The Multilateral Agreement on Investment (MAI) refers to the draft agreement negotiated among OECD members starting from 1995, with the aim of building a multilateral framework for international investment. However, the negotiation was suspended in 1998 due to disagreement on issues like investment protection standards, dispute settlement mechanisms and special preferential treatment for developing countries. This article analyzes several key factors that affected MAI negotiation process.
Developed and developing countries have different appeals for investment agreement
Developed countries hope to reduce restrictions on foreign investment through the MAI negotiation and promote capital flow, while developing countries are more concerned about development space and policy autonomy. The conflict makes it difficult to balance the rights and obligations between both sides. Specifically, developed countries advocate higher investment protection standards while developing countries worry those would affect their policy tools. In terms of dispute settlement mechanism, developed countries prefer international arbitration while developing countries argue for domestic judicial remedy.
Contradiction between comprehensiveness and flexibility
The MAI aims to become a comprehensive investment framework. However, considering varied conditions among participants, certain flexibility is also needed, like transitional periods and exemption clauses for developing economies. It’s challenging to determine the scope and criteria. Overly harsh standards may hinder some countries from joining while too much flexibility sacrifices the value of a multilateral agreement.
The rise of civil society voices
In 1990s, civil society and NGOs became more active in participating global economic issues. They criticized MAI for lacking transparency, challenged globalization policies that may undermine environmental and labor interests. Their opposition set obstacles for the negotiation to reach consensus.
Confusion about interaction with WTO rules
At that time, both WTO and OECD were promoting agreements in relevant areas – WTO focusing on trade in goods and services, OECD on investment. It’s unclear whether MAI should align with WTO principles or set separate rules. The uncertainty increased difficulties in settling controversial topics.
In summary, major obstacles blocking a successful MAI negotiation include conflicting appeals between developed and developing participants, contradiction between pursuing comprehensiveness and allowing flexibility, the rising voice of public opinions opposing perceived drawbacks of globalization, and confusion about how MAI shall interact with existing WTO frameworks.