WTO Should Not Take Up Trade and Investment - Joint NGO Statement on the Investment issue in WTO

The following is the text of a joint NGO Statement opposing the moves by some countries to get the WTO to begin a study process on trade and investment at the WTO Ministerial Conference. The NGOs expressed concern that once a study process on investment begins, it will lead to a multilateral investment agreement (MIA) in the WTO which would accord all rights to foreign investors with no obligations in return.

1. We the undersigned NGOs representing sections of civil society in many countries, would like to express our concern and anxiety over the present moves by some countries to get the WTO Ministerial Conference to declare that the WTO should "begin an examination of trade and investment."

2. This proposal is still being put forward despite the clear lack of consensus in the WTO. Several developing countries have objected to the WTO taking on this issue, at least at this time. We support this position.

3. Although the proposal is couched in terms of merely starting a study or discussion of the trade and investment link, it is obvious that developed countries would like to set up a working party as the first step to negotiations for a multilateral investment agreement (MIA).

4. We therefore strongly oppose the proposal of some countries to set a working party on trade and investment or any examination of this issue in the WTO.

5. Should a study process be needed on this issue, it should be carried out in UNCTAD, which the trade ministers and officials had mandated at UNCTAD-9 to carry out such a process to study the framework for investment rules.

6. The WTO is inappropriate for such a "study process" because of its narrow trade focus, the imbalances in its structure and bias against developing countries, and because of the tense atmosphere of a legally-binding rules-based system in which even a discussion could lead to negotiations for new rules.

7. Further, the WTO only has competence to deal with trade-related aspects of investment policy. Yet investment policy is one of the most crucial aspects of development as a whole. The UNCTAD can be a forum for comprehensive discussion of the links between investment policy and the development process. The trade aspects of this can be discussed within this wider development context.

8. It is clear that many developing countries are opposed to the introduction of new issues at present, and thus there is no consensus to have them on the agenda of the Ministerial Conference. Yet they will be on the agenda, despite the strenous objections of these many developing countries.

9. We are extremely concerned that attention of the Ministerial Conference will be focused on intense negotiations on these controversial new issues. Thus, attention will be diverted away from the original agenda of the meeting, the review of the Uruguay Round and problems of implementation, which are issues of greater interest and importance to developing countries and to the public.

10. We are especially concerned because of our belief that the apparently innocent proposal to merely begin an examination of trade and investment in WTO will start a process towards a multilateral investment agreement (MIA) in the WTO.

11. The MIA, as advocated by Northern countries, is a one- sided framework which would give overpowering rights to foreign companies to enter any country and in almost all sectors, and be granted "national treatment" (or be treated as well as local firms). There would not be obligations on these foreign corporations.

12. Correspondingly, governments would give up their authority, rights and instruments to regulate the entry and terms of operations of foreign investment. This would give rise to grave dangers, threatening national sovereignty, depriving states of necessary economic and financial policy instruments, and posing dangers to the balance of payments of host countries.

13. We oppose a MIA because it will abolish the power and legitimate right of states and people to regulate the entry, conditions, behaviour and operations of foreign companies and foreigners in their country. This is a prime and fundamental sovereign right which is essential for any country to determine its own economic and social policies.

14. This is a precious right which is especially vital for developing countries to protect. This is because the domestic sector (comprising local firms, local farms and the public sector) has been weakened through colonialism and still requires a longer period of capacity building. The ability to regulate foreign companies as part of economic policy is crucial to enable domestic capacity building which would eventually allow local enterprises to compete successfully in the economy. The removal of the right of developing countries to regulate the area of investments, would effectively close the possibility of domestic economic capacity building.

15. For countries in transition, the right and ability to regulate foreign investments is also needed, to enable a relevant mix of policies for the transition to appropriate models of development.

16. Foreign investment can have a significant role to contribute in the development process, provided that this role in placed in an appropriate policy context. This requires that governments continue to be given the right to regulate the terms and conditions for the entry and operation of foreign investment in the various sectors.

17. We are particularly opposed to the suggestion that the WTO be the forum for discussions and negotiations on the investment issue. This is due to the fact that the institutional framework of the WTO is such that disciplines would be imposed upon host countries of foreign investment; those countries that fail to meet these disciplines could then be subject to the imposition of trade sanctions and/or penalties. Thus, developing countries would have to give up their right to regulate transnational corporations (TNCs) under the threat of sanctions being placed on their exports.

18. Moreover, the WTO is supposed to be an organization dealing with trade issues, and is not mandated to establish rules relating to the rights of foreign investors per se. The WTO can only make provisions for investment measures which have distortive effects on trade flows. These are dealt with under the present TRIMS (trade-related investment measures) agreement in the WTO. Hence, no further new regimes in the area of investment are required. The WTO's mandate and powers should not be extended beyond trade to investments per se, especially since the WTO is an untransparent, and undemocratic organization in which the majority of countries are unable to have their interests adequately represented. Moreover, the possibility of NGOs to follow (let alone influence) developments in the WTO is most inadequate.

19. As NGOs, we are also very aware of the adverse economic, social, environmental and cultural effects that foreign investments and companies have had and can have - even when these companies are subject to government regulation. If the proposed treaty is accepted, then the already inadequate regulations most countries have on foreign investment will be compulsorily removed. This would most likely result in a great expansion in the number and intensity of negative effects. Potential effects include the losses and closure of many local firms and farms, increased unemployment, greater profit outflow leading to balance of payments difficulties, the inability of the domestic sector to build its capacity, loss of economic and political sovereignty, as well as the substantial buying of land and property by foreigners. Adverse environmental and cultural effects would also be experienced, as more foreign firms introduce new industries, industrial products and cultural "services" in a totally unchecked manner, and at an accelerated pace.

20. Further, we are most concerned that the way in which this proposal is being pushed onto the agenda is yet another illustration of the secretive, undemocratic and unaccountable workings of the WTO, where the governments or trade officials of a few major countires can determine the process without notifying the public or even their Parliaments/legislatures. Moreover, a direct consequence of this is that financially powerful lobbies - particularly large corporations, are able to promote and/or further their interests, through WTO rules. It is thus imperative that mechanisms be created to ensure the WTO is more accountable to the public in all countries.

21. We therefore make the following suggestions and demands:

a. Member countries of the WTO should oppose proposals in the WTO Ministerial Conference, that the issue of "trade and investment" be introduced in the work agenda of the WTO, even for an apparently harmless examination of the issue, as this would be a negotiation for an investment agreement.

b. Instead, the WTO should focus its attention on resolving difficulties faced by countries in adjusting to the Uruguay Round agreements of GATT.

c. A discussion on trade and investment should be carried out in UNCTAD together with other aspects of trade and development, such as technology transfer, balance of payments effects, and the balance of equity ownership between locals and foreigners.

d. There must be more public accountability, transparency and democracy in the operations and decision-making processes of the WTO. This should include greater access for NGOs to the WTO.

e. The issue of the role of foreign investments and a balanced and comprehensive discussion of the rights and obligations of foreign investors as well as of governments and people should be discussed in UNCTAD. Such discussions could determine the areas of competence of various agencies.

List of NGOs which have prepared or endorsed the "Joint NGO Statement on the Investment issue in the WTO"

1. The Third World Network

2. UBINIG (Bangladesh)

3. Konphalindo (Indonesia)

4. Indigenous Peoples' International Centre for Policy Research and Education (Philippines)

5. IBON (Philippines)

6. Sewa (Nepal)

7. Consumers' Association of Penang (Malaysia)

8. Research Foundation for Science, Technology and Natural Resources Policy (India)

9. National Working Group on Patent Laws (India)

10. Centre for Study of Global Trade System and Development (India)

11. Forum of Parliamentarians on Intellectual Property (India)

12. Citizens' Coalition for Economic Justice (Korea)

13. Consumers' International (Regional Office for Asia and Pacific)

14. ISODEC (Ghana)

15. Economic Association of Swaziland

16. Institute for African Alternatives (South Africa)

17. Organisation of African Trade Union Unity

18. Development Innovations and Networks (IRED) (Zimbabwe)

19. International South Group (Zimbabwe)

20. Econews Africa (Kenya)

21. Mexican Action Network on Free Trade (Mexico)

22. Centro de Investigacion Economica Para El Caribe (Centre for Economic Studies for the Carribean) (Dominican Republic)

23. Latin American Institute for Alternative Legal Services (ILSA) (Colombia)

24. IBASE (Brazil)

25. Third World Institute (Uruguay)

26. Asia Indigenous Women's Network

27. Women's Environment and Development Organisation (WEDO)

28. GRAIN (Genetic Resources Action International Network)

29. Institute for Integrated Rural Development (India)

30. Red Thread (Guyana)

31. South Group (Switzerland)

32. Swiss Coalition of Development Organisations

33. International Federation of Organic Agriculture Movements (IFOAM)

34. Focus on the Global South (Thailand)