Three years after the OECD abandoned its controversial Multilateral Agreement on investment (MAI), a group of advanced countries, including the EU and Japan are again attempting to establish a similar agreement, this time at the WTO. From the submissions made by these countries at the WTO's Investment and Trade Working Group, it would seem that they would like an agreement which would provide investors with high standards of protection as well as free dom to invest anywhere and in any activity (subject to the usual exceptions for defence, culture etc.). One important difference between the OECD's MAI and the advanced countries' proposed new agreement at the WTO (referred to throughout this paperas PMAI) is that the latter would exclude short-term capital flows and only be concerned with FDI.

This paper examines the implications of PMAI particularly from the standpoint of developing countries. It argues that (a) the case against MAI-type agreement is if anything stronger now than before; such a treaty would seriously prejudice economic development. (b) PMAI is not only incompatible with the developmental needs of poor countries, it is also likely to harmthe interests of advanced country citizens and workers. (c) A continuation of the status quo in this area (i.e., implementing the bilateral investment treaties) would be preferable for developing countries than the PMAI. The paper outlines at the end the general principles of a development friendly multilateral agreement on investment.

December 29, 2001.