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MAI, What Happened
To Our Sovereignty?

QC - 27/2/98

The OECD-led Multilateral Agreement on Investment ("MAI") will disadvantage New Zealand and New Zealanders at the hands of international corporations. Why does the New Zealand Government intend to sign up...?

MAI is being negotiated in secret at the Paris offices of OECD. Until a draft copy was leaked in Canada last year, there was no public knowledge or debate. The New Zealand government (The Treasury & Ministry of Foreign Affairs and Trade) will likely sign up to MAI without consulting the National or New Zealand First caucuses. There are no plans for public debate or to consult the New Zealand public.

So what is the Multilateral Agreement on Investment and why is it so important?
Former TV school-age-game-show host, now Minister of Trade, Lockwood Smith, describes MAI as"an innocuous document" designed to regulate international investment. Who is he trying to fool?

MAI is a further step in the process of globalisation - the breaking down of national boundaries, the erosion of national sovereignty and the establishment of a global order. MAI follows the General Agreement on Tariffs and Trade ("GATT"). It was originally part of the GATT but was removed because of its unpalatable nature.

MAI was resurrected within the inner sanctum of OECD countries. It will be agreed among twenty odd OECD nations and presented to the rest of the world as a fait accompli. This tactic avoids input from nations that question the erosion of sovereignty and attempt to protect their citizens from the global plantation. As a result MAI will be closer to what was ordered. It will mean that transnational investment can move around the planet freely and unfettered.

New Zealand Exposed
If a government dares to discriminate against a foreign company, then that company can sue and recover damages. We know what this means because the North American Free Trade Agreement (otherwise known as "NAFTA") contains similar conditions. In Canada, under NAFTA, Ethyl Corporation sued the Canadian government for prohibiting the sale of a fuel additive that the Canadians regarded as a toxic chemical. Ethyl Corporation recovered damages for loss of access to the market.

The New Zealand economy is a fraction of the size of some transnational corporate economies. Signing MAI will make our government even more vulnerable to intimidation by threats of legal action by foreign companies. One irony is that a New Zealand company cannot sue the government under MAI. Only foreign companies can do that.

Part of the problem may be that the lawyers advising government on these issues also act for large foreign companies. There is a clear conflict of interest but for "the Chinese walls" between offices in such firms. Another problem is that the largest political contributions tend to come from the largest companies. These companies have international interests. They are in a position to exploit MAI.

But who is in a position to challenge this system? If you have a few hundred thousand loose change floating around you might want to take them on in litigation. Maoridom may be our last hope. Treaty of Waitangi reservations to MAI have been proposed. However, according to the lawyer who acted for Ethyl Corporation against the Canadian Government, there are no guarantees that the final draft of MAI will contain any specific reservations requested.

Origins of Free Trade
The impetus for free trade is not new. It arose from colonial expansion as epitomised by the various European East India companies of the seventeenth to nineteenth centuries. The Dutch East India Company (Vereenigde Oost-Indische Compagnie) established in 1596 was the first, but the (British) East India Company became by far the most successful.

By the early nineteenth century the East India Company's writ extended across most of India, Burma, Singapore and Hong Kong, and a fifth of the world's population was under its authority. The Company had at various stages defeated China for the right to sell opium, occupied the Philippines, conquered Java and imprisoned Napoleon on its island of St. Helena. It profited from selling Indian-grown opium to China and made vast profits from slave trading. The East India Company was the largest single commercial enterprise the world had ever seen, with revenues derived not only trade but also tax-collecting.

Adam Smith, author of The Wealth of Nations in 1776, that cornerstone of modern free-market economics, had been in the service of the British East India Company, as had other familiar names like Thomas Malthus, who originated the current Malthusian approach to the lower classes. Company money founded Yale University and the University College London. The United States flag was taken directly from the company flag. Stars simply replaced the East India Company emblem in the blue corner.

On 30 June 1815, Nathan Rothschild duped the London Stock Exchange about the outcome of the Battle of Waterloo. Being first to receive news of the outcome, Nathan and known Rothschild agents began selling Consuls, the UK government bonds. A panic ensued, Rothschild kept selling, the price fell away to nothing. Meanwhile unidentified Rothschild agents bought.

By the end of the day's trading, Rothschild interests had become the proud owner of a majority of Consuls - at a 1400th of their face value. As the British Government's largest creditor, Rothschild interests enjoyed a strong position in relation to both the Government and the Bank of England.

A deliberate policy of promoting free trade can be traced back to the mid nineteenth century. Britannia ruled the waves and commanded strategic seaports around the coasts of Africa, the Middle East, the Americas, and throughout Asia and the Pacific. British merchants enjoyed substantial advantages.

International trade was conducted in sterling and the Royal Navy patrolled sea routes and protected British merchant shipping. Continental European traders and many others were forced to use sterling and insure against piracy, catastrophe, and acts of war, through the London-based Lloyds shipping insurance and banking syndicates.

Free Trade Policy Adopted
In the 1840s Rothschild interests set up The Economist magazine to agitate for reform of agricultural trade protection laws. The Corn Laws, as they were known, were repealed in 1846. The British promoted free trade policies, i.e. all nations should open their borders to trade. The rationale was that unrestricted trade would allow the British merchants to consolidate and extend their dominance.

As a direct result of this policy British finance went offshore looking for easy profits. The Empire grew, but British industry and infrastructure suffered, as local investment was not as attractive and English workers could not compete with imports from the new world. Does this sound familiar?

In 1873 Britain entered the prolonged "Great Depression". Dreadful hardship and poverty ensued which gave impetus to colonial exodus from Britain. This is the Victorian England Dickens wrote about - slums, starvation, child workhouses, and gangs of thieves.

Free Trade Rejected
It is notable that around 1870 Germany rejected anglophile notions of free-trade in preference for a policy of national development. Germany established a national system of technological schools (Technische Hochschulen) and colleges modelled on the French Ecole Polytechnique, and a system of "Handelshochenschulen" in conjunction with chambers of commerce and industry to provide business education. This was paralleled by a system of "Fachschulen" for training skilled craftspeople. Germany introduced protections and incentives to develop local industry and within thirty years, Germany, which had previously been dwarfed by British industry, was leading many industrial indicators. It almost caught up to British coal production, and German steel production was twice that of Britain's. German technical and chemical industries flourished. From 1870 to 1900 the German navy went from being the 5th largest in Europe to the 2nd largest, behind Britain, but with a more modern fleet. Germany became largely self sufficient for food. In 1913, Germany produced more grain than all of Russia and produced 95% of the meat it consumed, Britain on the other hand imported 45% of its meat.

Germany's industrial success was a direct result of a protectionist policy of fostering the local people, infrastructure and industry. Within thirty years, of adopting this type of policy Germany had the best-educated population in Europe, and had been transformed into a major power.

New Zealand Sovereignty Eroded
Current international trade agreements such as the GATT and MAI, reduce parliament to a mere civil litigant with respect to the rights of foreign corporations. This is a serious derogation of sovereignty. The New Zealand government is giving away the right to determine the economic interests of this country. It is handing these rights over to an international elite that answers to no master but profit.

Corporations are not motivated by social responsibility. A foreign corporation has no national loyalty and will only invest in New Zealand to extract profit on the investment. This profit is normally taken offshore and represents a net drain for the New Zealand economy. Telecom is an example: most of its $700 odd million annual profit has been expatriated back to the United States. To attract investment, New Zealand workers must be competitive against workers in third world nations. Over the last fifteen years we have seen the New Zealand economy transformed, the poor are getting poorer, the health and education systems have deteriorated, crime has increased, and in real terms, standards of living and quality of life have dropped.

The purpose of this article is to demonstrate that free-market and free-trade policies are not new. They have extremely dubious origins and have been implemented previously with disastrous consequences for the local populations. Historically there have been close ties between private commercial interests and government. Corporations have governed territories and fought wars to further their interests in the past. Communities, standards and quality of life that people take for granted have disintegrated.

After 20 years under GATT and MAI, New Zealanders will be competing directly with Indian, Asian and Chinese workers. The New Zealand government will be powerless to protect the local economy and New Zealand may not be recognisable.

Be warned, the worst is yet to come, if New Zealand gives over sovereignty and rights of self-protection to the global and corporate elite.

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