US, India-South Africa nix move for investment facilitation accord at G20

Proponents of the investment facilitation issue had earlier suffered another setback at the G20 major economies forum when attempts to push through a draft agreement in this area were opposed by the US, India and South Africa.

by D. Ravi Kanth

GENEVA: A sustained push by Germany to revive the failed Multilateral Agreement on Investment (MAI) under the banner of an investment facilitation agreement foundered on 5 May at a G20 technical experts’ meeting in Berlin.

The German attempt at the meeting of the G20 Trade and Investment Working Group (TIWG) failed after the United States, and India and South Africa blocked the draft agreement on different grounds, participants told the South-North Development Monitor (SUNS).

The US at the meeting also opposed attempts to strengthen trade monitoring and trade measures for resisting protectionism, and trade assistance.

The US made it categorically clear that it is not in a position to consider the three issues at this juncture, said several participants who took part in the deliberations.

Germany – which currently holds the presidency of the G20 – along with Japan, Canada, Australia, China and Brazil, among others, have worked hard to prepare the deliverables on these three issues at the level of technical experts so as to finalize them for the G20 sherpas meeting later in May. The sherpas meeting is to be followed by the meeting of G20 leaders in July.

After two days of discussions that began on 4 May, Germany held a meeting with the US, India and South Africa to see whether the three were ready for a much-watered-down text on investment facilitation.

The US stuck to its hardline stance that it was not in a position to agree to any outcome, while India and South Africa said that even a non-binding outcome on investment facilitation as proposed by Germany would undermine policy space for developing countries to pursue their developmental policies.

The two developing countries made it clear that they could only agree to some broad messages on investment facilitation but not a deliverable based on a non-binding outcome, according to participants who took part in the meeting.

Against this backdrop, Germany was forced to cancel the meeting a day before the scheduled end on 6 May.

Draft package

Despite fierce opposition from the US, which asked Germany to drop the consideration of investment facilitation at a G20 experts’ meeting in April, Germany along with several developed and a few developing countries had gone ahead to negotiate the draft agreement that was circulated prior to the meeting.

The German draft package called for reaffirming “the Principles for Global Investment Policy Making endorsed in the Hangzhou communique and encourage policymakers to use them as reference and guidance.”

“Investment plays a central role in promoting inclusive economic growth and sustainable development through the creation of jobs and the dissemination of skills and technology,” it argued, suggesting that, at a time when foreign direct investment flows are volatile and not sufficient to induce economic growth, there is an urgent need for facilitating investment.

Therefore, it suggested language to the effect that G20 leaders agree that “investment policies should be transparent, efficient, predictable and consistent – also with international obligations.”

“To maximize the beneficial impact of investment, we are committed to encouraging investment that is sustainable from an economic, social and environmental perspective and to promoting good corporate governance as well as responsible business conduct.”

Further, “to complement the G20 Guiding Principles for Global Investment Policy Making and facilitate their implementation we endorse the attached non-binding G20 Investment Facilitation Package,” read the draft.

The “non-binding G20 Investment Facilitation Package” would include the following objectives:

(i) reaffirming and complementing the G20 Guiding Principles for Global Investment Policy Making;

(ii) fostering open and transparent business climates that are conducive to investment;

(iii) promoting inclusive economic growth, sustainable development and a level playing field for all investors, including small and medium-sized enterprises.

To achieve these objectives, the draft listed four actions for investment facilitation: (a) transparency, (b) predictability and consistency, (c) efficiency, and (d) stakeholder relations.

No consensus

While technical experts from Japan, Canada, China, Russia, Brazil and Australia, among others, started discussing each element in the German draft, the US simply refused to engage in the discussions.

On 11 April, the US had sent a communication to Germany and other members of the G20 that it “does not believe that G20 TIWG negotiation of detailed policy prescriptions in this area [investment] is necessary or helpful at this time, nor that TIWG should seek to prioritize policy actions in certain areas of investment over others, including with respect to which issues should be on the agenda of separate bilateral, plurilateral, and multilateral negotiations.”

Japan, on its part, sought robust provisions on investment facilitation, while China, Russia and Brazil insisted that it should guide G20 countries to negotiate the facilitating issues based on the G20 Hangzhou outcome.

India and South Africa raised several objections on investment facilitation, insisting that while there was no need for any outcome at this juncture, their demands – right to regulate, policy space, respecting developmental needs of developing countries, and without prejudice to discussing it in other international fora – must be incorporated.

As the talks proceeded for two days, it became clear that there were formidable obstacles to arriving at a meaningful deliverable on investment facilitation. Faced with a grim impasse, Germany convened a meeting with the US, India and South Africa on 5 May to determine whether the three countries were prepared to consider a watered-down text.

The US said that it was not in a position to join consensus. India and South Africa maintained that they were not in a position to incorporate the document as a recommendation of the TIWG but were willing to consider only some key messages or broad signals for investment, according to people who took part in the meeting.

The writing on the wall is thus unmistakably clear that investment facilitation will not be able to make progress at the WTO given the fierce opposition from the US on one side, and India and South Africa on the other, said a trade envoy who asked not to be quoted. (SUNS8458)                                           

Third World Economics, Issue No. 638, 1-15 April 2017, pp5-6