CRITICAL: Yash Tandon (here from another meeting at NSF08)
Saturday 11.08 I participated at a seminar about bilateral investment treaties (BITs) at the Norwegian Social Forum (Globaliseringskonferansen). Panellists were Yash Tandon (Economy professor from Uganda, and director of the South Centre), Knut Solli from NHO (the largest Norwegian business/employer organization), and Audun Lysbakken – co-chairman of the Norwegian Socialist Left party.
The Norwegian government is currently in the process of developing BIT-models to be negotiated with developing countries. NHO obviously supports these treaties which will mean better opportunities for its member companies – Tandon naturally oppose them as they will diminish the political elbow space of the governments of developing countries. Lysbakkens party is probably divided between a faction who wants to remain loyal to the coalition government they participate in with a right-leaning labour-party, and a faction with more loyalty to the radical grassroots of the party. Lysbakken tried to represent the latter in this debate (and mainly succeeded I suppose).
There are a few issues around the argumentation for these agreements which needs to be sorted out. One point is the need to use development as an argument for agreements who are obviously there to better the conditions of Norwegian companies and interests. This blatant need to push "development" in front of ones own agenda is in it self a clear sign that your real agenda is a bit shady. It is also an often used trick (for example the WTO's "development round"). An overlooked fact in this discussion is that several studies have shown (disregarding what you mean about the sum effect of foreign investments in developing countries) there is no connection between BITs and foreign investments. A country like Brazil for example, has the fastest growing economy in Latin-America, and it refuses BITs on principle.
BITs are problematic in principle, as international companies then will operate under the rules of these agreements in developing countries, and not simply under the laws of the country they operate in (which is, and has been the normal way to do business). I will make a few concrete points on this, where I go into detail on a couple of elements of these treaties.
One usual important element of BITs is "non-discrimination". This means that a country can not choose to have different rules for national companies than for foreign. This might initially sound fair, but you then forget that these countries are in the process of developing their industry – and in this process it is weak in comparison with huge multinational corporations.
Non-discrimination might be ok if you have an equal starting point, but – to use an often used metaphor: If you put me in the boxing-ring with Mike Tyson using non-discriminating rules, I'd be knocked out (and perhaps missing an ear or two) within seconds. That's the way competition works – the weak die.
You don't lift up your own national industry by having it eradicated. The countries that are now developed protected their national industry in the process of building it up. Developing countries today should be given an equal opportunity.
Another important aspect of BITs from the perspective of western business is to stop what they call "arbitrary" decisions from the government. The question this arises is what decisions are to be deemed arbitrary, and who decides what is arbitrary and what is not. In a democracy, this is normally the job of a democratically elected government, in the process of making laws. The BIT on the other hand, takes this question out of the national democratic sphere, and puts it in the hands of some sort of external court system.
In a democratic system laws can be changed with the election of new governments. BITs can greatly reduce the policy space of such a new government, and is therefore a democratic problem in itself. The Norwegian state a few years back put down a group of social scientists to do research on the state of democracy and power today. (Makt- og demokratiutredningen) This group concluded that the development where thee justice system is now making many decisions who should be made within the political system is one of the greatest challenges of our modern democratic society. It is therefore strange that the Norwegian government obviously does not see these perspectives when developing BITs with 3d world countries.
A concrete example can be nationalization of businesses. NHO representatives do not want to prevent this, they say, but they want compensation. This might sound fair enough, but the question is of course the nature of this compensation. For a poor developing country a need to compensate private businesses with huge amounts of money to retake democratic control over essential national industries and services may be just as effective a preventive measure as a ban. On the other hand, on might also argue that companies who have robbed poor countries for their natural resources over many years (perhaps also working hand in hand with leaders with little democratic legitimacy), deserve no compensation at all when they are kicked out by a new leadership (with a popular mandate). If one should speak of compensation, perhaps it should be the other way?
These are only a couple of examples of areas that are regulated by BITs, but they are enough to illustrate the conclusion: BITs do not create growth in developing countries. BITs only provide less democratic policy space, and are a transfer of power from the governments of developing countries to large western corporations.
The focus on "development" is also flawed. The flow of investments into developing countries is not primarily driven by their need for investments. It is driven by the need of western companies for places to invest their profits as access to new areas of investment in the west is narrowing. (This is naturally also the reason of the development of the finance "bubble" that has just burst – and shows that it is a fundamental system flaw, and not just a psychological phenomenon as some seem to think).
Say no to Bilateral investment treaties!
