A properly framed international investment agreement can help achieve sustainability

WINNIPEG — Environmental activists are widely credited with (or condemned for) derailing OECD negotiations for a Multilateral Agreement on Investment in late 1998. It took more than environmental opposition to stop the MAI, but since then it has been accepted wisdom that environmentalists are opposed to an international investment agreement. Today, the International Institute for Sustainable Development releases a book that takes a hard look at that assumption. Its first conclusion is that an international investment agreement should be a priority for those interested in environment and sustainable development. The question then is: what kind of an investment agreement?

An International Investment Regime? Issues of Sustainability (PDF - 2.1 mb) by Konrad von Moltke, IISD Trade and Investment Senior Fellow, asks, "What would international investment rules look like if they aimed to achieve both economic growth and environmental protection?" To answer this critical question, the book examines the many attempts to draft investment rules and takes an innovative approach, first considering the nature of the problem and then asking what this means for the shape of the necessary institution. The proposed solution is radically different from any pursued to date.

"This books argues that international investment - particularly long-term investment - is key to achieving sustainable development," said David Runnalls, IISD president. "Poor countries, in particular, need investment to replace outdated infrastructure and environmentally damaging technologies. An international set of rules on investment would help lower perception of the risks of investing in developing nations. This book sets out to discover what an investment agreement would look like if it were intent on achieving sustainable development."

Creating an investment agreement with a sustainable development focus is a challenge. It would look significantly different from the MAI and the GATT. It should not be modeled after trade-rules institutions because investment is not like trade in goods, which is a once-off deal. Instead, productive investment can last for years or decades, with the investor gaining economic citizenship in the host country and environmental regulations steadily evolving over that time. Key trade principles such as national treatment and most-favoured nation simply become inappropriate when applied to investment.

In framing an international investment regime, we should learn from the architects of international environmental agreements. A framework agreement on investment combined with a number of sectoral agreements in areas like climate change or forestry, for example, would make it possible to identify public interest that might be impacted by providing private investors with additional rights, as negotiated in the investment agreement. Creating this type of framework would allow us to bring greater balance to the rights of investors and their responsibilities to their host countries.