TWN Info Service on WTO and Trade Issues (May17/09)
12 May 2017
Third World Network

US, India-South Africa nix move for Investment Facilitation accord
Published in SUNS #8458 dated 9 May 2017

Geneva, 8 May (D. Ravi Kanth) -- A sustained push by Germany to revive the failed Multilateral Agreement on Investment (MAI) under the banner of an Investment Facilitation agreement foundered on Friday (5 May) at the G20 technical experts' meeting in Berlin.

The German attempt failed, after the United States, and India and South Africa blocked the draft agreement on different grounds, participants told SUNS.

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

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 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 this month.

The sherpas meeting was to be followed by the meeting of G20 leaders on 9 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 are ready for a much watered-down text on investment facilitation.

The US stuck to its hardline stance that it is 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 the German Presidency will undermine policy space for developing countries to pursue their developmental policies.

The two developing countries made it clear that they can 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.

Significantly, the setback suffered at the G20 Trade and Investment Working Group (TIWG) on investment facilitation on Friday has nearly put paid to the discussion of several proposals on the same subject at the World Trade Organization General Council meeting on Wednesday (10 May), according to participants who asked not to be identified.

Proposals such as the need for an informal dialogue on investment facilitation for development by a group of countries, possible elements of investment facilitation by China, a WTO instrument on investment facilitation by Argentina and Brazil, MIKTA investment proposal by Mexico, Indonesia, Korea, Turkey, and Australia, and a Multilateral Investment Facilitation agreement by Russia, are all listed for consideration at the General Council meeting on 10 May.

Despite fierce opposition from the US which asked Germany to drop the consideration of investment facilitation at the G20 experts' meeting last month, Germany along with several developed and a few developing countries went ahead, as though it is business as usual, to negotiate the draft agreement that was circulated prior to the meeting.

The German draft package, for example, has 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 has argued, suggesting that, at a time when Foreign Direct Investment flows are volatile and not sufficient enough to induce economic growth, there is an urgent need for facilitating investment.

Therefore, it has suggested language that G20 leaders agree that "investment policies should be transparent, efficient, predictable and consistent - also with international obligations."

"To maximise 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," Germany argued.

The "non-binding G20 Investment Facilitation Package," according to Germany, would include the following objectives:

(I) reaffirming and complementing the G20 Guiding Principles for Global Investment Policymaking;

(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 SMEs, G20 members propose the following list of non-binding actions for the consideration of policymakers seeking to facilitate investment during its whole life-cycle.

To achieve these objectives, the draft has listed four actions for investment facilitation. They include (a) Transparency, (b) Predictability and Consistency, (c) Efficiency, and (d) Stakeholder Relations.

As part of transparency, the draft has suggested the need to promote accessibility and transparency of policies, regulations and procedures relevant to investors.

Other elements of transparency include making "publicly available clear and up-to-date information on the investment regime including timely and relevant notice of changes in applicable standards, procedures, technical regulations and conformance requirements."

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 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." (See SUNS #8444 dated 18 April 2017.)

Japan sought robust provisions in the IF (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 to IF, insisting that while there is 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 all the three issues faced formidable obstacles for arriving at meaningful deliverables.

Faced with a grim impasse, Germany convened a meeting with the US, India, and South Africa on Friday afternoon to know whether the three countries are prepared to consider a watered-down text.

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

On trade monitoring and measures, and trade assistance - which included issues such as steps to prevent protectionism, the WTO's continued role to monitor trade measures and the need to keep markets open, the US said it is not in a position to join consensus.

It now remains to be seen how the proponents - Argentina, Brazil, China, Russia, and the MIKTA (Mexico, Indonesia, Korea, Turkey and Australia) will pursue their proposals on investment facilitation at the GC meeting on Wednesday.

But the writing on the wall is unmistakably clear that IF 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, due to differing positions, said a trade envoy, who asked not to be quoted. +