI and the amendments proposed to it? We should have such a debate before we move to the next stage and to an international agreement.
§ Mrs. RocheI am unable to provide that assurance, but I can tell my hon. Friend that this matter will have to go through all the procedures of the House. It has already been considered by the Scrutiny Committees, and because of the European Community dimension of the negotiations it will inevitably go through all the scrutiny procedures of the House.
There have also been complaints, particularly from non-governmental organisations interested in the environment and international development, that the negotiations have been conducted in secrecy. The Government strongly support wider consultation with NGOs to hear their concerns and to learn from their experience. It was agreed in June to arrange a further meeting of MAI negotiators and NGO representatives in Paris in October. I can confirm that my own negotiators will attend that important meeting.
In the United Kingdom, officials from the Department of Trade and Industry and other interested Departments have met British NGOs on more than one occasion and will be holding another meeting in September in advance of the Paris meeting. Officials in my Department are looking forward to that meeting. Naturally, I cannot promise that we will support every suggestion that the NGOs may make, but I can make a commitment that we will listen to their ideas very carefully.
I have spoken about the parliamentary scrutiny process. I am glad that the House has had the opportunity today to debate the agreement. We welcome that. In accordance with standard procedure, the agreement will be available to Members of both Houses prior to ratification by the United Kingdom.
The MAI has its roots in the OECD. A great deal of effort has also been put into outreach events, looking towards countries that are not part of the process. We are playing a prominent role in that.
United Kingdom negotiators will be present at an event in Paris in September for a large number of OECD non-members and at a first event in Africa in the autumn to be hosted by the Egyptian Government. We hope that, as a result of all that activity, by the time the negotiations are completed, at least a handful of non-OECD countries may—
§ Mr. Deputy Speaker (Sir Alan Haselhurst)Order. We now move to the debate on British fishing policy.