India and others ensure IF can’t be discussed formally at WTO

Formal discussion in the WTO on the contentious topic of investment facilitation has been blocked following opposition spearheaded by India.

by D. Ravi Kanth

GENEVA: India along with several other developing countries on 18 May ensured that investment facilitation (IF) cannot be discussed formally at the World Trade Organization, dealing a huge setback to China, Russia, Brazil, Argentina and others which had sought to sneak into the global trade body the failed OECD-mediated Multilateral Agreement on Investment in a new avatar, trade envoys told the South-North Development Monitor (SUNS).

The sponsors of IF – China, Russia, Brazil, Argentina, MIKTA (Mexico, Indonesia, Korea, Turkey and Australia) – can now only discuss their proposals informally without seeking any outcome either at the WTO General Council (GC) or at the upcoming eleventh WTO Ministerial Conference in Buenos Aires this December.

Effectively, India and other developing countries – South Africa, Uganda, Ecuador, Cameroon, Cuba and Venezuela, among others – served notice to the IF sponsors that they will continue to oppose the issue of investment on grounds that it is not part of the WTO mandate.

Chair’s statement

India had blocked the proceedings of the GC on 10 May due to the inclusion in item 5 of the agenda of five proposals under the banner of trade and investment facilitation. The GC chairperson, Ambassador Xavier Carim of South Africa, then suspended the meeting and subsequently held consultations with the sponsors of the IF proposals and India to break the impasse.

The two sides agreed to a chair’s statement which stated unambiguously that the proponents of IF will only discuss the issue at their informal meetings without seeking any decision or negotiated outcome at the GC. The breakthrough finally came on 17 May, said trade envoys familiar with the development.

At the reconvened GC meeting on 18 May, GC chair Carim read out a statement on his own responsibility.

The statement said that agenda item 5 was reformulated as “Communications on MIKTA Workshop and Informal Dialogue on Investment Facilitation” to allow for an exchange of views on the initiatives that some members have had, or plan to have, in respect to informal dialogues on investment facilitation.

[The draft agenda item 5 for the 10 May GC meet had read: “Trade and Investment Facilitation – Communication from Mexico, Indonesia, Korea, Turkey and Australia (MIKTA, Job/GC/121) – Joint Communication from the Friends of Investment Facilitation for Development (Job/GC/122 and Job/GC/122/ADD.1) – Communications from the Russian Federation (Job/GC/120), China (Job/GC/123), Argentina and Brazil (Job/GC/124).]

Carim’s statement also recalled the 2004 GC Decision (as contained in document WT/L/579) as well as paragraph 34 of the Nairobi Ministerial Declaration to emphasize that trade and investment were removed from the Doha Development Agenda (DDA) negotiations and that the Nairobi Ministerial Declaration has made it unambiguously clear that new issues cannot be negotiated unless there is consensus among members.

Further, the GC chair has stated that “the proponents [of investment facilitation] seek to share information on informal dialogues on investment facilitation, and that the communications do not constitute proposals for negotiations. Proponents believe that informal dialogues on investment facilitation are important.”

The language has made it clear that IF can only be discussed informally outside without any specific WTO mandate.

The chair’s statement also included language proposed by India that “some Members believe that investment facilitation does not lie within the scope of the WTO and hence the General Council”.

Therefore, “pursuant to rules 2 and 4 of the Rules of Procedure for the General Council, we note that the General Council is not required to take any decisions under this item of the agenda,” the chair’s statement said unambiguously.

India reiterated its “strong opposition to discussions in any formal structures of the WTO on Investment Facilitation, as this subject we believe is outside the scope and ambit of the Marrakesh Agreement establishing the WTO.”

It praised the GC chair’s consultation and stated that India’s opposition to the discussion on IF in the WTO is “based on serious, substantive, systemic concerns.”

India maintained that such discussion does not fall within the ambit and scope of the WTO and hence the General Council or any of the formal structures of the WTO since investment facilitation does not concern “multilateral trade relations”.

It took a potshot at the sponsors which sought to sneak in their proposals on IF in the GC agenda, with the remark that “discussions” in the WTO do not occur without a context and that context is setting enforceable multilateral disciplines or rules.

“Therefore, any discussions or negotiations in the formal structures have significant repercussions and implications,” India cautioned.

India reminded the sponsors that “‘investment’ itself covers a wide range of assets or enterprises that are subject to a separate universe of bilateral obligations.” Further, “investment issues, including investment facilitation, are much more deep-rooted within the domestic regulatory mechanisms and complex in nature as compared to tariff issues which often can be controlled by taking border measures.”

“Therefore, regulation of investment involves measures which are specific to national circumstances, involving multiple stakeholders and complex processes,” India argued.

India spoke about the need for “policy space” by emphasizing that “specific criteria for investment policy making would have to be consistent with national development objectives and a state’s constitutional authority and obligations.”

“Therefore, a multilateral trade organization like the WTO does not have the authority or competence to discuss investment related issues, including investment facilitation,” India emphasized.

India challenged the view of IF sponsors that IF would result in attracting foreign direct investments. “The importance of investment facilitation and attracting foreign investment for development are substantially different from the need for discussing or negotiating disciplines on investment facilitation at the WTO,” India said.

“Investment facilitation is not directly related to multilateral trade relations and the WTO hence is not the appropriate forum to have this discussion,” India maintained.

And “merely because trade and investment have a complementary role in a nation’s development, this ipso facto does not justify the relevance of the WTO to discuss or make rules in this respect,” India argued.

India told the sponsors that they are free to hold their informal consultations only “outside the formal structures of the WTO.”

The rephrased agenda item 5, according to India, is only limited to having “informal dialogues on investment facilitation.”

No mandate

Several developing and least-developed countries joined India in making it clear that they cannot agree to IF on the grounds that it is not part of the DDA and Nairobi Ministerial Declaration.

South Africa raised serious objections to IF, saying that bringing another controversial issue will make it difficult for the eleventh Ministerial Conference to achieve any outcomes. It said there is “neither a mandate nor an agreement to discuss or negotiate on investment in the WTO,” according to people present at the meeting.

Ecuador, Bolivia, Cuba and Venezuela said IF has no place in the Doha agenda as per the 2004 July Framework agreement.

Uganda, which is a coordinator for the least-developed countries (LDCs), regretted that IF had been put on the draft agenda. It said the Marrakesh Agreement had made it clear that only existing issues in the WTO rulebook can be negotiated or improved. Investment is not “within the scope of the WTO,” Uganda said, emphasizing that it cannot “promote a process that seeks to play by the rules for purposes of expediency.”

China, which is the leader for the friends of the IF proposals, said that it has a mutually reinforcing role. China suggested that IF must be discussed while avoiding controversial subjects.

Russia said it is keen on discussing IF informally.

In conclusion, India has put the brakes on IF at the WTO for the time being and much would depend on how developing countries get their act together in securing developmental   outcomes of  the DDA at the Buenos Aires meeting, trade envoys said. (SUNS8466)                                          

Third World Economics, Issue No. 638, 1-15 April 2017, pp2-3