Tag Archives: bilateral investment treaties

UK-Africa Relations Seminar Series Part 5

21 Sep

Back in July I was involved in hosting the fifth meeting of an ESRC Seminar Series on UK-Africa relations at my own institution, Oxford Brookes University. The theme of the day was ‘Trade in UK-Africa Relations’. This blog post is a summary of the discussions and some reflections on a number of the key themes that, from my perspective, emerged out of the seminar. Podcasts of all the presentations are available at the seminar series website.

Panel 1: The UK and African Development: Fair trade and/or trade justice?

The first panel during the morning considered the relationship between trade and African development. Liz May, who is Head of Policy at Traidcraft, gave a fascinating account of how her organisation is involved in providing support to producers, both in Africa, and other parts of the Global South. Her presentation outlined three areas of current advocacy work:

  1. Controlling unfair practices of UK supermarkets via a new regulatory body (The Groceries Code Adjudicator).
  2. A focus on Bilateral Investment Treaties (BITs) and the investment chapters of Free Trade Agreements (FTAs) and in particular the problematic inclusion of investor-state dispute settlement mechanisms, which limit the policy space for developing countries through what Liz described as ‘regulatory chill’.
  3. Increasing the legal power over the extra-territorial practices of UK companies.

Liz concluded that current UK government practice is, in some cases, undermining the developments that Traidcraft is seeking in all three of these campaign areas.

I then gave a presentation based on an ongoing research project, which is looking at the Trade Justice Movement (TJM), and its attempts to shape the debate on the relationship between trade and development. TJM was one of the three main pillars of Make Poverty History (MPH) in 2005. Ultimately TJM seeks to promote ‘trade justice’ as an alternative to free trade. During the last decade or more, however, the UK government has continued to support trade liberalisation and, in relation to Africa, the ‘prosperity agenda’ advanced by the Coalition government, discussed at the fourth seminar in the series, is even more resolutely in favour of free trade, with the emphasis on the benefits both for African economic growth and UK exporters and investors.

After lunch a further three speakers spoke to the broad theme of ‘UK-Africa Trade in a Changing Global Context’. Robin Gwynn, who has had a long and distinguished career as a diplomat, specialising in Africa, discussed the development of UK trade policy towards Africa during the 5 year term of office of the Coalition government. Commercial diplomacy, he argued, became more central during this period and given the impacts of the financial crisis, the emphasis was on searching for new markets. Hence, Africa became more significant as it was viewed as a ‘high-growth region’. Robin suggested that trade alone will not sustain growth in Africa unless there is a focus on job-creating economic activity. He also noted that some African governments are requiring higher standards of trade and investment and they need to be supported in this endeavour. Ultimately trade and investment, argued Robin, have to be at the centre of any future development in Africa.

In contrast, the final two speakers, in very different ways, then exposed some of the dangers that trade and investment policy can have for African development. Peg Murray-Evans (University of York) explored the intricacies of the varied negotiating positions adopted by states in Southern Africa in their Economic Partnership Agreement (EPA) negotiations with the EU. She noted how one of the outcomes of the regional EPA negotiations is that different African countries now have a range of trade regimes with the EU, which may ultimately skew UK trade and investment decisions. Peg concluded by noting the concern that South Africa and other key African states raised in the EPA negotiations, over the point made earlier in the day by Liz May, about the potential for these new trade deals to limit the ‘policy space’ for African countries.

Our final speaker, John Hilary (War On Want) began by reminding everyone that history tells us that successful development has not been achieved in other parts of the world via a ‘deep integration’ model of trade. Nevertheless, John argued that although the rhetoric might have been different under New Labour, in essence the UK government has continued to have a firm commitment to trade liberalisation across Africa. The second half of his presentation then considered the NGO response to this over recent years. He noted how many key players in the UK have moved away from trade in the period since MPH in 2005 and how difficult it was to build a mass public campaign around the EPA negotiations, discussed by Peg. John optimistically concluded that unlike EPAs, the Transatlantic Trade and Investment Partnership, which is currently being negotiated between the US and the EU, allows a re-emergence of the debate on trade by opening up the broader issues of power being acquired by capital.

Overall, it was both an enjoyable and stimulating day of discussions. I was left with lots of questions and fewer answers! I guess this is the point, however. In particular, the following thoughts struck me as worth further consideration:

  1. Trade is increasingly about so much more than imports and exports, with investment becoming centre stage in both the UK and EU’s position.
  2. Is UK trade policy conducive to human development in Africa? Are existing regulatory measures (such as the focus on the practice of UK supermarkets) sufficient in this regard?
  3. There are alternatives to the orthodox view that trade liberalisation is good for development. However, for the UK government this remains a key assumption. By being critical of this stance, as John Hilary emphasised in his presentation, does not mean that we have to adopt a position where we are against the idea of trade. The challenge is how we move from the idea of fair trade to realising the more systemic changes captured by the concept of ‘trade justice’.

The next seminar in the series is scheduled for 20 January 2016 in London where the theme will be ‘Africa in the UK Public Imagination’. Further details and podcasts from other seminars can be found at the the series website. For updates do follow the series on twitter: @UKAfricaSeminar

Why South Africa has ripped up foreign investment deals

17 Dec

This piece was originally published on The Conversation at https://theconversation.com/why-south-africa-has-ripped-up-foreign-investment-deals-20868

Over the past few months, South Africa’s government has cancelled foreign investment treaties with Germany, Belgium and Luxembourg, Switzerland, Spain and the Netherlands. The reasoning behind this tells us much about modern patterns of trade and development. As the nation looks to move on from the loss of Nelson Mandela, these moves to regain control over foreign investment will prove valuable.

Cancelling the treaties caused panic in South Africa’s mainstream business press and also led to the EU’s trade commissioner expressing his concern about the impact this might have on future investment in the country.

But South Africa is not acting alone. These moves represent part of a broader change of opinion among many developing countries towards investment treaties. It is no wonder when you consider large western companies are increasingly using the deals to launch legal challenges against developing countries in which they operate. The decision by arbitrators to award US$1.77 billion to Occidental Petroleum (an American oil corporation) in a case against Ecuador has spooked many developing countries.

The problem with these deals is they lock-in the rights of foreign investors. South Africa’s decision to terminate them will open up welcome space for the government to balance domestic development with the rights of overseas firms.

Firms over states

Bilateral Investment Treaties (known as BITs) are agreements between states that ensure a range of protections for transnational corporations. Crucially, they all include mechanisms for settling disputes between states and investor companies which, unlike the World Trade Organisation, allow firms to bring legal cases directly against states.

If a multinational company claims a state has seized its property in the “public interest”, under the terms of a bilateral investment treaty this dispute would then be resolved by international tribunals rather than national courts. The advantage these deals give to corporations over weaker states is clear.

Given that attempts to negotiate global investment rules collapsed years ago, bilateral treaties remain the main international legal mechanism for protecting the rights of multinationals. UN data suggests there are nearly 3,000 such deals in existence and nearly half of these will be due for renegotiation by the end of 2013.

In the post-apartheid years the ANC-led government sought to attract further foreign investment to the country, following the dominant neoliberal ideas of the time. The mid-90s saw South Africa sign a number of investment treaties with partner countries including 13 with current EU member states. This was a period when the number of treaties rose substantially across the globe, and South Africa felt compelled to compete with other potential investment locations.

New approaches

In more recent years the government has begun to acknowledge this strategy has failed to resolve South Africa’s socio-economic challenges. More specifically, it began to question investment treaties after investors based in Italy and Luxembourg launched a compensation claim in 2007. It was argued that the government’s Black Economic Empowerment measures in the minerals and energy sectors contravened investors’ rights, and a private settlement was reached in 2010.

Neoliberalism and an open-door stance towards multinational corporations has now been abandoned in favour of a development policy focused on a more strategic role for the state. Over the past few years the country’s “New Growth Path” has sought to create jobs via an active industrial strategy. This entails a specific focus on reviving manufacturing and boosting employment through state-led investment in infrastructure.

However, South Africa is still hamstrung by numerous bilateral trade and investment agreements. With these deals still in place, foreign firms found their advantages written into law, and the government simply did not have the policy space to implement the strategy it would like. It is within this context that the moves away from investment treaties should be understood.

South Africa is still a far from undesirable location for multinationals. Contrary to some recent scaremongering it remains very unlikely that the end of these deals will lead to a wholesale programme of nationalisation, and all existing investments are still protected for a further ten years.

Eventually, the government plans to replace individual deals with a single framework. This proposes, quite reasonably, that foreign and national investors should both be treated equally under South African law. Moreover, corporations are already afforded strong protection in the constitution.

Revoking the treaties removes one of a number of obstacles to South Africa being able to address its development challenges. Whether the government will make effective use of this space to develop policies that can start to address the triple challenge of poverty, unemployment and inequality remains to be seen. But it is space worth having.