Toward a New Foreign Policy

Article excerpt

The U.S. will play a decisive role in shaping the regulatory architecture for international investment. To shoulder its global role responsibly, Washington must first dearly define its policy goals. In the MAI (Multilateral Agreement on Investment) process, which the U.S. initiated and led, environmental and social concerns were initially not even on the radar screen. Even after a storm of public criticism, environmental issues made only a minor appearance. Yet the evidence shows that regulation--or the lack of it--matters. Foreign investment, both direct and portfolio, could act to promote ecological sustainability, which is--or should be--a strategic U.S. foreign policy goal.

U.S. policy on international investment should thus not veer toward short-term commercial gain via liberalization but should be based firmly on a wider set of integrated economic and environmental, as well as security and social, objectives. Policy goals should be clearly articulated--via a process of wide public debate and consultation--and implemented by all the relevant bureaucracies. How investment is governed globally has impacts not only for business and for the environment but for international peace, human rights, and social justice.

To promote sustainable development, U.S. policy should thus aim not only to define and enforce environmental standards but to increase the flow of economically beneficial foreign investment to developing countries, especially the poorest. It should also aim to reduce beggar-thy-neighbor, conflict-enhancing competition for FDI, and it should promote human rights.

The challenge, then, is how to channel investment toward sustainable development. First, it is dear that regulation matters. Though local and national regulation are important, there is a great need for an overarching global framework to define and raise investor environmental responsibilities. Located within a set of global or regional rules governing investment, environmental norms would likely best be defined at the level of industrial sector.

Global rules for environmental management must include process issues, such as the requirement for environmental impact assessment and mitigation, as well as substance issues, such as adherence to a set of international baseline environmental standards, perhaps on a sectoral level. Effective international standards should be minimum standards that countries and companies can exceed if they wish, and they must be set high enough to have a real impact. The formulation of such standards should include widespread consultation among both developed and developing countries as well as among environmental and other NGOs. …