MODULE 26

MULTILATERAL TRADE AND INVESTMENT AGREEMENTS AND ESC RIGHTS
USING MODULE 26 IN A TRAINING PROGRAM

The Purpose of Module 26

The purpose of this module is to provide an overview of multilateral trade and investment agreements as they relate to the enjoyment of ESC rights.

The module

• highlights the relevance of a human rights approach to advocacy with respect to these agreements;
• proposes a human rights framework that provides direction for this advocacy;
• introduces international coalitions of civil society organizations currently active around these agreements; and
• identifies challenges and opportunities confronting organizations seeking to protect ESC rights from the negative impacts of these agreements.

Introduction

At the dawn of the twenty-first century, economic globalization [1] dominates the world stage.  Its manifestations are all around us and include its manifold failures.  The iniquitous outcomes of economic globalization have been confirmed in numerous UN reports.  Even international economic policy forums now recognize that the so-called "trickle down” effect, for long the social justification for economic liberalization, is not occurring.  Studies such as the UN Conference on Trade and Development (UNCTAD) Trade and Development Report 1997 and the UN Development Programme (UNDP) Human Development Report 1997 (HDR 1997) convincingly show that the opposite is true.  UNCTAD describes how since the early 1980s the world economy has been characterized by growing inequality, both among and within countries; how income gaps between North and South continue to widen; and how the income share of the richest 20 percent has risen almost everywhere, while that of both the poorest 20 percent and the middle class has fallen. [2]   The HDR 1997 similarly documents how, although want has been dramatically reduced in many parts of the world, one-quarter of the human race remains in severe poverty.  It shows that the UNDP’s human development index (HDI) declined in more than thirty countries-more than in any year since the HDR was first issued in 1990-and that economic globalization had indeed helped to reduce poverty in some of the largest and strongest developing economies, but had produced a widening gap between winners and losers among and within countries. [3]

The United States, whose ideology created and sustains the global architecture on which eco­nomic globalization depends, ironically experienced its own domestic dispossession and poverty. [4]   Poverty is now more widespread and extreme in the United States than in any other indus­trialized country.  Powerful voices are now emerging within the nation to question the basis of economic globalization as we know it; these include such figures as the chief economist of the World Bank, Joseph Stiglitz. [5]

As if the adverse effects of the liberalization of trade and investment were not enough, at­tempts are being made to create conditions that will allow for unfettered capital flows.  The trend began with the establishment of global deregulated markets in the 1980s and 1990s.  While massively increased financial mobility has become a primary danger to the health of national economies-as was demonstrated by the crisis in Southeast Asia in the late 1990s-the exponential growth and current scale of such financial flows is astounding. [6]

The years 1997 and 1998 witnessed an attempt to adopt a Multilateral Agree-ment on Investment (MAI).  This was being negotiated at the Organization for Economic Cooperation and Deve-lopment (OECD), the international club of the world’s twenty-nine richest countries.  If adopted, the MAI would have contributed a significant chapter in what has been called the "constitution of a single global economy,” or "a bill of rights and freedoms for transnational corpora-tions . . . a declaration of corporate rule.”  Until February 1997, when a draft was leaked, the agreement had for the most part been negotiated in secret and was driven by the ag-gressive advocacy of the International Chamber of Commerce, the US Coun-cil on International Business, and other corporate-backed groups.  Essentially, the MAI sought to complete the economic liberalization agenda, favor-ing the rights of transnational investors and corporations over the rights of workers, consumers, communities and the environment. 

In December 1998, under intense pressure from civil society organizations (CSOs), [7] and in response to the withdrawal of France from the negotiations, the OECD abandoned the MAI.  (described below).  However, increased freedom for investment is very much on the agenda at various global and regional forums.  Provisions that made the MAI notorious with environmental, human rights, [8] and development NGOs are cropping up at the World Trade Organization (WTO), the International Monetary Fund (IMF), the Free Trade Agreement of the Americas (FTAA), and elsewhere.  CSOs thus need to be more, not less, vigilant.

It is against the background of attempts to liberalize finance, trade and investment still fur­ther that activists contemplate perhaps the greatest challenge to social action: how to sustain countervailing forces that challenge, expose, demystify and discredit the lure of economic globalization and blunt the power of those who are devising ways to push the world closer to the edge of economic and social disaster-processes already evident with the recent crises in Southeast Asia, Russia and Brazil. 

The pressing need for social actors and activists is to grapple with the world’s economic systems, at whatever level possible-from gathering information and gaining understanding to carrying out research on the impacts of globalization; from advocacy work aimed at reform of global institutions to staking claims to space during international and regional negotiations on economic treaties and demanding an increased role for the United Nations.

The onus is on CSOs to push at all levels for the implementation of human rights, in particular ESC rights.  Ironically, the catalyst for doing so is to be found in the very processes that have been produced by economic globalization.  Ever more extensive transnational alliances are needed to restore what has been destroyed in recent decades.  An inability to understand the many dimensions, some quite technical, of globalization, a reluctance to lock horns with the institutions that spearhead it, and a focus only on local-level action will serve to marginalize CSOs, and to consign many millions of people to further exclusion and poverty.

The Relevance of the Human Rights Approach

While ever more people and institutions now acknowledge problems with the economic liberalization model, what is overlooked is the framework within which economic policy needs to be formulated for the benefit of humankind.  The existing international human rights treaties and declarations, [9] and UN mechanisms monitoring compliance with these instruments, provide such a framework and confer upon states the legal obligations to protect, promote, and fulfill human rights.  Together, these instruments form useful points of departure in articulating and putting into practice collective rights, such as the right to development and to a clean environment.  Certain instruments also promote the rights of specific population groups such as indigenous and tribal peoples, minorities, and disabled persons. [10]   Collective rights are emerging as an important area of articulation and action as calls are heard for rights such as clean drinking water, or for the rights of women, indigenous peoples and peasant farmers.

Underpinning the human rights instruments are basic principles of nondiscrimination, equal­ity, self-determination and the right to political participation.  Human rights provide the per­spective, the context and the substance (through the entitlements contained in numerous in­struments) to realize sustainable development and social justice for all.  Viewed in such a light, the realization of human rights for every woman, man and child is the primary system through which international investment, finance and trade regimes can be held accountable.  The policies, programs and instruments emanating from economic globalization affect peo­ple at the local level, both directly through the acquisition of natural resources and indirectly through the influencing of national policies that undermine the capacity of people and com­munities, especially the marginalized, to control their own space and resources.  Such im­pacts are clearly a violation of internationally accepted obligations under human rights trea­ties. 

The dangers inherent in emerging investment agreements are well expressed by OXFAM in its 1998 update on the MAI. [11]   OXFAM’s reservations indicate the serious threat that is posed by the principles and provisions in emerging regional and international investment agreements to basic human rights principles such as the progressive realization of ESC rights.  OXFAM’s objections to the MAI are summarized as follows: [12]

Scope

• Coverage of every economic sector and an expansive interpretation of invest­ment.
• Coverage of every tier of government (local, provincial and national) without due consideration to subsidiarity or informed consent of local and provincial governments.

Process

• Lack of transparency and involvement of all relevant actors (including NGOs) and agencies at intergovernmental and governmental levels.
• Exclusion of developing countries from the negotiations even though they were key targets of the eventual treaty.
• Top-down negotiating model, instead of a bottom-up sector-by-sector ("posi­tive list”) approach.
• Lack of adequate, timely and transparent independent reviews of the social and environmental implications of the draft MAI for OECD and developing countries.
• Absence of policy coordination at OECD and governmental level to ensure that the draft MAI promoted, and in no way impeded, national obligations un­der international social, environmental and human rights treaties.

Principles

• Exclusive emphasis on investor protection and private property rights, without comparable attention to establishing legally binding investor obligations and accountability.
• Rigid interpretation of the nondiscrimination (national treatment) principle that could lead to foreign investors being treated not only as favorably as, but better than, domestic investors.
• Blanket prohibition of foreign investment controls and screening by govern­ments-unless exceptions were specifically negotiated. 

Provisions

• The unprecedented inclusion of national treatment and market access provi­sions in the pre-establishment phase, not just in the post-establishment stage common to bilateral investment treaties.
• Prohibition of compulsory performance requirements (e.g., local content and employment stipulations).
• Inadequacy of proposed Non Lowering of Standards clause to prevent down­ward pressure on environmental and labor provisions in order to attract for­eign investment.
• Wide definition of expropriation which could be abused by foreign investors (precedents under the North American Free Trade Agreement) and threaten legitimate national legislation on the environment, taxation, health and safety, consumer and labor rights.
• Foreign investor bias of the investor-state dispute settlement mechanism.  This would enable foreign investors to sue governments for alleged breach of MAI rules in secret tribunals, but provide no corresponding legal standing for citi­zens to bring evidence before such courts.
• Undemocratic nature of the standstill and roll-back clauses.  These would force progressive conformity of national laws to MAI disciplines and be irre­versible, even if national governments and priorities change, unless countries withdraw from the MAI.
• Absence of any provisions to regulate investment incentives (fiscal and regu­latory), or strengthen laws on competition policy and combat restrictive busi­ness practices.

The International NGO Committee on Human Rights in Trade and Investment (described below) has identified four fundamental human rights that are under threat.  The committee has pro­posed a useful framework to explain a human rights approach and has offered clear directions for gain­ing and retaining human rights: [13]

The primacy of human rights: The promotion and protection of human rights must be accepted as the fundamental framework for and goal of all multilateral and bilateral investment, trade, and financial agreements.  Such agreements cannot exclude or ignore human rights principles and objectives without losing their most fundamental claim to legitimacy.

Nonretrogression: All states have a duty to respect, protect, ensure and fulfill international human rights obligations and cannot derogate from or limit them except as expressly provided for in the relevant human rights treaties.  "Rollback” and "standstill” requirements, as formulated in the MAI, are incompatible with the requirement that ESC rights be realized progressively, as explicitly stated in the ICESCR. (See Module 9 on state obligations.)

The right to an effective remedy in the appropriate forum: The right to an effective remedy for anyone whose rights have been violated cannot be contracted away by the state nor denied by the operations of intergovernmental institutions.  Investment or trade bodies should not adjudicate concerns that fall firmly into the human rights domain as if they were simply disputes between corporations and state actors.  They should instead be dealt with by appropriate domestic, regional, and international human rights forums and enforcement mechanisms.

Rights of participation and recourse of affected individuals and groups: Human rights cannot be effectively realized unless the right of participation of the affected populations in planning, implementation, and seeking redress for violations is respected.  The participation of women in all these processes is particularly important.

The new social movements that have adopted this holistic approach have done much not only to strengthen the pro-environment lobby and women’s movements, but also to demonstrate the imperative of viewing human rights and development as complementary and mutually reinforcing trajectories in achieving social justice for all. 

In addition to the OXFAM report and the proposals by the NGO Committee just mentioned, there are also valuable insights and directions offered by the resolutions emanating from the UN’s human rights program. [14]   Take, for example, the resolution adopted on 20 August 1998 by the UN Sub-Commission for the Prevention of Discrimination and the Protection of Minorities entitled: "Human rights as the primary objective of trade, investment, and financial policy.”  In this resolution the sub-commission emphasized that the realization of the human rights and fundamental freedoms is the "first and most fundamental responsibility and objective of States in all areas of governance and development.” [15]   This phrase reaffirms language adopted by the world’s governments in the Declaration and Plan of Action from the 1993 World Conference on Human Rights. [16]   The sub-commission also expressed concern about the human rights implications of the MAI, "and particularly about the extent to which the Agreement might limit the capacity of States to take proactive steps to ensure the enjoyment of economic, social and cultural rights by all people, creating benefits for a small privileged minority at the expense of an increasingly disenfranchized majority.” The 1998 resolution also called for a working paper on trade, investment  and human rights. [17]

Building on its 1998 groundbreaking initiative, the sub-commission passed a resolution at its 1999 session titled "Trade liberalization and its impact on human rights.”18 In this resolution the sub-commission addressed itself directly to the WTO, calling for steps to be taken "to ensure that human rights principles and obligations are fully integrated in future negotiations” in the WTO. 

It also grappled with the problematic issue of trade sanctions to enforce human rights.  Many developing countries fear, and with considerable justification, that linking trade with human rights (including labor rights) or environmental protection would provide fertile ground for quasi-protectionist measures against developing country exports.  The misuse, or the perceived misuse, of human rights objectives as pretexts for disguised protectionist measures only serves to bring human rights into disrepute in the target country.  Recognizing this difficulty, the sub-commission declared, "Sanctions and negative conditionalities which directly or indirectly affect trade are not appropriate ways of promoting the integration of human rights in international economic policy and practice.”

The apparently unqualified rejection of trade sanctions by the sub-commission does not mean that trade sanctions for human rights abuses should never be considered.  However, such sanctions are certainly not conducive to a holistic integration of human rights principles into trade policy or to promoting the adoption of a human rights framework for the processes of international economic policy formulation.

In its 1999 session, the sub-commission also established a Working Group (WG) on transnational corporations (TNCs) and human rights.  Among other initiatives, the WG is renewing earlier efforts to formulate a human rights legal framework for TNCs.  The sub-commission has also appointed a Special Rapporteur on globalization and human rights.  Moreover, the sub-commission intends to consider the promotion and realization of economic, social and cultural rights within the context of economic globalization in an interdisciplinary  social forum format.

In the days immediately prior to the WTO meeting in Seattle in 1999, the CESCR issued a statement to the WTO and its members.19 Over 100 of the 135 members of the WTO have ratified this International Covenant.  In its statement, widely reported in Seattle, the committee urged members of the WTO to ensure that the organization plays "a positive and constructive role in relation to human rights.”  Trade liberalization, said the committee, does not necessarily create and lead to a favorable environment for the realization of ESC rights. Moreover, trade liberalization "must be understood as a means, not an end.  The end which trade liberalization should serve is the objective of human well-being to which the international human rights instruments give legal expression.”  The committee said that it had become increasingly aware of  "the extent to which international economic policies and practices affect the ability of States to fulfil their treaty obligations” in the area of ESC rights. It called for a review of the full range of international trade and investment policies and rules, to ensure that these are consistent with existing treaties, legislation and policies designed to protect and promote all human rights. "Such a review should address as a matter of highest priority the impact of WTO policies on the most vulnerable sectors of society as well as on the environment.”

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USING MODULE 26 IN A TRAINING PROGRAM

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