MAI and Canada’s Cultural Sector: Navigating the Multilateral Agreement on Investment

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The world of international trade agreements is vast and complex, with economic globalization at its core. Among the many agreements, the Multilateral Agreement on Investment (MAI) stands out as a significant player. In this comprehensive article, we delve into the MAI and explore its potential impact on Canada’s cultural sector.

Background: The Genesis of MAI

International trade agreements are pivotal in shaping the global economic landscape. The MAI, currently under negotiation through the Organization for Economic Cooperation and Development (OECD), represents the latest milestone in this journey. The OECD, an agency based in Paris, collects and disseminates economic data for the world’s largest industrialized nations, comprising 29 member countries.

The origins of the MAI within the OECD can be traced back to the 1960s when it adopted two instruments on investment liberalization: the Code of Liberalisation of Capital Movements and the Code of Liberalisation of Current Invisible Operations. These Codes, though binding on member states, were narrower in scope than the MAI, relying on moral suasion and peer pressure for enforcement.

The MAI’s momentum gained traction during the Uruguay Round of talks, which led to the creation of the World Trade Organization (WTO). The discussions on Trade Related Investment Measures (TRIMS) during this round aimed to liberalize rules governing foreign investment among GATT member countries. Dissatisfaction with the progress on TRIMS led to formal MAI discussions at the OECD in May 1995.

Negotiations have been ongoing since, involving various Negotiating Groups (NGs), Expert Groups (EGs), and a Drafting Group (DG). While a basic agreement was reached in January 1997, the final language of key elements remains unknown. These unresolved issues are of utmost importance to Canada’s cultural community.

Basic Provisions: What Does MAI Encompass?

The MAI’s core provisions are rooted in its preamble, which highlights its objectives:

  1. Efficient Resource Utilization: The agreement aims to promote efficient resource utilization, job creation, and improved living standards through the treatment of investors and their investments.
  2. Multilateral Investment Framework: It seeks to establish a multilateral framework with high standards for liberalizing investment regimes and investment protection, coupled with effective dispute settlement procedures.

The MAI’s overarching goal is to facilitate the movement of assets, including money, production facilities, and intellectual property rights, across international borders. It achieves this through commitments made by signatory nations:

Definitions

The proposed definition of an investor encompasses individuals and businesses, regardless of incorporation status or profit motive. Investment is broadly defined to include “every kind of asset owned or controlled, directly or indirectly, by an investor,” explicitly including intellectual property rights.

National Treatment/Most Favoured Nation Treatment

These provisions form the cornerstone of international trade agreements. National Treatment (NT) requires each signatory country to treat nationals of other signatory countries no less favorably than its own nationals, across laws, rules, regulations, and practices. Most Favoured Nation (MFN) provisions mandate equal treatment for all foreign countries. This prevents imposing discriminatory policies and grants foreign companies access to dispute settlement mechanisms.

Transparency

Member countries are obligated to make all relevant laws, rulings, and regulations publicly available, ensuring transparency in the operation of the Agreement.

Movement of Personnel

MAI grants approval for temporary entry to work for investors and key personnel, including executives, managers, and specialists deemed “essential to the enterprise.”

Prohibitions

  1. Performance Requirements: Nations cannot impose measures on investments that demand certain performance standards, such as export levels, domestic content percentages, or purchasing domestic supplies. This provision promotes equivalent treatment of investors from non-signatory nations.
  2. Uncompensated Expropriation: Expropriation is only allowed in the public interest, with due process of law, non-discrimination, and prompt, adequate, and effective compensation.
  3. Restrictions on Capital Movement and Profit Repatriation: Investors should be able to move capital and profits to and from nations freely and in a convertible currency, according to market exchange rates.

Privatization

National Treatment and MFN treatment are upheld when a government privatizes public resources or assets. Canada, however, has reservations, asserting that these provisions are redundant given the basic NT and MFN obligations.

Dispute Settlement

MAI outlines dispute resolution mechanisms for both individual investors and states:

  1. Investor-to-State: Individual investors can file complaints against signatory nations, leading to arbitration panels. This provision extends enhanced rights to foreign companies.
  2. State-to-State: Disputes between nations are resolved through panels, involving experts as required.

Application to Sub-National Governments/Government Entities

MAI extends to all levels of government within a nation, including state, provincial, municipal, and local bodies. The Agreement aims to prevent circumvention of its rules.

Exceptions and Safeguards

The MAI includes limited exceptions, covering essential security interests, temporary measures during balance of payments crises, and prudential measures in financial services. Disagreements persist on taxation matters, particularly regarding investment incentives.

Country Specific Reservations

Signatory nations may maintain specific measures that would otherwise violate the Agreement by listing “reservations” upon signing. While the scope and nature of these reservations are still debated, some key points are:

  1. Non-Conforming Measures: These can be listed, continued, and amended if they increase conformity. However, agreement is pending on a provision (Part B) for reservations on new measures in specific economic sectors.
  2. Standstill: Listed non-conforming measures are subject to the Standstill principle, prohibiting new or more restrictive exceptions. Violating Standstill entails a breach of underlying MAI obligations.
  3. Rollback: The Agreement outlines methods for eliminating non-conforming measures over time, involving peer pressure, periodic reviews, and future negotiations.

The Cultural Sector in the MAI Text

In the January draft, the cultural sector received no direct mention, either as an exception or inclusion. However, France has proposed an exception clause for cultural industries, emphasizing the need to preserve and promote cultural and linguistic diversity. This proposal addresses challenges related to investment restrictions, linguistic requirements, and coproduction treaties in film and television.

Canada’s Role: A Stakeholder in the MAI

Canada plays a significant role in the MAI negotiations, with over 21 references to Canadian proposals in the text. Canada has a vested interest as both an investor abroad and a recipient of foreign investment. Sectors such as mining, high tech, and financial institutions have substantial foreign holdings.

Canadian Cultural Measures at Risk

Canada’s cultural policies, designed to support its artists and cultural industries, face potential challenges under the MAI:

Restrictions on Foreign Ownership

Canada limits foreign ownership in cultural industries, potentially violating NT, prohibitions on performance requirements, and capital movement restrictions. Policies at risk include:

  1. Broadcasting: No foreign company can own more than 1/3 of a Canadian broadcaster or distribution undertaking.
  2. Book Trade: Policies restrict foreign company sales and new business establishment.
  3. Film and Sound Recording: Restrictions on foreign ownership and mergers.

Funding Programs Limited to Canadian Individuals and Firms

Canada’s support programs exclusively benefit Canadians, potentially discriminating against foreign investors under the MAI.

Summary

The Multilateral Agreement on Investment (MAI) represents a complex web of provisions with far-reaching implications. Canada’s cultural sector faces challenges in aligning its policies with the MAI’s stringent rules. As negotiations continue, it’s essential for Canada to balance its commitment to international trade with the preservation of its cultural diversity and identity.

In an increasingly interconnected world, navigating the MAI’s intricate framework while safeguarding cultural interests remains a formidable task for Canada’s policymakers. The fate of Canada’s cultural measures under the MAI hinges on careful negotiation, strategic policymaking, and a clear vision for the future of its cultural landscape.

In this dynamic landscape, only time will reveal the extent to which Canada can preserve its cultural heritage while participating in the global economic arena.