page 16

issue 103
august 2003

shell raising hell in mexico

wto investment treaty threatens communities

In 2002, the oil giant Shell announced its plan to develop a gigantic new gas facility in a delicate marine ecosystem in Costa Azul, Mexico. Local residents are opposing the project due to the projected severe social and environmental impacts. This project is just one among many unwelcome intrusions that communities would find harder to change if the WTO investment treaty is agreed to in Cancun. And Shell is just one of the companies, many of them grouped in the influential International Chamber of Commerce, that would benefit from this new investment regime.

In 2002, Shell Gas and Power announced a US$500 million plan to develop an enormous Liquefied Natural Gas (LNG) facility along the pristine coastline of Baja California, Mexico. The project aims to build a receiving terminal and re-gasification facility, a port and pipelines (one of which will be 200 kilometres long) near the Bajamar tourist resort. Most of the gas produced will probably be exported to nearby powerhungry California.

Costa Azul is one of the last spots of wilderness on the Baja California coastline – an area renowned for its unique flora and fauna, as well as for the population of grey whales that swim from Alaska to calve in the warm waters of the Gulf of California. By choosing this site for an LNG plant, Shell risks not only obstructing the path of the whales, but also creates the danger of collisions between whales and ships.

Some 5,000 local people work in the thriving tourist industry up and down this coast. An LNG plant just a stone’s throw away from the resorts threatens to wipe out their jobs, small businesses and livelihoods. Shell has not offered compensation for the potential loss in tourist revenue, and very few jobs will be created by the investment. The local people have proposed an economically viable alternative that moves the pipeline offshore and keeps the grey whale’s migratory routes clear. Shell, however, remains determined to carry out its initial plan.

As with the MAI, the Commission has explicitly sought to engage industry in developing its investment proposals. Between 1999 and 2000, the European Commission conducted a comprehensive survey of 10,000 large EU businesses to ascertain their ambitions with regard to a WTO investment agreement. The Commission also championed the ‘Investment Network’, a corporate-heavy body that it clearly created to generate direct, executive-level support for its WTO investment campaign.

The International Chamber of Commerce (ICC) -- a heavyweight corporate proponent of the failed MAI which brings together companies including Shell, Unilever, BASF, Nestle, Norsk Hydro and BP, is one of the most powerful corporate backers of EU moves towards a WTO investment agreement. In the corporate world, the ICC has unparalleled access to all levels of government as well as a great deal of influence at the WTO. As Stefano Bertasi, former head of the ICC Working Group on Trade and Investment states, “We’ve always had, throughout the years, a very close working relationship with the WTO, because obviously they deal with issues which are central to business interests. The ICC has always been a vector for business influence into WTO work.”

There is a steadily revolving door between the ICC and the WTO, which allows ideas and influence to be exchanged and cemented. Lars Anell, the current chair of the ICC’s Trade and Investment Committee, was chair of the Council of the GATT (the predecessor to the WTO) between 1986 and 1992. Arthur Dunkel, a former head of the ICC’s Trade and Investment Committee, was Director General of the GATT during the Uruguay Round.

investment treaty puts communities at risk
In 1998, an uprising by global civil society caused the OECD’s proposed Multilateral Agreement on Investment (MAI) to be scuttled. This widelycelebrated victory for people and the environment may be temporary, however, as the current proposal for a WTO investment agreement is yet another attempt to develop a bill of rights for global corporations. Together with the WTO’s services agreement (GATS) currently being negotiated, the proposed investment agreement would provide transnational corporations with greatly expanded rights to invest when and where they want.

European corporate lobby groups are working hand-in-hand with the European Commission to force investment onto the WTO’s agenda. Echoing the corporate lobby groups, the Commission embellishes its arguments for a WTO investment agreement with a huge amount of ‘pro-development’ rhetoric. The vast majority of developing countries are however opposed to an investment agreement in the WTO. This is understandable: even the most basic agreement would greatly undermine the rights of communities to regulate the entry and performance of foreign investors.

The crux of an investment agreement will be increased access for investors to all countries and reduced government regulations to control these investors. It’s not clear exactly what form the agreement will take, but all indications are that a full-scale investment agreement, as supported by corporations and their lobby groups, could endow investors with significant legal protection, incorporate mechanisms by which the investor can directly challenge state legislation and seek compensation, and require that investing companies receive the same treatment as domestic companies. The agreement will also likely lock liberalization in permanently and prevent performance requirements – which aim to share some of the benefits and jobs created through investment with the local population – for foreign investors.

For companies like Shell, an investment agreement like the one being discussed in the WTO would be liberating. For the communities in Costa Azul, Mexico, as well as in countless other places around the world, however, greater investment rights for corporates would likely be accompanied by countless social and environmental woes.