Why MAI Failed Sample Clauses

Why MAI Failed. When the negotiation of MAI was first started, the negotiators were quite optimistic. They felt sure that they could do for investment what had already been achieved for trade in goods and services – create a set of global rules that would lock in liberalization. They also hoped that an agreement would set the stage for dismantling remaining barriers against foreign investors, just as global talks have gradually lowered trade barriers. But that hope has long since disappeared. What went wrong? Deciding to travel via the OECD was the first mistake. Certainly, OECD members occupy most of the FDI inflows and outflows, but there were also good reasons not to use the OECD. One is that much of the discussion there is bound to duplicate negotiations at the WTO. Another is the fact that the OECD, whose main job is economic research, has no experience running such a complicated negotiation. While the WTO has a legal apparatus in place to deal with countries that violate their commitments to open trade, the OECD does not. The more significant barriers to 29 OECD, The MAI Negotiating Text (as of 24 April 1998) – Chapter VII, Authorization Procedures, p. 82. foreign investment lie in developing countries. Although they account for only a small share of foreign investment worldwide now, that share is growing rapidly. Among emerging economies, only Mexico, three central European countries and Korea were able to participate in the MAI talks, since no others are members of the OECD. The drafters’ original aim was to craft an agreement that emerging countries would want to join, but few developing countries were prepared to sign something which they did not help to shape at all. Even the richer countries, as it turned out, were not so enthralled freeing foreign investment either. They advanced several hundred pages of proposed exceptions from the general rules. Another main sticking points were the treatment of labor and the environment. A further, rather big, difficulty was the “free rider” problem: the MFN commitment in the WTO means that any measures on trade and investment negotiated elsewhere, such as the MAI, must be extended to some 135 countries.30 Compared with the OECD, the WTO offers several advantages: it has experience in brokering complicated rules; it already has a dispute-settlement system31; and it could involve far more countries. Talks under the WTO’s auspices might still take several years, but they would be on stronger foundations. 30 As of November 13...