Select Committee on Environmental Audit Second Report


46. The issue of multilateral rules on foreign direct investment is back on the agenda as was indicated by the Government during our inquiry into the OECD MAI. We noted that both Trade and Environment Ministers now disavowed the OECD process with Mr Caborn saying it "was wrong and we drew a line under it".[88] We retain the impression that the line had been drawn by the withdrawal of the French Government from the negotiations and that the UK Government had been sanguine about the prospects for eventual success.[89]

47. The key differences between the OECD proposals and what seems likely to be the basis for WTO negotiations (if agreed at all) appear to be:

- the unlikelihood of an investor-state dispute mechanism being negotiable;

- the introduction of differentiation based on legitimate policy criteria of the host government (as distinct from discrimination on the grounds of foreign ownership)[90]

- the reversal of the implementation process from top-down (whereby all economic sectors are covered unless specifically excluded);[91] and

- an emphasis, in the conclusions of the General Affairs Council at least, on investor responsibilities.[92]

These changes do reflect the thrust of our conclusions on the OECD MAI of last Session.[93]

48. The WWF told us that they remained convinced that the WTO was the wrong place for negotiations on investment rules because regulation (of investment and regulatory incentives, of transfer pricing, restrictive business practices and the environmental behaviour of multinational corporations) and the specific promotion of investment flows to developing countries was at least as important to improving foreign direct investment as liberalisation. And regulation was no part of the mandate or culture of WTO negotiators. NGO witnesses concluded that although the OECD MAI experience had brought about some changes in language, stated aims and process, there was no concrete evidence that the overall focus of UK policy had changed.[94]

49. We remain unconvinced of the need for multilateral rules for investment and wary of the same risks that were identified for us during our inquiry into the OECD MAI. Witnesses from NGOs pointed to the existing network of bilateral treaties and also to UNCTAD's conclusion that there was no discernible link between levels of liberalisation and investor protection and levels of investment flows.

88  Q10 Back

89  See Appendix to the Report Back

90  Ev p. 22 Back

91  Commission communication, p 10 Back

92  Ev p. 107 (c) Back

93  See Appendix to the Report Back

94  Ev p. 23 Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 1999
Prepared 25 November 1999