TWN Info Service on WTO and Trade Issues (May17/03)
4 May 2017
Third World Network

New efforts to bring long-buried MAI into WTO
Published in SUNS #8453 dated 2 May 2017

Geneva, 28 Apr (D. Ravi Kanth) - A group of countries - Argentina, Brazil, China, Russia, Hong Kong (China), Mexico, Nigeria, Colombia, Korea, and Australia among others - has stepped up its efforts to bring back the long-buried Multilateral Agreement on Investment (MAI) to the World Trade Organization in the form of an Investment Facilitation Agreement for Development, several trade envoys told SUNS.

Argentina, which will chair the WTO's eleventh ministerial meeting in Buenos Aires later this year, is going to oversee an "informal dialogue" on investment facilitation so as to explore what role the WTO can play in facilitating investments.

In a submission to the WTO's General Council on 26 April, eight countries - Argentina, Brazil, China, Colombia, Hong Kong (China), Mexico, Nigeria, and Pakistan - under the banner of Friends of Investment Facilitation for Development (FIFD) have directed Argentina's trade envoy Ambassador Hector Marcelo Cima to coordinate the discussion on "the role that the WTO could play as a forum to discuss measures that Members could take to facilitate investment."

"Given the increasing inter-linkages between trade and investment, their mutually reinforcing role in fostering global development and inclusive growth, and the growing interest in this area in the WTO," the sponsors underscored the need for furthering "the discussions on how the WTO could contribute to facilitating cross-border investment, with the ultimate aim of promoting more inclusive trade and growth for its Members, especially developing and least-developed Members."

The Argentinean ambassador, according to the submission, will oversee the dialogue for examining "possible elements" in several areas of trade and investment. The elements include:

i. improving regulatory transparency and predictability;

ii. streamlining and speeding up administrative procedures;

iii. enhancing international cooperation and addressing the needs of developing Members.

The proposed informal "dialogue," according to the sponsors, "will not tackle market access, investment protection and investor-state dispute settlement."

However, "as part of this dialogue, key elements of current and future proposals of WTO Members could be discussed".

In what seems to be a well-coordinated move, the submission from the eight countries also coincided with two other proposals on investment facilitation that were circulated on 26 April.

The second proposal submitted by Argentina and Brazil has listed the "possible elements of a WTO instrument on Investment Facilitation." The two countries maintained that India's proposal on "Trade Facilitation for Services" has added momentum to current informal discussions on investment facilitation, as such [the Indian initiative] encompasses the supply of services through commercial presence (mode 3).

"From a public policy perspective," according to Argentina and Brazil, "there seems to be no reason for Members to adopt or adjust institutional and regulatory measures to facilitate investment in services only [as proposed by India] and not investments in general."

[When negotiations on trade in services, on a separate track, were launched at Punta del Este, for more than a year, discussions and negotiations on it at Geneva could not make progress. The US proposal for supply of services through investment was not acceptable to the large majority of developing countries. The deadlock was broken only after the compromise of the current definition of "trade in services in four modes of delivery" was evolved, with supply through "commercial presence" being balanced by supply through mode 4, "movement of natural persons." Repeated efforts by the US during those negotiations to secure investment rights for supply of services, and for a service company using its investment and establishment to expand into other sectors (agriculture, goods etc) were rejected, including at that time by Brazil and Argentina. SUNS]

"Therefore, serious consideration should be given to the establishment of a common framework encompassing investment facilitation in general, that is, in both services and goods," Argentina and Brazil have now argued in their joint paper.

It added that the workshop organized by Mexico, Indonesia, Korea, Turkey and Australia (MIKTA) on the issue of Investment Facilitation, and the document tabled by the Russian Federation also contributed to a more in-depth discussion of the issue of investment facilitation.

Argentina and Brazil almost repeated the same issues that were listed by FIFD for which they are also the sponsors. The two countries said "that any WTO discussion or negotiation on investment will only succeed if it avoids well known contentious issues, such as protection rules (market access, compensation for expropriation, etc.) and dispute settlement clauses, in particular Investor-State Dispute Settlement (ISDS).

"In other words, if any multilateral effort in this area is to succeed, it must be strictly circumscribed to facilitation," Argentina and Brazil maintained.

The two countries, however, suggested that "despite not involving investment protection rules or dispute settlement, WTO provisions on investment facilitation, to be effective in reducing transaction costs and making it simpler for investors to invest, may require national legislative and institutional arrangements that, in a few cases, could prove challenging, in particular for developing countries and LDCs."

"Therefore, like the Trade Facilitation Agreement, investment facilitation measures could be implemented in an incremental manner, and meaningful special and differential treatment provided for."

But, the trade facilitation agreement is a covered agreement of the WTO rule book and it includes binding provisions for raising trade disputes, an issue that was settled in the run-up to the WTO's ninth ministerial meeting in Bali, Indonesia, in December 2013.

So, to say that it would not have "dispute settlement clauses, in particular Investor-State Dispute Settlement," is a misleading statement, said a trade envoy who had handled issues concerning investment in its national capital.

The "possible elements of a WTO Instrument on Investment Facilitation" as proposed by Argentina and Brazil include:

1.1. SCOPE: a WTO instrument on investment facilitation would apply to measures taken by Members to facilitate investment whether for production of goods or for the supply of services. It would cover FDI and, as indicated above, would not include investment protection rules and dispute settlement disciplines. Government procurement and public concessions would not be covered by the instrument.

1.2.TRANSPARENCY: Members shall notify to the WTO all laws relating to investment policy issues of general application and regulatory issues of a cross-cutting nature. Members could also be called to provide, whenever possible, opportunities for investors and stakeholders to comment on existing or proposed investment-related measures.

1.3. FORMALITIES AND DOCUMENTATION REQUIREMENTS: Members would periodically review formalities and documentation requirements applicable to foreign investors and their investments and ensure, as appropriate, that such formalities and documentation requirements are, for example: (i) not an impediment to admission and establishment; (ii) adopted or applied so as to minimize as much as possible the time and cost of establishing an investment; and (iii) not maintained if no longer required.

1.4.ACCEPTANCE OF COPIES: Members would commit to make their best efforts to facilitate documentation requirements, such as accepting paper or electronic copies of supporting documentation required for the expansion, management, conduct, operation, and sale or other disposition of investments in their respective territories.

1.5. PROCESSING OF APPLICATIONS: Establishing a common set of principles regarding the processing of applications for investment screening and licensing would significantly contribute to creating a stable, predictable and efficient framework for investors.

1.6. SINGLE ELECTRONIC WINDOW: There would be a single electronic entry point to competent authorities. The single window would unify electronic procedures for the admission of investments, establishment of an enterprise, licensing and qualification procedures for an investment. Documents submitted to the single window would be accepted by all national agencies or regulatory bodies.

1.7.NATIONAL INSTITUTIONAL ARRANGEMENTS: In order to improve the investment-related institutional governance, including through better communication between governments and investors, a National Focal Point or Ombudsperson would be established and given practical responsibilities such as: providing information/clarifying doubts on investment policies and other regulatory issues of a cross-cutting nature; seeking to address possible complaints of investors; and to the extent possible and without prejudice to specific competencies of pertinent national agencies, assisting investors in resolving specific government-related difficulties. By performing such activities, among others, the Focal Point/Ombudsperson would help prevent disputes between Members. Each Member would be free to decide whether a new office or agency would be established or whether these functions would be assigned to existing bodies. Members would decide on the nomenclature of any new agency/office.

1.8. COOPERATION AMONG NATIONAL FOCAL POINTS/OMBUDSPERSONS: Cooperation among competent authorities of Members is quite important in facilitating investment. The areas for cooperation under this provision could include exchange of information on procedural requirements and associated formalities and documentation. Other areas of cooperation could address the sharing of experiences regarding implementation, best practices for collection and compilation of data relating to investment, exchange of statistics as well as technical guidance or assistance and support for capacity building for small and medium enterprises.

1.9.MULTILATERAL INSTITUTIONAL ARRANGEMENTS: a Committee for Investment Facilitation would be set up to: (a) follow the implementation of a WTO instrument on investment facilitation; (b) discuss issues related to investment facilitation of general interest; (c) propose new cooperation and facilitation agendas; (d) exchange experiences in investment facilitation; and (e) compile and disseminate international best practices. Following the example of the Trade Facilitation Committee, this proposed Committee could decide to reach out to the private sector to seek its views on issues related to investment facilitation.

1.10. CORPORATE SOCIAL RESPONSIBILITY: Members could be called to advocate for the voluntary adoption by investors of principles and standards for responsible business conduct.

1.11. IMPLEMENTATION: Following the example of the Trade Facilitation Agreement, obligations under a WTO instrument on investment facilitation could be divided into three categories, one for immediate implementation (Category A) and two others (B and C Categories) with different schedules of implementation.

1.12. SPECIAL AND DIFFERENTIAL TREATMENT: the WTO instrument would contain special provisions for developing countries and LDCs pertaining to the entry into force of this Agreement due to their special economic and developmental situation as well as trade and financial needs. While LDCs would not be required to implement any obligations, they would be encouraged to do so.

1.13.TECHNICAL ASSISTANCE: Technical assistance would be provided to developing countries and LDCs in order to advance and strengthen their institutional and regulatory capacities in investment facilitation. The provision would entail obligations that help build the supply capacity of developing countries and LDCs.

The third submission by China included almost the same elements proposed by Argentina and Brazil in their "WTO Instrument on Investment Facilitation." The crucial section in China's proposal is on the "options for improving the efficiency of administrative procedures relating to investment." The procedures include:

i. Encourage the establishment of clear and consistent criteria and procedures for investment screening, appraisal and approval, and specify the materials to be submitted.

ii. Streamline investment-related licensing and qualifications requirements and procedures, specify reasonable timeframes for the screening of - and making decisions on - investment applications by relevant regulatory authorities, and provide timely notice of these screening decisions to the applicants.

iii. In the case of incomplete applications, specify, according to Members' respective domestic laws and regulations, the additional information required to complete the application and provide the opportunity to supply this information.

iv. Encourage and foster institutional cooperation and coordination among Members' domestic regulatory authorities, including the establishment of a "one-stop" approval institution where possible. Clarify the roles and responsibilities of different levels of government, and of various agencies, where more than one agency is involved in the investment screening process.

v. To the extent possible, keep costs for the investor in the investment approval process to a minimum, and make fees charged commensurate with the administrative cost of processing an application.

vi. Facilitate the entry and sojourn of personnel relating to investment.

vii. Endeavour to accord investors easy access to basic public infrastructure.

In relation to the G-20 sherpas meeting in Germany, India and South Africa strongly opposed discussing investment facilitation. In addition, the Trump administration in the US came out openly and strongly against the proposal, with the Trump administration in effect asking the WTO DG, Roberto Azevedo, who was promoting it at the G20, to lay off.

Significantly, despite fierce opposition from the United States as well as India and South Africa for discussing investment facilitation at the G20 sherpas meeting on 4 May in Germany, the group of eight countries have now tabled separate proposals on investment facilitation at the WTO, where besides the US, India and South Africa, a large number of developing and least developed countries remain opposed.

Meanwhile, over the past five days, Argentina's foreign minister, Ms Susana Mabel Malcorra, has actively campaigned here in Geneva for launching negotiations on e-commerce at the Buenos Aires meeting despite massive opposition from all African countries except Nigeria and perhaps Egypt, as well as several major developing and least-developed countries.

She says the current work program for e-commerce which was agreed by members in 1998 and which requires them only to "explore" all issues concerning e-commerce remained "limited." Therefore, she has told reporters, that if WTO members fail to arrive at a new mandate to engage and embrace e-commerce, they will "miss the boat" of the biggest opportunities for bridging the gap between the haves and have-nots.

Along with the WTO director general Roberto Azevedo and the Alibaba Group's chief Jack Ma, she projected e-commerce as a "developmental" issue even though it is basically an import-facilitation route for global e-commerce behemoths such as Alibaba, Amazon, eBay, and a few other companies.

Already, small e-commerce companies such as Flipkart in India and elsewhere are being smothered by predatory practices being adopted by Amazon in India, according to several news reports.

In crux, Argentina along with the WTO director general are resorting to proposals and practices that have already undermined the credibility of the eleventh ministerial conference even before it starts in the second week of December, trade envoys said.