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Opinions of Thursday, 4 September 2003

Columnist: GNA

New WTO proposed investment agreement is a sham

A GNA feature by Lawrence Quartey

Accra, Sept. 3, GNA - The heated argument as to whether African governments would be able to rise above the shackles of poverty and marginalisation still rages on.

Whilst some hold the view that the continent's resuscitation is buried only in the commitment of African governments to forge a united front to kick against anything inimical to their development efforts, others believe that Africa cannot fight poverty without the support of the advanced world and their Breton Woods institutions.

Those in favour of a united front argue that the advanced world has a hidden agenda to deepen the economic and political woes of the Third World and further widen the yawning gap between the North and South. As a result the advanced countries through the Breton Wood Institutions - International Monetary Fund (IMF) and the World Bank (WB) - are devising new ways to repackage their "puppetry" game of marginalizing African governments through unfair trade policies. These policies are retrofitting the African continent to become neo-colonialist-dependent entity.

An important decision confronting Africa and other developing countries at the forthcoming fifth Ministerial Conference of the WTO in Cancun, Mexico this September is whether or not to adopt an agreement introducing rules on investment within the framework of the WTO. This new investment rules are proposals being advocated by the European Union (EU), United States (US), Japan and Canada, which had been opposed to by most developing countries, specifically by African countries. The opposition by the developing nations dated as far back as 1996 when the rules were first proposed by the United States, European Union, Canada and Japan.

The new proposed rules are aimed at giving the foreign investor equal rights to invest in any country in any sector (except the military) without the national government of that country having any say as to where, how, and what foreign investment should operate in its country. In Ghana, the main advocacy group leading the campaign against the adoption of the investment proposal is the Third World Network (TWN) - Africa, an international network of groups and individuals, who seek greater articulation of the needs and rights of people of the Third World.

The group says though it recognises the important role foreign investment, especially direct investment, plays in a country's economy, it had also been widely acknowledged that such investments are most effective only when they contribute to building national domestic capacity.

"But for foreign investment to make this kind of contribution, it requires that the government of the country receiving the investment to retain the sovereign right and ability if they don't exercise it all the time to select and direct such foreign investment to the priority areas," it said.

According to the TWN, what makes the proposed treaty more inimical to developing countries was the fact that if the proponents have their way the treaty would become part of the rules of the WTO. This means that if a country, for example, the United Kingdom, complains that the "right of one of its citizen companies to establish itself anywhere" has been violated in another country, such as Ghana, then the UK would have recourse to the trade sanctions of the WTO.

This arrangement then allows the UK to retaliate against Ghanaian companies working in the same area as the UK Company whose alleged rights have been violated or cross-retaliate against any Ghanaian product in the UK market, the society explained.

The TWN stated emphatically that such a treaty and, therefore, such a change to the WTO rules, was not good for developing countries, especially African countries. "True it has been suggested by the European Union that this treaty is the best means to secure foreign investment to African countries which need it most..."

But arguing its case further, Mr Tetteh Homeku, TWN Head of Programmes, said the experience of the movement of foreign investment so far had suggested that the astute investor was attracted not so much by freedoms, but by the social, economic and physical infrastructure available.

He said as the existence of the Asian economies shows and as acknowledged worldwide, including the World Bank that foreign direct investment contributes to an economy's development not because of the free reign that it is given, but the "partnership" that arose between it and the country.

"Malaysia, Singapore, Korea are the giants that they are today because they retained the right and ability to direct the foreign investor to where they wanted it, and restrained it from the areas where they wanted to promote local enterprise.

"We call on members of the WTO, especially developing countries, to explicitly reject the launch of negotiations on investment...at the Ministerial Conference in Cancun this September," Mr Homeku appealed The position of African governments would continue to be of vital importance in determining the agreement or otherwise on investment and other Singapore issues at the WTO, he noted.

African government, collectively and individually, Mr Homeku said had the responsibility to uphold the interest of their people by blocking the launch of negotiations on such issues.

A recent resolution adopted by some Civil Society Organisations (CSOs) such as the TWN, at a meeting held in Accra, has reiterated the call for the rejection of the launch, saying Africa and the developing countries must offer a decisive and united leadership in order to register their displeasure about the agreement.

It noted that investment was not a trade issue and as such the WTO was a wrong forum for global investment talks. The resolution also called on developing countries to kick against the North American Free Trade Agreement (NAFTA), the Multilateral Agreement on Investment (MAI) and other similar proposals as contained in the Cotonou ACP-EU Economic Partnership Agreement as well as the US-African Growth and Opportunity Act.

It explained that the existing international investor protection rule in the NAFTA and hundreds of bilateral investment agreements were being used to challenge and seek, compensation for governmental actions that were essential to achieving a just sustainable future. This, the resolution stated was a problem that affected both developing and developed countries adding: "The filing of new claims by corporate investors in international arbitration was increasing at an alarming rate.

"While the threats to regulatory prerogatives of governments and thereby the development agenda of Africa countries and the global South was clear, there was little if any empirical evidence, that adopting such investor protection rules would lead to any increase in the amount or quality of investment flows."

For Africa, it has been said that given the structures of its economies and the patterns of foreign investment so far, the rights of governments have become very crucial. Some advocacy groups have pointed out that, left to the proponents of the proposed rules alone, foreign investment was going on in the natural resources of the extractive sectors of the economies, particularly mining.

They maintained that, "In spite of all the efforts of our governments to liberalize our economies, and provide different guarantees, FDI has barely moved beyond these sectors".

The crust being advocated here is that, it is not just any kind of investment that Africa needs, but rather an investment that is targeted towards specific purposes and ends.

This is the rationale for not going in for the proposed multilateral investment treaty that would tie the hands of developing countries' governments for a long time to come, even forever.