Trinidad Express | 5 April 2004
In one of my papers entitled "Threat of investment liberalisation" produced in October 1997 I raised the question of uncontrolled ingress of foreign investment into T&T and developing countries in general. The paper reminded us of the December 1996 meeting of the WTO, which set up working groups on investment and competition in preparation for the negotiations on the Trade and Investment Measures (TRIMs) scheduled then for January 2001.
Parallel to this was the task the OECD countries (the developed world) had undertaken, to develop a Multilateral Agreement on Investment (MAI). This agreement could have been the blueprint for any investment relationship that a recipient developing country would have to accept in order to "benefit" from foreign investment.
Clearly the MAI, when and if it were completed, would have also been the base document for any WTO agreement. The fact that many developing countries see foreign investment as the prime vehicle for their economic development would have made the MAI-like agreement at the WTO a done deal. The NGO-Internet based assault against the MAI and the subsequent collapse of this OECD initiative are history. However, during this period our Prime Minister, Mr Basdeo Panday, was quoted (1997) as saying in Boston that T&T was open for (foreign) business.
He continued that we had done away with negative lists, quotas, surcharges, stamp duties, anything that retarded foreign investment and trade. He also promised that his government was prepared to negotiate attractive incentive packages and given that we were among the oldest industrial bases in Latin America and the Caribbean, our government had taken drastic measures to create a transparent and predictable environment to permit foreign-driven business to flourish. The concerns that motivated the destruction of the MAI initiative were clearly not shared by the UNC government of the day, nor our present government.
But many commentators share the concern that uncontrolled foreign investment in a developing country could be dangerous, for example, Alengendro Nadal et al from Colegio de Mexico. They were highly critical of the role NAFTA played in the collapse of the Mexican economy based on free market policies. However, the developing countries have formed themselves into the group of 21 led by Brazil, India and China, which stopped the US and the EU in Cancun, and a subset of the developing countries also brought to a halt the deliberations on the FTAA.
The demands of the South were that the developed countries should drastically reduce their subsidies on agriculture (a point made on Friday last by the new head of the ACS) and that the developing countries should be awarded "special and preferential treatment". In particular, a developing country should be free to discriminate in favour of its own companies with regard to, say, government procurement and other special treatment by the government without having to extend these to foreign companies.
Surely the stage is now set at the FTAA and the WTO for the developing countries to make some meaningful headway against the asymmetry of the level playing field and regain the ground lost in the original Uruguay Round. In the face of such optimism we read in the Express Business magazine of March 31, 2004, that a bilateral MAI-like agreement between T&T and the US is already in place, signed in September 1994 by a PNM government.
We have already given the US most favoured nation status. According to the agreement no condition should be enforced which is designed to achieve a particular level of local content or give preference to products and services of domestic origin, or demand the carrying out of a particular level of R&D in the country. Possibly this is the reason, concluded the Energy Correspondent, why GOTT cannot impose a higher minimum wage on foreign construction in LNG.
How in God’s name could a government that understands the requirements for development in our on-shore economy agree to such conditions for foreign investment? But what is worse is that these agreements are made by the Executive without reference to the people and in particular to the Parliament of this country; unless a posteriori it is required to ratify them by an Act of Parliament, e.g. WIPO.
The Senate of the US has delegated, for a limited time only, to that country’s Presidential Executive the power to enter into trade agreements in what it calls fast track mode. In our case trade and investment positions are being prepared and then debated at WTO and FTAA, and the people and their Parliament are none the wiser. A group of Independent Senators had to seek an audience with the Minister of Trade to eke out information on what we are requiring of FTAA and WTO. It appears, paradoxically, that we want time-bound "special and preferential" treatment for small states (yet to be defined). The highlight of our FTAA thrust is to get the secretariat located here in T&T!
In the longer term our Constitution has to remove from the Executive the power to make such unilateral decisions on trade and investment. For now the only vehicle available to the Parliament is the Joint Select Committees that oversee the Ministries.