1997 July 11 - Letter to the U.S. Administration: USCIB Concerns with Environmental Provisions for the MAI

Letter to the U.S. Administration:

USCIB Concerns with Environmental Provisions for the MAI

11 July 1997

The Honorable Jeffrey Lang

Deputy Trade Representative

Office of the USTR

600 17th St., NW

Washington, DC 20508-4801

Dear Ambassador Lang:

I am writing on behalf of members of the U.S. Council for International Business (USCIB) to express our concern over new environmental provisions for the Multilateral Agreement on Investment (MAI) now under consideration by the United States. By separate letter, I have also written to Secretaries Albright, Rubin, Daley, and Ambassador Barshefsky to underscore these concerns.

As you know, USCIB advocates a high standards agreement on investment in the OECD, and we lead the efforts of the business community in the United States in support of this initiative. Further, through our chairmanship of the experts group of the OECD’s Business and Industry Advisory Committee, we provide participants in the negotiations our views on important issues.

We have recently been advised that the U.S. is considering tabling four additional provisions on the environment: 1) the addition of NAFTA 1114.1; 2) a provision indicating parties should institute protective standards for toxic chemicals and hazardous waste; 3) adoption of language similar to articles 3 and 5.1 of the NAFTA environmental side agreement, which suggests parties should provide for high levels of environmental protection and effective enforcement of such laws; and 4) a provision based on Principle 17 of the Rio Declaration suggesting parties should use environmental impact assessments. Further, we have learned that the U.S. tabled additional preambular language on the environment and labor. While we have not seen this language, we have the impression that it may also be troublesome.

The cumulative effect of these provisions would turn the MAI into a vehicle to promote environmental and labor objectives unrelated to (and possibly inconsistent with) the goals originally outlined by the Agreement. By introducing language from other instruments into the MAI and subjecting the new provisions to a consultation provision, the MAI would impose new obligations on both governments and investors, and create the possibility of discriminatory administrative delays and obstacles to investors. We fear that the result would be a loss of business support for domestic and international approval of the MAI. Moreover, we are concerned that loading-up this agreement with environmental and labor objectives would also deter non-OECD members from adhering to this free standing agreement.

Our specific reasons for questioning these provisions are as follows:

· The scope of the four new provisions overlap, are redundant, and as a result introduce uncertainty into provisions which will be subject to consultation and may result in disputes where parties use the new language as an excuse for administrative delays or outright discrimination against foreign investors.

· Some provisions duplicate, pre-empt and may possibly conflict with ongoing international negotiations. Chemical management issues are currently being addressed within UNEP, the OECD, the IFCS, the IPCS, and the IOMC as well as in a number of regional forums such as the CEC. Similarly, issues related to the sound management of hazardous wastes are being addressed under the Basel Convention and within the OECD.

· The proposed provision based on Articles 3 and 5.1 of the NAFTA environmental side agreement is inappropriate for the MAI. These two articles are applicable only to the unique circumstances resulting from our common border with Mexico. Moreover, the cited NAFTA articles comprise the core obligations of parties to the North American Agreement on Environmental Cooperation (NAAEC) and are the sole subject of its dispute settlement procedures.

· Specific reference to selected environmental issues (chemicals and wastes) and one environmental policy tool (impact assessments) is ill-advised in that it detracts from the comprehensive approach to environmental issues that is required for effective environmental protection.

· With reference to Principle 17 of the Rio Declaration, which calls for the use of environmental impact assessments, it is important to recognize that the Rio Declaration was negotiated as a package. Bringing this particular requirement into MAI removes it from that context and loses the balance with other provisions, a position taken by the U.S. delegation at the U.N. General Assembly meeting. As a substantive matter, we are not in agreement with this proposed provision. The use of environmental impact statements is a very complicated matter as the volumes of litigation and regulation indicate. A flat statement that countries should require environmental impact statements is simplistic. Unlike the Rio Declaration, the MAI is a binding instrument. Adding environmental impact assessments to the agreement could be a deal-breaker for a number of countries, especially non-OECD members.

Our members will judge the MAI in its totality when it is completed. Regarding labor and the environment, we can probably accept the following:

· preambular language referring to the positive role investment should play in encouraging sustainable development, drawing from NAFTA and WTO preambles as long as the language does not affect any substantive provision of the MAI.

· a single NAFTA 1114-type provision stating that the MAI does not prohibit countries from taking non-discriminatory environmental measures and that environmental standards should not be relaxed in order to attract investment. Such a paragraph should make clear that these provisions apply to domestic as well as international investors and are non-binding and not subject to dispute settlement. Furthermore, these provisions should not be used by a party in a discriminatory fashion to delay or deter foreign investment.

· an appropriate reference which takes note of the OECD Guidelines for Multinational Enterprises and associates them with the final act of the MAI as long as it is clear that the Guidelines remain voluntary and non-binding and do not in any way affect the interpretation of the MAI.

We would welcome the opportunity to discuss these issues further with you in an effort to avoid a failure in these important negotiations.

I am sending similar letters to Stuart Eizenstat, Al Larson and David Lipton.

Sincerely,

Abraham Katz

11 July 1997

The Honorable Charlene Barshefsky

U.S. Trade Representative

600 17th St., NW

Washington, DC 20508-4801

DearAmbassador Barshefsky:

The USCIB advocates a high standards agreement on international investment in the OECD, and we lead the effort in the American business community in support of this initiative. Further, through our chairmanship of the experts group of the OECD’s Business and Industry Advisory Committee, we provide the participants in the negotiations with our views on important issues.

We understand that the Administration is under considerable pressure from environmental and labor organizations, some of which have made clear their outright opposition to the MAI, to add provisions on environment and labor to the proposed agreement and thereby mollify the concerns of these groups. We appreciate the need to accommodate legitimate concerns about the environment and labor. However, the provisions now under consideration would turn this investment agreement into a vehicle for achieving environmental and labor objectives unrelated to and inconsistent with the goals originally outlined by the Administration.

I am concerned that these provisions will jeopardize the active support of the business community for the agreement. As you well know, that support will be necessary to ensure approval of the agreement domestically and internationally. I also believe that an MAI which includes these additional environment and labor provisions will deter key LDCs, who are not members of the OECD, from adhering to this free-standing agreement and thereby undercut a major objective of the United States -- to have a number of key non-OECD member countries join the MAI before beginning negotiations on investment in the WTO.

A copy of a letter to Deputy Trade Representative Lang, which sets forth our concerns in detail, is enclosed for your information. In addition to the specific issues identified in that letter, we also offer our views on the kinds of labor and environmental provisions with which the business community probably could live.

We would welcome the opportunity to discuss our concerns further with you or your staff in an effort to avoid a failure of these important negotiations.

I am sending similar letters to Secretary Albright, Secretary Rubin, and Secretary Daley.

Sincerely

Abraham Katz