HOORAY! A Little Step Forward

At long last, cross-border investing is in the spotlight for something other than money-making. It is starting to get attention for its effect on people other than the investors themselves.

Here’s what’s happening. Over the years international agreements – numbering at least 2,500 - to protect the rights of international investors have proliferated to the point that they cover most of the globe. Now, there is growing challenge to the ubiquity of those agreements and increasing pressure to have the protected investment rights balanced with corresponding responsibilities. Or (from another perspective) to balance investor rights with corresponding rights of host governments and their citizens.

Last November, the 19 governments that are member states of the Common Market for Eastern and Southern Africa, Comesa for short, took a pioneering step by adopting an area agreement that will, when put in effect, cover private investment flows into and within Comesa. Its terms will include minimum requirements on labor standards and respect for human rights.

Another sign of the way the breeze is blowing: a two-day meeting in Singapore last October brought together more than 30 government officials who negotiate international investment agreements for over 25 countries. Briefings by experts served to strengthen the negotiating capacity of developing countries in light of three circumstances:

-- The increasing complexity of the model agreements proposed by the United States, Canada, and other major countries.
-- The stark disadvantage faced by developing countries when dealing with wealthier nations, which throw greater resources into the negotiating process.
-- The uncertainties of investor-state arbitration in settling disputes.

The meeting enabled the developing country negotiators to network and to share ideas on how to achieve an appropriate balance between the need to attract more foreign direct investment and the need to serve the country’s own public policy directives.

Developing countries don’t have the help that rich countries get from their Paris-based Organization for Economic Cooperation and Development (OECD). But the Singapore meeting was only the beginning, as indicated by its formal name: the First Annual Forum of Developing Country Negotiators.

The forum’s co-sponsor, the International Institute for Sustainable Development, has just made another contribution toward highlighting the significance of “International Investment Agreements, Business and Human Rights: Key Issues and Opportunities.” That’s the title of a 43-page report that the Institute’s Howard Mann prepared at the request of John Ruggie, the UN Special Representative on Business and Human Rights.

The report addresses this basic question: Does the present international investment agreement (IIA) regime play a positive role in embedding human rights principles into the values and institutional practices of global capital markets?

Answer: No, it does not, and it often plays a negative role by preventing a government from requiring a foreign investor to respect the country’s own labor and environment regulations. ”IIAs limit the right of states to regulate, and these limits may extend to the state duty to protect and promote human rights,” the report states.

Investment agreements go into great detail on the rights of foreign investors and how those rights can be enforced. But “there is no enforcement mechanism against [foreign] corporations, as there are no obligations falling upon them.”

The Institute’s report received no attention from the media. Hopefully, its message will live on, however, since Ruggie will draw on it for a report to the Human Rights Council later this year.

Why do I keep harping on this subject? Because:

1. International investments are a major force in shaping globalization.
2. Investment policy, as written and enforced, now takes priority over the labor policies of governments in the developing world.
3. This absence of pro-worker policies facilitates the job outflow from the United States and other industrial countries.
4. Reform of investment agreements is absolutely necessary, and future trade negotiations must insure that investment agreements balance the rights of foreign investment with corresponding responsibilities, including the responsibility to respect the human rights of workers.
5. Current demands to reform trade and investment policy fall short in that they neglect to cover the practices discussed in the IISD report.

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