Power grab: big business wants to tighten its hold with a new global trade pact.

Since 1995, negotiators from the world's twenty-nine richest countries have been meeting regularly in Paris with almost no public scrutiny to draft what the director of the World Trade Organization calls "the constitution of a single global economy." But James Madison wouldn't recognize any kinship between his work and the Multilateral Agreement on Investment (MAI). This new pact would enshrine a planetary regime built around a one-sided bill of rights for corporations and wealthy investors, not the human rights of individual citizens.

You may not have heard about the MAI before. Its beneficiaries prefer it that way. The free-trade establishment--multinational businesses, their law firms, and trade officials of both Republican and Democratic parties--began pushing for deregulation of global investment practices during the lengthy negotiations that led up to the formation of the World Trade Organization in 1995. It was part of a drive to expand the goals of trade negotiations beyond tariff reductions to a broad range of new topics, like protection of intellectual property and deregulation of financial services.

Because there was so much opposition, especially from many developing countries, the United States shifted its strategy. Clinton's trade representative, Charlene Barshefsky, urged negotiation of an investment agreement first among the members of the Organization for Economic Cooperation and Development (OECD), a grouping of the main industrialized nations. Barshefsky believed that these countries were more likely to agree to a radical reduction in controls over global investment. Once they signed on, they could then pressure other countries to come aboard or risk losing foreign investment.

Behind the scenes, big business is pushing for the MAI and helping to draft its language. The U.S. Council for International Business is playing a central role. This fifty-year-old group consists of more than 300 transnational corporations (like American Express, Intel, and Philip Morris) and high-powered global law firms (like Arnold & Porter and Baker & McKenzie). Despite its name, the group includes many corporations that are principally based outside the United States (like Matsushita and Nestle).

The draft text of the MAI--publicly available only because it was leaked to public-interest groups--would give investors a legal status on a par with that of nations. And it would require that almost all of a nation's economy be open to foreign investment. It would also allow corporations to sue governments and claim monetary damages.

"This agreement gives big corporations an extraordinary set of new rights vis-a-vis political authorities around the world," says Alan Tonelson, research fellow at the United States Business and Industrial Council, a trade group of small and medium-sized businesses. "The more people learn about this, the more scared they get. And they should, because it is a dangerous and audacious power grab that must be stopped."

Whether their "investment" is a shoe factory in Indonesia or a momentary blip on a currency trader's computer screen, businesses want to be able to place their bets on the global-money roulette wheel unimpeded by government regulations or social obligations. At the same time, they want citizens and their governments to assume as much of the risk as possible. That's why they want the MAI.

Already past their first deadline, MAI negotiators hope to sign an agreement by May, but persistent squabbles among the participants, growing pressure from public-interest groups, and the rising tide of disenchantment with globalization--intensified by the Asian financial collapse--may make it difficult to reach a consensus.

Many governments are trying to carve out broad exemptions from the treaty's rules to make the MAI more palatable to their domestic constituencies, even though over time they will be expected to fall into line. For example, the United States proposes that state and local laws should not be affected by the MAI, but this exemption would be lifted down the road.

For the MAI to take effect, negotiators first will have to settle their differences. Then the Clinton Administration would bring the MAI to the Senate, where it would require a two-thirds vote.

The agreement would stipulate that foreign investors be treated no less favorably than domestic companies. Governments would make a broad promise not to "impair" by unreasonable or discriminatory measures the use of any investment. National governments would be expected to make sure that all state and local laws comply with MAI standards.

Countries that sign the MAI would also have to eliminate all "performance requirements" for investors-such as targets for sales, local employment, or research in a given country-and lift all restrictions on the movement of capital, such as preferences for long-term investments over short-term stock speculations. Governments would have to compensate investors when their property is expropriated for a public use, like building a road. But they would also have to pay for "partial" expropriation or the "equivalent effect" of expropriation, which could force governments to pay corporations if regulations delay or reduce potential profits. In addition, governments would agree to treat foreign investors like all others in compensating for any strife, such as revolution. That protection might even extend to strikes--giving governments a new excuse to crack down on unions.

Though the MAI requires foreign investors to be treated no worse than national businesses, it does not prevent them from being treated better. Many of the corporate rights enshrined in the MAI could give foreign companies more power and protection than domestic companies. With fewer regulations and new powers to threaten governments, global businesses will be able to force governments to compete on their terms, to attract investment, to hold down workers' wages, and to color the political debate. Governments could not withdraw from the MAI for five years after signing, and investments would be protected from governmental interference for fifteen years after withdrawal.

The MAI allows only a few exceptions. Countries could depart from the rules of the pact only to protect national security or, temporarily, to deal with balance-of-payment difficulties.

The draft also includes purely voluntary exhortations to protect the environment and to abide by labor guidelines for responsible multinationals. Business interests like the U.S. Council on International Business and the International Chamber of Commerce have made it clear that they will oppose the MAI if the agreement includes any language obliging businesses to protect the environment or respect labor rights.

The MAI could undermine a wide range of legislation in the United States. MAI critics say the agreement could threaten the community renewal act, local economic development initiatives, unilateral state or federal actions against human-rights violators, set-asides for minorities, women, or small businesses, rules promoting socially responsible investment by public pension funds, and government promotion of recycling. Nobody knows whether corporations will file lawsuits that challenge these laws, and nobody knows how case law before international tribunals will evolve.

"The central issue is that the MAI is a virtual constitutional amendment," says Georgetown University law professor Robert Stumberg. "It creates very broad doctrines that are as open-ended or vague as their analogous cousins in the U.S. constitution. But the MAI is not part of our legal system, and the result will be indeterminate. We know one thing: It's one-dimensional. It is designed to protect corporations. Our Constitution is famous for checks and balances. That's the issue--one-dimensionality versus checks and balances."

The MAI could void the checks and tilt the balance. One key to the MAI provision--that government cannot impair the use of investment--strongly resembles limits on legislative interference in commerce that prevailed in U.S. law until the Supreme Court overturned them during the New Deal era, Stumberg says.

The MAI is more sweeping than other trade agreements, like NAFTA or GATT, in its assertion of basic rights for investors and corporations. It greatly broadens the scope of international economic deregulation. And, building on a precedent that NAFTA set, it would allow corporations to sue governments and then have those disputes heard by an international trade tribunal, which is usually stacked with free-traders.

Already under GATT and NAFTA there are inklings of how corporations could use the broader rights they would obtain with the MAI to bully governments and gain political power.

For example, the Ethyl Corporation has sued the Canadian government for $251 million because it banned the gasoline additive MMT as a public health risk and a pollutant. Ethyl claims that the ban, which it tried to block by threatening to sue even before parliament acted, is "tantamount to expropriation."

Last year, another U.S. firm, Metalclad, sued the Mexican government for $75 million in damages "linked to the delay in opening" a hazardous waste disposal facility it bought because the state government is blocking operation of what had been a troublesome plant.

Several years ago, U.S. tobacco companies threatened to seek compensation from the Canadian government for diminishing the value of its "trade dress" if the government, in an effort to discourage smoking, required that cigarettes be sold with generic white packages.

Oil companies, toxic-waste dumpers, and tobacco companies all want the power of the MAI. That should tell us something. So, too, should the secrecy behind the deal.

David Moberg, based in Chicago, is researching labor and the global economy with support from the John D. and Catherine T MacArthur Foundation.