Magazine article State Legislatures

Preemption Watch

Magazine article State Legislatures

Preemption Watch

Article excerpt

The United States is currently negotiating an international agreement, the Multilateral Agreement on Investment (MAI), which could significantly affect states. Its goal is to reduce barriers to the worldwide movement of capital. Renato Ruggerio, the director general of the World Trade Organization, says of the negotiations, "We are writing the constitution of a single global economy."

The agreement is being negotiated under the auspices of the Organization for Economic Cooperation and Development, composed of the leading industrial nations of North America, Europe and East Asia. Negotiators expect to sign an agreement next May.

The MAI seeks to remove restrictions on the movement of capital, require foreign investors to be treated as favorably as domestic ones, and open natural resources, telecommunications and all other economic sectors to foreign investment. Performance requirements (regulations that require investors to meet certain social policy goals) would be barred. Investors would be entitled to compensation for expropriated property. In short, investors would be protected from discriminatory treatment by governments.

The MAI would be binding on American states. State laws would be subject to challenge in the MAI dispute resolution process. In contrast to World Trade Organization proceedings, an MAI challenge to a state law could be initiated by an individual firm (as well as a foreign country). The United States could be held liable for money damages if a state law is found to violate the MAI. …

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