GLOBAL PUBLIC GOODS AND TRADE: CONFLICTS, COMPATIBILITY AND COMPLEMENTARITIES
Round Table 3 - Regulation policies and global norms: Articulation with the trade regime?
Global Public Goods, International Financial Markets and Foreign Direct Investment
Konrad von Moltke
Institute for Environmental Studies, Amsterdam, Netherlands
Stable currencies and sound banks are essential to international trade and investment. They contribute in critical ways to the stability of the system, so only those who advocate radical change in the interests of protecting global public goods can have any interest in instability.
The measures that are needed to ensure stable currencies and sound banks have highly mediated impacts on global public goods. Because they respond first and foremost to the logic of money their impacts on public goods are typically second order effects, for example relating to the willingness of banks to lend to certain classes of borrowers or to government actions designed to respond to balance of payments problems.
Investment is quite different in character but it is important to distinguish between productive investments and investments that are essentially financial operations related to the purchase and sale of instruments most often derived from productive investments: stocks, bonds, or more complex instruments.
Productive investments directly affect a wide range of public goods at the local, national, regional, and global level. Many productive investments involve the permanent alteration of ecosystems, the use of natural resources in ways that can impact other countries or even global systems. Productive investments create the boundary conditions for future development of economy and society, including employment, critical aspects of social welfare, land use, and infrastructure needs. Productive investments are private actions with important implications for public goods.
One of the most important functions of the institutions of governance at all levels is to ensure the balancing of private rights and public goods in a manner that is legitimate, transparent, and accountable. Many countries, and all advanced market economies, have developed highly elaborate institutions of governance at all levels to ensure that this balancing occurs. In the environmental arena alone these include research and assessment, monitoring, transparency, participation, administrative procedure, and several layers of judicial review. All societies have also developed highly elaborate formal and informal institutions concerning investor responsibility once an investment has been approved and made. All of these institutions are directly impacted by the emergence of foreign direct investment, where the investor is not a citizen of the jurisdictions responsible for the balancing and not subject to many of the institutions designed to ensure investor responsibility.
International negotiations on foreign direct investment date back several decades. They have been characterized by some dramatic failures.
Evidence is accumulating that the scope and purpose of international agreements on investment have been inadequately defined, and that negotiation has occurred without sufficient public debate about its aims. The issue of balancing private rights and public goods is central to this situation. The governance of foreign direct investment is burdened by two central dilemmas.
Global public goods have not been articulated in a sufficiently effective manner to ensure proper balancing. It is now manifest that such public goods exist and that they cannot be adequately characterized as the sum of all national interests in those goods.
The institutions of international governance have not evolved sufficiently to ensure a balancing of private rights and public goods at the global level in a manner that is legitimate, transparent and accountable.