More 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
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
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

"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.