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International Political Economy: Beyond Hegemonic Stability

Milner, Helen V. (Columbia University) Foreign Policy, Spring 1998, pp. 112-123

The question of how markets and states in the international system influence each other has taken on a new salience in the post-Cold War era. Milner reviews a range of theories that aspire to explain today's heterodox world economy, including theories that emphasize the role of multilateral institutions like the World Bank and IMF, the impact of domestic political imperatives and institutions on business and trade, and the influence of changing ideologies of development and economic growth. Globalization is another focus of the author. "Some claim that globalization is not only a creation of the United States but also a creature controlled by it," Milner observes. "Ironically, many Americans see globalization as beyond their country's control. Indeed, in their eyes, the United States is ever more constrained by global forces, just like everyone else."

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Sens and nonsense in the Globalization Debate

Rodrick Dani(Harvard University)Foreign Policy, Summer 1997, pp 19-37

"Few observers understand a key tendency in the emerging global economy: countries that have opened themselves to foreign trade have usually maintained high levels of government spending on social programs. The lack of understanding is symptomatic of a poor-quality debate over globalization. Opponents decry the elimination of jobs and national values. Supporters dismiss all the complaints as protectionist or resulting from economic illiteracy."

International Economics: Unlocking the Mysteries of Globalization Sachs, Jeffrey Foreign Policy, Spring 1998, pp. 97-111

"How will national economies perform now that nearly all the world is joined by a single marketplace?" asks Sachs. This concise overview of the phenomenon of globalization is unusually cogent and thought-provoking, although predictably it casts a skeptical eye at the rapid liberalization of international capital flows during the past decade. Among the implications of globalization on which Sachs focuses are the heady prospects of developing countries which have succeeded in generating new export growth; the perils of financial panic in a global economy; the inconclusive evidence about income distribution under the conditions of a globalized economy; and the turmoil inspired by forces that are undermining the very nature of the nation-state. "At the end of the twentieth century," Sachs writes, "the national market is being increasingly displaced by the international marketplace."

Globalization and Its Discontents Haas, Richard N.; Litan, Robert E. Foreign Affairs, May/June 1998, p 2-6

"The crises of globalization will be solved by neither a super-IMF nor an unfettered market... The real choice for governments is not how best to fight globalization but how to manage it, which will require creative policies both at home and abroad."

Has Globalization Gone Too Far? Rodrik, Dani (Harvard University) Challenge, March/April 1998, pp 81-94

Trade can affect wages more than many trade economists believe.

The Depth of Economic Integration between Mexico and the United States.

Weintraub, Sidney (CSIS) The Washington Quarterly, Autumn 1995, pp 173-184 "What follows looks first at the causes and the nature of the financial meltdown; then at its meaning in the context of U.S.-Mexican integration; and finally at the fallout. I will draw two competing conclusions. The first is that the existence of NAFTA made a marked difference in how Mexico and the United States reacted to the crisis; or put differently, that NAFTA added much depth to the integration of the two economies. The second is that even this extra depth is insufficient."

Brainard, Lael (Senior Fellow, The Brookings Institution) Globalization in the Aftermath: Target, Casualty, Callous Bystander? Brookings Institute, paper, November 2001,

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Fleche_haute60E0.gif (883 octets)  US INTERNATIONAL TRADE POLICY   

U.S. Competitiveness: "Resurgence" versus Reality.

Hayes, Robert H. (Harvard University) Challenge, March/April 1996, pp. 36-44

"The business press these days is full of glowing stories about the resurgence of U.S. industry in the 1990s. As a long-time practitioner in this field, the author believes the truth is much less reassuring: not only is the United States investing insufficiently in its future, but the real challenge America is facing today is not low-cost labor but low-cost technology. The issue there is that Japanese companies continue to invest two to three times as much per employee as does the United states --even though they have been experiencing a prolonged recession, while America has enjoyed strong years throughout most of the 1990s." =

Having It All? Domestic Regulations and the Global Economy

Nivola, Pietro S. (The Brookings Institute) The Brookings Review, Winter 1996, pp. 17-21

"Each year the U.S. government publishes a revealing report about the rest of the world's policies, practices and `acts' that are said to impair American commerce and prosperity. No less interesting would be to list the numerous U.S. rules and acts that create similar difficulties. The burdensome regulations of foreign countries deserve attention. But so do the burdens we, too, impose on ourselves and sometimes on others."

Globalizing Free Trade.  Bergsten, Fred C.    Foreign Affairs, May/June 1996, pp. 105-120

"Regional trade blocs, which account for 60% of world trade, have opened markets, but they cannot substitute for worldwide reciprocity. To prevent free trade from remaining their privilege alone, rich Northern countries should strike a bargain with poorer ones: low tariffs for greater market access. The grander the initiative, the greater the chance of success, particularly now that the U.S. is in danger of baksliding. Since export industries offer higher pay and more stable jobs, a firm date for free trade can solve America's most pressing problem, stagnating wages and the attendant social ills."

The Myths and Realities of Trade Protectionism

Johnson, Bryan T.Backgrounder, The Heritage Foundation, No 1077, April 8, 1996. 11p

"This year's presidential campaign has raised once again the issue of free trade versus protectionism, with protectionists arguing that reducing foreign import protects American jobs and benefits the overall U.S. economy. What are the facts?". The author refutes 11 `myths' advanced by opponents to free trade.

Export Our Way to Prosperity.

Morici, Peter (University of Maryland) Foreign Policy, no. 101, Winter 1995/1996, pp. 3-17

Business professor Morici argues that the Clinton administration should seek trade agreements to open foreign markets because the U.S. economy increasingly relies on exports to sustain growth. U.S. exports, fueled by aggressive application of technology, surged 112 percent since 1985, and U.S. GDP increased 25 percent between 1985 and 1994. He favors a deepened U.S.-European relationship.

Rethinking NAFTA: Does the Trade Pact Help or Hurt U.S. Workers?

The CQ Researcher, June 7, 1996, Volume 6, No.21, pp. 481-504

"The North American Free Trade Agreement (NAFTA) is no longer a decisive issue in the 1996 presidential campaign. But Pat Buchanan's protectionist rethoric struck a chord with voters worried about job security and stagnant wages." This backgrounder presents the views of supporters and opponents. The result of this debate is important as it may determine the outcome of ongoing negotiations to expand NAFTA to include the rest of the Western Hemisphere by 2005.

Foreign Economic Policy Priorities Stuart Eizenstat Notes on Economic Affairs, May 1997, 5p

Broad goals of U.S. foreign economic policy :to increase international trade,support peace processes, and to solidify economic partnerships with other countries.

Business and Foreign Policy

Garten, Jeffrey E. Foreign Affairs, May/June 1997, pp 67-79

"The connection between American business and foreign policy is poorly thought out and mismanaged, on both sides. It is, however, vital to the national interest. For most of the country s history, foreign policy has reflected an obsession with open markets for American firms. At one time, protecting the interests of a company like United Fruit was synonymous with policy toward Latin America. While those days may be gone, commercial interests must still play a central role. Herewith, a framework for the second Clinton Administration to guide cooperation between the government and the business community for the benefit of both."

The Institutional Roots of American Trade Policy

Bailey, Michael A.; Goldstein, Judith; Weingast, Barry R. World Politics, April 1997, pp 309-338

The 1934 Reciprocal Trade Agreements Act (RTAA) changed the structure of the making of U.S.. trade policy and made possible a dramatic reduction in tariffs. "In summary, the early history of liberalization in the U.S. provides a picture of how domestic politics, institutional choice, and the international economy are linked."

Foreign Policy-Related U.S. Trade Law Economic Perspectives, USIA, September 1997, 27p

"No shortage of controversy surrounds U.S. use of export controls and trade sanctions, especially as the number of unilateral sanctions has surged in the 1990s. This issue of Economic Perspectives examines some of those issues."

U.S. Trade Law and Trade Policy Journal of Economic Perspectives, USIA, June 1997, 39p


This issue of "Economic Perspectives" focuses on those laws that give the U.S. government specific powers to act against foreign barriers to U.S. exports and protect U.S. industries from unfair trade practices and unfairly traded goods. It includes an overview of U.S. trade law, a USTR perspective, a view from the Congress, an article on U.S. antidumping laws, and information resources on these issues.

The Fast Track Debate USIS File, September 1997, 30p

President Clinton has re-launched his drive to get fast track trade negotiating authority passed by Congress this year. This file contains Clinton s speeches, fact sheets and testimonies. To get these texts (and some more) you can also consult "The Fast track Debate" on our web site <>.

Trade Liberalization: Western Hemisphere Trade Issues Confronting the United States

U.S. General Accounting Office, July 21, 1997, 14p

"This report describes the principal existing subregional trade arrangements in the Western Hemisphere; outlines the current status of FTAA discussions; and identifies certain recent developments in regional trade liberalization outside the FTAA process, and possible implications of these developments for the United States."

The Richest Market on Earth

Barth, Steve; Zhan, Sherrie World Trade, vol. 11, no. 4, April 1998, pp. 42-48

The authors offer a statistics-laden, easy-to-digest snapshot of the U.S. import market: what do Americans buy, who exactly is buying it, and from which countries are they buying it?

The Insider's Insider. National Journal, November, 18, 1996, pp 2852-2855

"Forget Buchanan. Forget Perot. When it comes to the future of U.S. trade policy, the economic nationalist who makes things happen is Robert Lightizer, a lawyer-lobbyist who's close to Senate Majority leader Robert Dole."

National Export Strategy : Executive Summary Business America, October 1995, pp 18-27

"This year's report outlines the steps we are taking to meet this heightened foreign government competition, including in-depth focus on our advocacy efforts on behalf of American firms and our efforts to help small and medium-sized business increase their exports. Implementing this strategy over the coming years will ensure U.S. companies will be able to make the most of our policy achievements."

Greg Mastel China and the World Trade Organization: Moving Forward Without Sliding Backward The International Law Journal of Georgetown University Law Center - Spring 2000 The Future of WTO The Cato Journal, Volume 19, Number 3, Winter 2000 Aaron Lukas (Center for Trade Policy Studies at the Cato Institute) WTO Report Card III:Globalization and Developing Countries Trade Briefing Paper No. 10 June 20, 2000. 20p Institute for International Economics. Schott, Jeffrey J., Ed. WTO After Seattle.

U.S. Dept. of Commerce. International Trade Administration. July 2000. Report to the President on Global Steel Trade: structural problems and future solutions. Andrew Szamosszegi Short Circuited: Dumping & America's Consumer Electronics Industry Economic Strategy Institute. Study. April 2000 Andrew Szamosszegi Trade Policy, the Asian Recovery, and Corporate America's Response  Economic Strategy Institute. Washington Roundtable for the Asia-Pacific Press. July 14, 2000 Gary C. Hufbauer. Institute for International Economics. July 2000 NAFTA in a Skeptical Age: The Way Forward

U.S. General Accounting Office. World Trade Organization: Issues in Dispute Settlement. Report to the Committee on Ways and Means, House of Representatives. August 2000. 121p Lancaster, Carol. Institute for International Economics. Transforming Foreign Aid: United States Assistance in the 21st Century. August 2000. 100p U.S. General Accounting Office. International Monetary Fund: status of efforts to strengthen safeguards over lending. Report to the Committee on the Budget, House of Representatives. September 2000. 36p Thomas Palley, Financial Markets Center Stabilizing Finance: The Case for Asset-Based Reserve Requirements Financial Markets & Society Report, August 2000 Alan Greenspan (U.S. Federal Reserve Board) Globalization Remarks at the Institute for International Economics, October 24, 2001 Roger B. Porter, Pierre Sauvé, Arvind Subramanian, Americo Beviglia-Zampetti Efficiency, Equity, and Legitimacy: The Multilateral Trading System at the Millennium The Brookings Institution, book, chapter one available online, October 2001, 13p Christian E. Weller, Robert E. Scott and Adam S. Hersh The Unremarkable Record of Liberalized Trade EPI Briefing Paper, October 2001, 10p Howard Lewis III and J. David Richardson  Why Global Commitment Really Matters! IIE study, October 2001, 92p Beginning the Journey: China, the United States, and the WTO Independent Task Force, Council of Foreign Relations, report, October 2001, 27p China-U.S. Trade Issues U.S. Congressional Research Service, Issue Brief, updated September 28, 2001 Free Trade: The Key to Success in the Western Hemisphere The Heritage Foundation, heritage lecture, October 10, 2001, 6p

Jeffrey A. Frankel Globalization of the Economy NBER Working Paper W 7858, August 2000 Martin Feldstein: Aspects of Global Economic Integration: Outlook for the Future NBER Working Paper W 7899, September 2000 Organization of American States. Stephenson, Sherry M., Ed. <Services Trade in the Western Hemisphere: Liberalization, Integration, and Reform.> Brookings Institution Press   2000   22.95  pa   Bibliography  Index  256p Robert B. Zoellick <American Trade Leadership: What is at Stake> The Institute for International Economics, September 24, 2001, 14p Edward Gresser with Sarah West<Race to the Top II: The Facts About American Trade and a Debate That Misses the Point> Progressive Policy Institute, Backgrounder, October 2001, 10p Bipartisan Trade Promotion Authority Act of 2001<House Ways and Means Committee Report, October 2001, 62p> id=f:h3005rh.txt.pdf Edward Gresser<Trade Promotion Authority: The Key Questions> Progressive Policy Institute, Memo, October 12, 2001 Impact of Financial and Professional Services Exports on Small Business.; U.S. House. Committee on Small Business, hearing, October 2001.

Building Support for More Open Trade; Council on Foreign Relations Independent Task Force, Report, October 2001,32p Ann Florini and Robert Johnson: Transform Trade Carnegie Endowment for International Peace, Article, November 2001 Jeff Faux: >Fast Track to Trade Deficits> Economic Policy Institute, Issue Brief, November 2001, 7p

Lael Brainard and Hal ShapiroFast Track Trade Promotion Authority: A Primer and a Prescription for Progress Brookings, Paper, November 7, 2001, 8p  

Race to the Top II: The Facts About American Trade and a Debate That Misses the Point

Gresser, Edward; Sarah West Progressive Policy Institute, Backgrounder, October 2001, 10p

"The right question for U.S. policymakers is, "How do we adjust to a fundamentally changed domestic economy?" To illustrate the trends, this paper looks at three basic questions: First, how much do we trade? Second, what do we trade? And third, with whom do we trade?"A Case for Free Trade: The United States and Globalization in Asia  Wasow, Bernard Challenge, July-August 2001, pp 59-66 Has Asia grown at the expense of America? No, argues this economist. It may be more protectionist than the United States is, but free trade has helped us all. He makes a case for free trade.

The Unremarkable Record of Liberalized Trade  Weller, Christian E., Robert E. Scott and Adam S. Hersh

EPI Briefing Paper, October 2001, 10p "After 20 years of global economic deregulation, poverty and inequality are as pervasive as ever"

Bridging the Trade-Environment Divide  Esty, Daniel C. (Yale) Journal of Economic Perspectives, Summer 2001 pp. 113-130

"This article seeks to explain why trade liberalization and environmental protection appear to be in such tension and to push economists to explore more aggressively what economic theory and practice might do to address the concerns being raised."

Fast Track to Trade Deficits  Faux, Jeff Economic Policy Institute, Issue Brief, November 2001, 7p

"Largely ignored in the fast track debate is the connection between U.S. trade policies and the unsustainable trade deficits that have followed in their wake. These trade deficits pose a serious threat to U.S. economic stability, and at this perilous point in U.S. history, even devout believers in free trade owe it to the nation to look closely at this piling on of foreign debt. [This Issue Brief is] … an analysis of why Congress should develop a credible program for reversing the country's rapidly growing foreign debt before granting fast track authority…"

Finding Allies in the Back Yard Balze, Felipe A. M. de la Foreign Affairs, July/August 2001, pp. 7-12

"With so many players involved, the eagerly anticipated Free Trade Area of the Americas is likely to wind up a shallow project. A better way to jump-start hemispheric integration would be to expand NAFTA to the Southern Cone – enhancing prosperity, security and democracy throughout South America."

Safety Valve or Flash Point? The Worsening Conflict between U.S. Trade Laws and WTO Rules  Leibowitz, Lewis E.

Center for Trade Policy Studies, Trade Policy Analysis No. 17 November 6, 2001, 21p

"In response to a succession of wide-ranging challenges to U.S. trade remedy law and practice, the WTO Dispute Settlement Body has handed down a number of key decisions finding the U.S. government in violation of its international obligations. A review of those disputes and the relevant WTO rulings makes clear that the U.S. trade remedy laws have become a flash point of tension in the international trading system. It is increasingly obvious that the U.S. laws in their current form and U.S. support for negotiated trade liberalization are not complementary but rather antagonistic and even incompatible."

Greening of the WTO  Weinstein, Micheal M. and Steve Charnovity Foreign Affairs, November/December 2001, pp.147-156

"The WTO I soften portrayed as a dangerous threat to the environment. But this reputation is largely underserved, because the trade body has in fact developed principles that accommodate both trade and environmental concerns. There are several steps it can take, however, to make sure the green trend continues."

Labor Standards: Where Do They Belong on the International Trade Agenda?  Brown, Drusilla K (Tufts University). Journal of Economic Perspectives, Summer 2001 pp. 89-112 During the past decade, universal labor standards have become the focus of intense debate. This article analyzes the arguments concerning the value of coordinating labor standards internationally, as well as the instruments that can be used constructively to bring about compliance. The WTO as a Mechanism for Securing Market Access Property Rights: Implications for Global Labor and Environmental Issues  Bagwell, Kyle and Robert W. Staiger Journal of Economic Perspectives, Summer 2001, pp. 69-88

"In this article, [the authors] describe an alternative perspective according to which the central purpose of WTO rules is to create a negotiating forum where member governments can voluntarily exchange market access commitments, with the assurance that the property rights over negotiated market access commitments are secure against unilateral government infringement. … [T]his perspective identifies how supporters of sound trade policies and supporters of sound labor and environmental standards can in a bread range of circumstances both benefit from a well-functioning WTO."

Beginning the Journey: China, the United States, and the WTO Independent Task Force, Council of Foreign Relations, report, October 2001, 43p

The report outlines in some detail the social, economic, and political challenges that Chinese authorities will face in implementing their part of the WTO commitments. The Task Force also underscores the high - perhaps unrealistically so - expectations of many Americans concerning the benefits that will accrue to the US economy in the immediate aftermath of China’s entry into the WTO. Climate Indices for the Economy National Climatic Data Center U.S. TRADE   INTERNATIONAL TRADE Economic Benefits of Trade Promotion Authority JEC, Study, December 2001, 5p Fast Track Trade Promotion Authority. Brookings Policy Brief, December 2001, 9p. Fast Track Bill Moves Backwards Public Citizen, article, December 2001 Thinking Constructively about Free vs. Fair Trade Corporation for Enterprise Development, Paper, December 2001 Bhagwati, Jagdish and Arvind Panagariya Wanted: Jubilee 2010 against Protectionism AEI, On the Issues, November 2001 Anti-dumping: The Free-Trade Antacid Federal Reserve Bank of Minneapolis, The Region, December 2001 Evaluating Doha: Next Steps for the WTO and the Multilateral Trading Carnegie Endowment for International Peace, December 12, 2001

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NAFTA at Eight: A Foundation for Economic Growth  Office of the U.S. Trade Representative, Report, May 2002, 8p French edition available at:

After Mexico: Emerging Markets, Emerging Crises?

Klein, Lawrence R.; Heldring, Frederick; Heebner, Gilbert A.; Sicherman, Harvey Orbis, Spring 1996, pp 297-306

This article draws from information and ideas expressed at the symposium organized by the Global Interdependence Center and the Foreign Policy Research Institute in June 1995. "The purpose of the meeting was not simply to assess Mexico but to ask these questions: Are there more such crises on the horizon? If so, are the international institutions and other financial mechanisms able to handle the problem? And if not, can we develop policies for preventing crises or for managing them more effectively once they occur?" =

Trade Policy and Economic Development: How We Learn

Krueger, Anne O. (Stanford University)The American Economic Review, vol. 87, no. 1, March 1997, pp. 1-22

The author examines the dramatic changes in developing countries' trade policies over the past 40 years and the similarly dramatic changes in conventional wisdom on trade and economic development. In the article, which is the text of Krueger's Presidential Address to the 1997 American Economic Association meeting, she traces the evolution of the import-substitution model from its theoretical origins to its widespread use and final demise. She analyzes why a theory so at odds with the widely accepted economic concept of comparative advantage gained such support among professional economists.

Troubles Ahead in Emerging Markets

Garten, Jeffrey. Harvard Business Review, May/June 1997, pp. 38-50

The lack of "democratic capitalism" may sidetrack some of the so-called big emerging markets, says the author, a former Under Secretary of Commerce for International Trade who supported the Clinton Administration's focus on expanding U.S. trade with 10 big emerging markets (BEMs) in Asia, Africa, and Latin America. After taking the first major steps toward opening domestic markets, several BEM governments face domestic challenges that could lead to the election of new governments, possibly with different policies. Such setbacks to BEM liberalization could affect the export growth of the industrialized countries that increasingly rely on these markets for sales and even financing of pensions.

Smuggling in Emerging Markets: Global Implications

Gillespie, Kate; McBride, J. Brad Columbia Journal of World Business, Winter 1996, pp 40-54

"Economists and policymakers have lauded the adoption of liberal trade policies in many of the emerging markets....Yet the authors have found that these countries are likely to see the emergence of smuggling and contraband distribution in response to trade liberalization... In a market environment in which organized crime competes alongside more legitimate channels of distribution. U.S. multinationals will face new challenges relating to strategic planning, maintaining alliance relationships and corporate control of global brands and pricing."

International Development: Is It Possible? Stiglitz, Joseph E.; Squire, Lyn Foreign Policy, no. 110, Spring 1998, pp. 138-151

"Has the East Asian financial crash also brought down the conventional wisdom regarding economic development? Should over developing nations bet on export-oriented policies? Two leading experts review 50 years of development policies and ponder what, if anything, the world has learned."

Chen , Shuxun, Charles Wolf, Jr. China, the United States, and the Global Economy RAND, Center for Asia Pacific Policy Kenen, Peter B. (Professor of Economics and International Finance at Princeton University) International Financial Architecture: What's New? What's Missing? IIE, Book online, November 2001 192p. Jeffrey A. Frankel, Nouriel Roubini The Role of Industrial Country Policies in Emerging Market Crises Laurence H.Meyer Financial Stability in Emerging Markets: what have we accomplished and what remains to be done? Federal Reserve Board, Remarks, Federal Reserve Board Governor, December 18, 2001

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Fleche_haute60E0.gif (883 octets)  MULTILATERAL RELATIONS

The Outlook for World Trade

Business America, April 1997, pp 4-10

A Commerce Department analyst reports that it is the difference in the economic performance of the United States compared to that of our trading partners that has been the major factor behind the growth of the U.S. trade deficit in the last five years. The deficit situation should begin to improve later in 1997."

Is American Abandoning Multilateral Trade?

Garten, Jeffrey Foreign Affairs, November/December 1995, pp 50-62

"Japan, Europe, and others worry that the United States is backing away from its historical commitment to international rules and reverting to arm-twisting and private deals on trade. So long as governments intervene unfairly, Washington cannot demobilize. But as the world's most open market and a burgeoning exporter, America has the most to gain from multilateral decisions to lower trade barriers and increase exchange. During the past half-century it has shown the way, and it will continue to lead in shaping a multilateralism for the millennium."

Open Markets Matter: The Benefits of Trade and Investment Liberalization

OECD Report, executive summary, April 1997

Opening markets to trade and investment makes countries stronger as competition stimulates efficiency, which in turn contributes to economic expansion and rising incomes. The report rebuts arguments that liberal trade and investment rules lead to weaker labor and environmental standards and national sovereignty.

The Political Economy of Nontariff Barriers: ACross-national Analysis. Mansfield E. and Bush M. International Organization, Autumn 1995, pp 723-749

"Nontariff barriers to trade are most pervasive when deteriorating macroeconomic conditions give rise to demands for protection by pressure groups, when countries are sufficiently large to give policymakers incentives to impose protection, and when domestic institutions enhance the ability of public officials to act on these incentives. Statistical results based on a sample of advanced industrial countries during the 1980s support the argument that the incidence of nontariff barriers tends to be greatest when the preferences of pressure groups and policymakers converge."

Social Regulations as Trade Barriers

Vogel, David The Brookings Review, Winter 1998, pp 33-36

"As U.S. regulatory reformers scrutinize the costs and benefits of federal regulations, they should also hee the regulation-related complaints of unfair trade practices from America’s trading partners. For just as many U.S. health, safety, and environmental regulations impose substantial costs on American industry without yielding significant gain to society, some also disproportionately burden foreign producers seeking to do business here."

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Foreign Investment and the Multilateral Agreement on Investment

Journal of Economic Perspectives, USIA, April 1997, 38p <>

This year, the OECD hopes to conclude the first comprehensive multilateral rules for international investment: The Multilateral Agreement on Investment (MAI). This issue of "Economic Perspectives" examines proposed new global rules on investment, the link between trade and investment, and growing efforts to stop one of the major impediments to financial flows -- bribery and corruption.


("Dramatic improvements" in proposed text needed)

Washington -- Alan Larson, assistant secretary of state for economic and business affairs, says that "dramatic improvements" are needed in a text of the proposed Multilateral Agreement on Investment (MAI) before the United States would consider signing it. "It is more important to do it right than to do it fast," Larson told a House of Representatives Subcommittee on International Economic Policy and Trade. Larson told the committee March 6 that it will not be possible to conclude the agreement in time for the April ministerial meeting of the Organization for Economic Cooperation and Development (OECD), under those auspices the agreement is being negotiated.

Following is the text of Larson's testimony as prepared for delivery:

The Multilateral Agreement on Investment: A Work in Progress

Madam Chairperson, I welcome this opportunity to report to the Committee on the Administration's objectives in negotiations on a Multilateral Agreement on Investment (MAI).

Foreign investment, both inward and outward, makes a crucial and growing contribution to the prosperity of the United States. In 1996, flows of foreign direct investment (FDI) into the United States reached $78.1 billion while FDI outflows reached $85.6 billion.

In a globalizing world economy, American firms need a global presence in order to sell effectively. Service industries, which accounted for $236.8 billion in exports in 1996, almost always need a physical presence on the ground. Increasingly, a foreign presence is also necessary to market effectively exports of goods. All things considered, approximately 26 percent of U.S. exports are channeled through foreign based affiliates of U.S. companies.

Inward foreign investment is an important stimulus to our economy. Some five million Americana are employed by foreign owned companies. These firms contribute to our economic success by bringing new technologies. They also pay higher wages than comparable U.S. companies and have greater labor productivity.

Americans have a stake in having a fair and effective framework for international investments. This hearing can contribute to a greater understanding of the challenging issues posed in seeking to develop such a framework. To ensure that interested groups and citizens are fully informed on the MAI, the negotiators have put a draft consolidated text on the internet at Additional information on the MAI is available on the State Department web site at as well as the USTR web site at

The fundamental principle underlying this and other investment agreements is the principle of non-discrimination. Such agreements do not generally call into question the sovereign right of governments to regulate as long as regulation does not single out or discriminate against investors based on their nationality.

Developing an international framework for treatment of foreign investment is not our only objective in the MAI. Another primary objective is to ensure that the MAI contributes to the achievement of our goal of fostering stronger global efforts to protect the environment, to respect internationally recognized core labor standards and to achieve sustainable development. Many important issues must be resolved, however, before we will have an agreement that will achieve these objectives.

The basic architecture of the MAI follows the familiar lines of the forty-one Bilateral Investment Treaties that American administrations have negotiated since the mid-eighties and of the investment chapter of the North American Free Trade Agreement. We are, of course, seeking to make improvements wherever we can. The main features of the MAI are expected to include;

-- non-discrimination (the better of national or most-favored-nation treatment) for our investment abroad and the application of these principles not only after an investment is established but also when an investor is seeking to establish investments;

-- disciplines on performance requirements that distort trade and investment;

-- freedom to make any investment-related transfers, such as profits, capital, royalties and fees, whether into or out of the country where the investment takes place;

-- international law standards for expropriation and compensation, consistent with U.S. legal principles and practice; and

-- access to international arbitration for disputes between Parties and also for individual investors when they suffer specific harm from alleged breaches of the agreement. 

We are negotiating with other members of the Organization for Economic Cooperation and Development. Our negotiating partners include twenty nine advanced Countries of Europe, Asia and North America, together with the European Union(1). Taken together, these countries are the largest sources of, and the largest destinations for, flows of foreign investment. The OECD has a long track record of dealing with investment issues, as well as the broader social and environmental issues that all modern economies must address. OECD countries tend to have high labor standards and good records on environmental protection.

While OECD countries provide an important critical mass for a multilateral investment agreement, we do not support a closed arrangement. Rather, the agreement will be open for accession by other countries willing and able to accept its obligations. 

A number of developing and transition economies are following the negotiations closely and some have indicated an interest in being charter members. Argentine, Brazil, Chile, Hong Kong, and Slovakia are observers, while Latvia, Estonia and Lithuania have also indicated their interest in acceding to the MAI.

From the beginning, the United States has insisted that we will not support a MAI that does not result in a satisfactory balance of commitments and meaningful improvements in the access of American firms to foreign markets. At this time, we are unsatisfied with the commitments on the table. Some of our partners are seeking ambiguous and sweeping carve-outs, including proposals by the EU for a carve-out for "Regional Economic Integration Organizations" and proposals by several countries for a general carve-out for cultural industries. We also have significant objections to country specific exceptions requested by many of our negotiating partners. Dramatic improvements will be necessary, and this can come only through careful study and negotiation.

Negotiators also need to give detailed attention to provisions of the agreement dealing with regulatory and enforcement issues. From the beginning, the U.S. delegation has argued that the provisions of this proposed agreement simply cannot interfere with normal, non-discriminatory regulatory activities in such areas as health, safety and the environment. In particular, we want to ensure that the expropriation article of the MAI cannot be used inappropriately to challenge regulatory decisions. Other countries, initially skeptical of our proposals, are now more receptive. Hard work will be required to translate this receptivity into satisfactory legal tex

The U.S. is one of the most open economies in the world and generally places few restrictions on foreign investment. Thus, we have little to fear from new multilateral rules. Nevertheless, we are determined to protect existing measures where we may wish, for important policy reasons, to reserve our right to discriminate or otherwise deviate from our MAI commitments.

We have, for example, taken exceptions to protect existing non-conforming measures at the state and local level. We have proposed other exceptions consistent with those we took in NAFTA and take in our Bilateral Investment Treaties (BITs). We have been careful to preserve our freedom of maneuver in the future in such areas as programs to support minorities. We have also proposed U.S. exceptions for subsidies and government procurement; these would protect future as well as existing programs which discriminate against foreign investors. However, these last two are areas where our trading partners hope for greater U.S. commitment

Like our BITs and the investment chapter of NAFTA, the MAI envisions provisions for state-to-state and investor-state dispute settlement. Though rarely used in these agreements, dispute settlement provisions provide an important tool of last resort for U.S. business, especially in countries where legal protections and court systems are not well developed. This may have growing importance as MAI membership expands beyond the OECD members.

It is important to keep the dispute settlement issue in perspective. The U.S. has strong constitutional provisions and an effective court system that provide important protections to foreign investors. The U.S. has a good record of honoring its international commitments. No arbitration cases have been brought against the United States under our BITs or under the NAFTA investment chapter.

We are sensitive, however, to the fact that this is a multilateral agreement which would include our major investment partners. In the months ahead, we will take particular care to ensure that the provisions of the agreement are fully consistent with U.S. practice and are sufficiently precise to minimize the likelihood that they would interpreted in unintended ways.

With respect to the interests of state and local governments, as they requested in the case of the NAFTA, we intend that our states and localities not be responsible for responding to complaints about treatment alleged to be contrary to the obligations of the MAI. If such cases were to arise, the federal government would stand in to defend the case.

The Administration believes a well-designed MAI has the potential to advance American values in such areas as environmental protection and internationally recognized core labor standards. The OECD Secretariat has assembled considerable evidence suggesting that, as a general rule, foreign investment has a favorable impact on environment and labor standards abroad. Certainly, American companies generally take their high standards with them when they operate abroad. In addition, OECD nations have developed one of the few multilateral codes for business and these Guidelines for Multinational Enterprise are going to be associated with the MAI agreement.

The United States has made a series of proposals to strengthen the environmental provisions of the MAI. These proposals to affirm the legitimacy of regulation to protect health, safety, and environment as long as it is otherwise consistent with the agreement. Additional proposals recognize the right of each Party to establish its own levels of domestic environmental protection and encourage environmental impact assessments for proposed investments involving a governmental action which is likely to have a significant adverse impact on health or the environment.

In addition, we have proposed language to preserve our right to regulate in general. For example, we have proposed language that further explains why the questions of national and most-favored-nation treatment need to be judged by comparing investors or investments that are "in like circumstances." We also have proposed language on transparency to provide for the verification of information to ensure compliance with a Party's laws and regulations. We are studying other proposals to further strengthen protection of the environment.

The United States is also giving attention to provisions that will be important to U.S. workers. In addition to the OECD Guidelines on Multinational Enterprises, we are seeking an affirmation of support for internationally-recognized core labor standards.MAI negotiators agree that parties to the MAI should not engage in a "race to the bottom" by lowering their health, safety and environmental standards, or retreat from their support for internationally recognized core labor standards, in order to attract an investment. There will need to be meaningful commitments in these areas. This is an exceptionally challenging topic and developing the best approach will take time and will require consultation with interested constituencies. OECD countries, however, broadly share U.S. values in these areas and the OECD has a long tradition of dealing with environmental and labor concerns. For these reasons, this negotiation provides a good opportunity to tackle a set of issues that our country simply must confront as we move into an ever more globalized economy.

Over the past several years, developing countries have become more interested in and receptive to foreign investment. They recognize the benefits of foreign investment to their economies and people. They know that private foreign investment flows now substantially outpace foreign assistance funds. The interest of developing countries in attracting foreign investment can be seen in the explosion of bilateral investment treaties globally since the beginning of the 1990s, from 435 in 1990 to some 1300 today. Investment discussions in UNCTAD, the WTO, APEC and the FTAA are all looking to the MAI as a model for multilateral rules. Several of the transition and advanced developing economies have expressed interest in acceding to the MAI, including the five observers and the Baltics. The value of an MAI will be significantly advanced if a wider group of countries adhere to its provisions.

In order to ensure that any non-OECD signatories of the MAI meet basic environmental and labor standards, we have suggested the possibility of "readiness criteria." These criteria would indicate the ability of new members to the agreement to meeting their commitments on labor and environment. We are studying what type of criteria might be appropriate.

On the margins of the MAI negotiations, we have been working with the Europeans on disciplines to inhibit and deter investment in illegally expropriated property and on principles to address and resolve differences over conflicting jurisdiction. This discussion flows out of the April 11, 1997, Understanding concluded by Ambassador Eizenstat and EU commission Sir Leon Brittan.

We are seeking European agreement on a global set of disciplines. We would, of course, insist that these global disciplines be applied to expropriated American property in Cuba. We are also working on principles designed to foster better cooperation between the EU and the US in dealing with foreign policy challenges to our shared interests and values. We are making some headway on these issues. Any resolution we might reach would, in the first instance, be implemented bilaterally but could subsequently be incorporated in the MAI once it had entered into force.

As for timing, the MAI is an important and complex arrangement. It is more important to do it right than to do it fast. At a recent high level meeting, Ambassador Eizenstat and Ambassador Lang made clear the Administration's view that it will not be possible to conclude any agreement, let alone the high quality agreement we seek, in time for the OECD Ministerial in April.

We are convinced that reaching a high quality agreement will require hard work in narrowing proposed carve-outs, careful attention to regulatory and enforcement issues, and real dialogue with interested constituencies on how to address challenging labor and environmental issues. As we take the time needed to do it right, it is quite possible that we can interest additional non-OECD countries in joining the MAI. Additional members could enhance the agreement's attractiveness as the sound investment policies and the commitments to other policy objectives encompassed in the MAI are embraced by a wider group of countries. Achieving these objectives is a tall order. While success is by no means assured, we have made it clear that we are ready to roll up our sleeves and continue the work.

(1)OECD member countries include: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey, the United States and the United Kingdom.7rl.gif (3193 octets)Fleche_haute60E0.gif (891 octets)


Jackson, Janes K.

Congressional Research Service. Report for Congress. Updated March 18, 1998

Multilateral Agreement on Investment: Implications for the United States

A backgrounder on MAI written before the OECD meeting in April 1998.

Greider, William

After the WTO Protest in Seattle, It's Time to Go on the Offensive. Here's How.

The Nation, January 31, 2000

AThe central principle is that Americans have the sovereign power to impose rules on the behavior of their own American-based multinational corporations (notwithstanding the WTO's pretensions). Congress did so in 1977 with the Foreign Corrupt Practices Act.@

Nolt, James H., World Policy Institute

China in the WTO: The Debate

Foreign Policy in Focus, December 1999

AWTO membership for China is the most significant advance in relations with the U.S. since diplomatic ties were established two decades ago. Creating winners and losers on both sides, the November 15th agreement will benefit both economies, but China has conceded much more than has the United States. WTO membership would likely incline China more toward peace and the rule of law, though progress will take time. A

Permanent MFN for China: Will 2000 Be the Year?

Backgrounder: AChina may have been granted accession to the World Trade Organization, but the debate over its "most-favored-nation" status lives on. This year, Congress will almost certainly vote on legislation that would permanently extend normal trade relations with China.@

World Trade Organization: will China keep its promises? Can it? Congressional-executive Committee on China, Hearing, June 6, 2002  


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