Rightwords... Prudent Conservatism

Different Strokes: Many Paths


According to K. Singh, there are over 1,800 bilateral trade agreements in force today between nations. There is one well-known trilateral agreement, NAFTA, between the US, Canada and Mexico. A movement to create a one-size-fits-all trade agreement, the Multilateral Agreement on Investment (MAI), was promoted by the OECD, but it failed to reach acceptance, largely because it would have been unfair to small nations. The World Trade Organization is considering inclusion of some form of the provisions from MAI into their agreement structure.

Other nations have been negotiating their own versions of tripartite or multipartite agreements, such as the Free Trade of the Americas Agreement between North and South America, the Asia Pacific Economic Cooperation forum linking virtually all Pacific Rim nations, and the TransAtlantic Economic Partnership between the US and Europe. The International Monetary Fund is also considering modifications to its rules and agreements to force liberalization of investments between member nations.

The crux of these negotiations is squarely on the protections wanted by investors against fraud, nationalization, expropriation, and the like, and wanting specific performance by the client, versus the loss of some considerable sovereignty and flexibility by the client nation to create and change its development plans, and the lack of reverse protections for the client nation against predatory practices of some investors. For each form of globalization there have been a few steps forward, and then a step or two backward as the full difficulty of reaching agreements unfolds for all to critique.

Some of the serious difficulties that have arisen between parties to an agreement has come from “second order” effects, where, for instance, the client nation establishes an environmental law or zoning law that impacts the trade and investment agreement after the agreement has been in force for several years, with considerable sunk costs to the investor at that point. These cases go to adjudication. Another possible showstopper is the conflict between free markets and socialism/communism. Greater national globalization leads inevitably to greater national democracy, and vice versa.

But the general trend is towards more and more bilateral and multi-lateral investment agreements, with considerable standardization of rules applying to both sides appearing in each new version negotiated. Globalization is very much a work in progress, and it is strongly supported in many ways by the US government, US industries, and Transnationals.

This support is not meant to dominate nations financially, but rather to bring them into the 21st century as effective partners, with strategic investments and developments, improved infrastructures, and fruitful economic progress, all with well-proven rules for the efforts. It is obvious also that the economic rise of India, China, Japan, and the EU have resulted in new sources of investment funds and agreements that have been and will be put into place outside of the purview of the US, which is what should be.

Properly done, achieving most or all of the steps to globalization for a nation would be a win-win situation over time: a win for the nation’s social and economic health, and a win for the investors. As in everything complex, the Devil is in the details.

(to be continued)
(references to follow)

# posted by Mannning @ 10:28 PM