The MAI (Multilateral Agreement on Investment) sparked a long discussion on globalisaton in May, but here's a more specific question about this (type of) agreement that I'm puzzling over. The basic question is this: what is the (e.g. OECD, WTO) orthodox economist's rationalisation for such a treaty from the point of view of the host country? My thoughts so far go like this: 1. Payment of investment incentives to foreign investors loses some of the benefits to the host country of the investment. However if countries compete for inward investment by paying incentives then that loss is more difficult to avoid. Hence it is in the interests of all host countries to cooperate in agreeing not to pay such incentives. (Significantly OECD cannot agree to include this in the MAI!) 2. If one assumes (as the orthodox economists do) that all foreign investment is A Good Thing - i.e. a net benefit to the host country - then it is in the interests of every host country to impose upon itself all the other "disciplines" in the MAI to encourage such investment - such as "non-discrimination" (National Treatment and Most Favoured Nation), transparency of regulations, removal of performance requirements, removal of restrictions on capital and investment income flows, guarantee against expropiation, etc. Thus there is no need for common agreement to enforce these - i.e. no loss to the common good if they are not enforced. In fact individual countries can benefit by not signing such an agreement because they can gain a competitive advantage by offering such disciplines to attract investment, and that process would eventually make them universal. Even if the economist conceded *some* foreign investment wasn't beneficial, in which case some form of performance requirements etc could be justified, the logic still holds. If I am correct in the above, then it is only from the point of view of the *investors* that the MAI disciplines have a theoretical justification. Any corrections, comments? Bill Rosenberg /-------------------------------------------------------------------------\ | Bill Rosenberg, Acting Director, Centre for Computing and Biometrics, | | P. O. Box 84, Lincoln University, Canterbury, New Zealand. | | [EMAIL PROTECTED] Phone:(64)(03)3252-811 Fax:(64)(03)3253-865 | \-------------------------------------------------------------------------/
