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research on investment issue needed, says Ricupero GENEVA: "There are many central issues relating to trade, investment and development that need more study and explanations, before people engage themselves in negotiations on multilateral investment rules," UNCTAD Secretary-General Rubens Ricupero told a seminar organized by the Third World Network. Ricupero, who was speaking at the opening session of the seminar for developing countries, on "Trade and Investment: Development Perspectives", was answering questions from trade diplomats about the "study process" underway on these issues at the World Trade Organization and what should be done. The UNCTAD chief had earlier referred to the issues about "coverage" that had surfaced in 1995, when an UNCTAD-organized seminar was held at Divon and a US business representative came out for all kinds of investments, including FDI, portfolio flows and others, to be covered, with investors being able to remit profits, dividends and capital without restrictions by the host country. The coverage question, Ricupero responded to the question from the floor, was only one of the many issues needing clarification and further study and research. There were already questions about the difficulty of distinguishing between FDI, portfolio flows, loans and other capital flows. A number of other questions raised on the issue of foreign investment and protection of investors' rights and development related to exchange-rate rules, capital control rules, problems of technology and technology transfer, and the impact of all these and others on development. Empirical evidence required "These issues," Ricupero said, "have never been fully discussed or explored. Whatever view one may have on the FDI issue, there is need for empirical evidence about the benefits and other aspects raised." Sometime ago, when he sought data from the UNCTAD secretariat on the impact of FDI on the balance of payments of countries in Asia, he was told by UNCTAD officials that the evidence was not conclusive, and the empirical studies conducted on the issue were not enough. "There is considerable scope for discussion and research on matters of considerable importance like these." "My own personal view (about the WTO study process) is that before someone engages in such negotiations, the persons concerned have to have a reasonable certainty based on empirical evidence as to how rules on investment will impact on countries." Some exploration of these issues, he noted, had taken place inside UNCTAD and in networking organizations like the Third World Network. "But we all need to make sure that we fully understand the implications. These questions need to be clarified before negotiators commit themselves to a negotiating process." But while this was what he would like to happen, Ricupero continued, what would actually happen in the WTO process was difficult to say. His own impression was that when the OECD negotiating process is resumed in October, there would be one more effort to reconcile the differences among the OECD members and see whether an agreement could be concluded in time for the May 1999 Ministerial meeting of the OECD. If that would not be possible, Ricupero suspected there would be efforts to start the process in the WTO, in time for the 3rd Ministerial meeting of the WTO in 1999. While the opposition of the non-governmental organizations to the OECD process had played some part in the stalemate at the OECD, the major reason for the deadlock was differences among the OECD members themselves relating to what was viewed as "security" exceptions and sanctions relating to prohibiting investments, as well as what were seen as cultural issues by France and Canada. Earlier, Ricupero said the UNCTAD secretariat would like to undertake studies and help developing countries. For this, they needed the support of developing countries. One should not forget that UNCTAD was an intergovernmental organization, and the governmental processes decided what it could do or could be mandated to do. Referring in this connection to the views on behalf of the Latin American group at the UNCTAD Commission on Trade in the last week of September that the organization was addressing peripheral issues rather than the central issue of the financial crisis and its effects on trade and development, Ricupero said that the "marginal agenda" for the Commission was set by the countries themselves. "We would like to get into more important subjects, but it is for the countries to assert themselves to ensure that the agenda is not made marginal." On his own part, within the scope available through ad hoc consultations with experts and with the Group of 77, Ricupero said, he was trying to help the negotiators formulate a positive agenda. But to go beyond it in the intergovernmental machinery, the developing countries need to assert themselves, he added. On the investment issue, he referred to the Midrand mandate and the expert meetings set by the Commission on Investment which he said provided some room for work by the secretariat. What needed to be explored was whether the initiatives for investment rules will end up shutting off the freedoms and options of developing countries for development. The investment talks were also taking place in the context of the financial crisis, which had now become an economic crisis, and this crisis would have an impact on all economic negotiations. "Durability" of investment issue Earlier, Mr. Chakravarthi Raghavan, chief editor of the South- North Development Monitor (SUNS), recalled that the subject of putting the investment issues into trade rules, and restricting the ability of developing countries to regulate investments, had come up at least since the 1982 GATT Ministerial, and then in the Uruguay Round. In the Uruguay Round, the investment questions had surfaced in the negotiations on Trade-Related Investment Measures and in the services negotiations. Agreement could be reached on TRIMs only after a compromise was arrived at that nothing more would be attempted beyond clarification of existing GATT obligations. In the services negotiations, the head of the then UN Center for Transnational Corporations had come to Geneva to meet key developing-country negotiators to persuade them to accept that services negotiations were really investment negotiations and to accept them. But developing countries did not agree, and the services negotiations could move forward only on the basis of the four modes of supply, of which "investment" or "commercial presence" was to be one, with countries free to determine and commit themselves on the extent of such investment or commercial presence they would allow. But even before the Marrakesh agreement was signed, the EC came back at Marrakesh in 1995 with the investment issue as a future agenda for the WTO. And before the Midrand meeting of UNCTAD, and the mandate given there, the UNCTAD division had begun to organize seminars in the Geneva area to promote investment negotiations and rules. But at the first Divon seminar, chaired by Mr. Ricupero, differences emerged, and Mr. Ricupero had said there was no international consensus. The same issue, namely writing international rules to advance the interests of foreign investors, that were promoted in the 19th-century version of globalization through colonialism, was surfacing now in the investment negotiations at the OECD, in the capital-convertibility idea of the IMF, in the WTO moves for investment rules, and in the WTO's financial services accord, as well as the UNCTAD ideas on a possible multilateral framework on investment. Developing-country negotiators, in each of these fora, as well as in capitals, had to do some homework and coordinate their positions and present the same position wherever the issue came up, Raghavan said. Organizations like the Third World Network, while trying to help the developing countries, could only do so to the extent their limited capacity allows, as in organizing the seminar and bringing outside experts like Prof. Jan Kregel. It was for developing countries to assert themselves in the intergovernmental organizations and groupings and make themselves heard. And at the WTO, they could not be diplomatic, but had to be blunt and say "no" and repeatedly to safeguard their interests. Unlike in the Uruguay Round, he warned, the public and various parts of governments have become more conscious of the implications of trade rules of the WTO, and it will be more difficult in the future to negotiate and write agreements in secret and force them on countries. (Third World Economics No. 194, 1-15 October 1998) The above article was originally published in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.
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