TWN Info Service on WTO and Trade Issues (May17/15)
22 May 2017
Third World Network

India and others ensure IF can't be discussed formally at WTO
Published in SUNS #8466 dated 19 May 2017

Geneva, 18 May (D. Ravi Kanth) -- India along with several developing countries on Thursday (18 May) ensured that investment facilitation cannot be discussed formally at the World Trade Organization, causing a huge setback to China, Russia, Brazil, Argentina, and others who sought to sneak in the failed (OECD mediated) Multilateral Agreement on Investment in a new avatar into the global trade body, trade envoys told SUNS.

The sponsors of the Investment Facilitation - China, Russia, Brazil, Argentina, MIKTA (Mexico, Indonesia, Korea, Turkey, and Australia) - can only discuss their proposals informally without seeking any outcome either at the General Council or at the upcoming WTO's eleventh ministerial meeting in Buenos Aires later this year.

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.

After India blocked the adoption of the GC agenda on 10 May due to the inclusion of item five that contained five proposals under the banner of trade and investment, the GC chair Ambassador Xavier Carim of South Africa held consultations with the sponsors of the IF proposals and India to break the impasse.

The two sides agreed to a chair's statement that 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 Wednesday (May 17) afternoon, said trade envoys familiar with the development.

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

The statement says that agenda Item 5 is 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 said: 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). SUNS]

Carim's statement also recalled the crucial "decisions of the 2004 General Council Decision (as contained in 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 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 has 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 has said unambiguously.

India, which opposed the inclusion of item five under the heading of trade and investment in which five proposals on investment facilitation were included, 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 chair's consultation and stated that "India's opposition to the discussion on "Investment Facilitation" in the WTO is based on serious, substantive, systemic concerns."

India maintained that discussion "on "Investment Facilitation" 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 pot shot at the sponsors who sneaked in their proposals on IF in the GC agenda, with the remark that "discussions" in this organisation 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 organisation 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 sponsors of IF that investment facilitation 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 five, according to India, is only limited to having "informal dialogues on investment facilitation."

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

South Africa raised serious objections to investment facilitation, saying that bringing another controversial issue will make the eleventh ministerial meeting difficult to achieve any outcomes.

South Africa 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 LDCs, regretted that IF was put on the draft agenda. Uganda said the Marrakesh Agreement had made it clear that only existing issues in the WTO rule book can be negotiated or improved.

But 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 Doha work program at the Buenos Aires meeting, trade envoys said. +