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10.34 am
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
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:
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:
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
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.
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,
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.
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.
"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 conduct"
of a foreign investment.
"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.
"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.
"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.
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