Foreign direct investment and international agreements: a south perspective

Foreign direct investment and international agreements: a south perspective

A critical examination of plans for a new MAI style agreement.

The case against an MAI style agreement is stronger now than when the original agreement was dismissed by the OECD. The MAI style proposals being suggested are against the interests of the citizens and workers of developed nations, are incompatible with the needs of developing countries and are a step backwards from even the existing staus quo.

The reasons for this are:

  • Competition to attract FDI has already shifted the balance of power in the dealings between developing countries and the multinationals towards the latter. The proposed MAI would make this worse.
  • The Asian economic crisis shows that unless developing nations can control the targeting, timing and amount of FDI to balance the flow of foreign exchange they are subject to possible liquidity problems and potentially disastrous financial fragility. Also research shows that both technology transfer and spill-over benefits occur best when FDI is carefully regulated and fits well into a host country's development programme.
  • By giving greater freedom to multinationals the proposed MAI would be likely to exacerbate the current concentration of FDI in a few high growth nations with already savings and investment rates. Low income, low savings nations require a share of this investment to meet developmental goals.
  • The international merger movement has already tilted the playing fields against developing country corporations in a number of ways. If the proposed MAI allows FDI to take the form of acquisitions of host country corporations this will have further negative consequences.

The author dismisses arguments made in favour of replacing bilateral investment treaties with multilateral treaties and is critical of the 'cherished WTO principles' of national treatment and market access arguing that they are in conflict with the stated WTO objectives of economic development and full employment.

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