Trade Tensions Sink Oecd Investment Treaty

Standoffs over US trade sanctions and movie subsidies sank attempts on Tuesday to pave the way for a global OECD treaty designed to liberalise and protect hundreds of billions of dollars in cross-border investments.

Its basically as good as dead in the water for now, a European delegate said.

Officials and junior ministers from the 29 OECD countries and five other countries had spent two days here in the hope that a final push would ensure at least a political agreement in April on the so-called Multilateral Agreement on Investment a treaty which would oblige governments to treat foreign investors as well as domestic investors.

 

The treaty would also challenge discriminatory subsidies and force governments to ensure fair play between foreign and domestic bidders in the case of privatisation in an attempt to liberalise flows of investment which are estimated at more than $350 billion a year.

But top US negotiators, under fire for laws against trade with Cuba, Libya and Iran, said that European countries were demanding too much, too fast and there was no point in pushing to agree the treaty at the OECDs annual ministerial meeting here on April 27-28.

For our part its better to do it right than to do it fast, US commerce undersecretary Stuart Eizenstat told a news conference. It is clear to use...that despite the progress made here, this work cannot be done by April if we are to produce a product that meets the standards called for at the 1997 OECD ministerial, he said.

He said friction over US Helms-Burton legislation against Cuba was a red herring and that, in any case, this and similar disputes with European countries were being handled outside the treaty talks at the Organisation for Economic Co-Operation and Development.

It was wrong for others to press for a rapid agreement on the OECD treaty while making the agreement contingent on negotiations elsewhere to resolve differences of the Helms-Burton Act, he said.

Eizenstat, flanked by deputy trade respresentative Jeffrey Lang, said Washington was also worried that other countries were trying to secure ambiguous and non-transparent carve-outs from the treaty and that a lot more work needed to be done to narrow the gaps.

That news will be protesting environment and labour groups, as well as French film-makers and who have mounted a high-profile campaign to prevent the treaty forcing the French government to share subsidies between them and rival Hollywood studios.

Despite assurances by OECD officials that there would be room for the cultural exception demanded by France and Canada Eizenstat made it clear that this was among the carve-outs nagging Washington along with demands for exceptions in the name of public order and special ties between European Union countries.

As soon as Eizenstat finished his news conference, a negotiator from the European Commission took his seat to spell out the carve-outs which Washington itself was seeking, saying one major one was for a wide exemptions for public procurement business.

Its a question not only of time but of political will, European Commission negotiator Robert Madelin said. We regard the mandate (to negotiate the OECD treaty) as still standing, until ministers not delegates at this meeting, so decide, he said.

He kept an olive branch extended to the US officials over talks which the Commission is handling separately with Washington over the Helms-Burton legislation, which can be used to deny people U.S. visas if they are involved in certain business dealings in Cuba.

We, like the United States, hope for a speedy solution, he said.

Washington is in more direct conflict with Paris since French firm Total clinched a multi-billion dollar gas field contract with Iran, although US sources have said Washington wants to hold off using its trade laws against Total in response.

Eizenstat said a US decision on the Total problem was getting closer but would not be drawn further.

France has made a point of saying that the OECD treaty cannot be agreed if it does not deal with extra-territorial US laws.

Despite differences which looked like they were just one step short of public acrimony, all sides said there was a genuine will to have a treaty which would provide clear and harmonious cross-border rules for investors.

But the negotiators were at a loss as to whether this could be achieved in the near future, given the failure to bridge major gaps since the idea was launched in May 1995.

Really, I just dont know, Francs Engering, head OECD official at the talks told a news conference when asked what would happen now. Engering steered clear of finger-pointing on many of the issues which he said remained unresolved.