TWN Info Service on WTO Issues (August03/13)

23 August 2003

Third World Network



The Chairman of the investment working group in WTO has concluded there is no consensus on how to proceed with the issue in Cancun, and will report accordingly to the General Council chairman.

This emerged at a meeting of heads of delegation at the WTO on Friday 22 August.

In the debate, the proponents told developing countries to take courage and jump in the water and swim.  The developing countries replied that they can jump in the river only when they know how to swim, and if they are confident the water is not too cole, not too deep, and does not contain crocodiles and piranhas.

Below is a report of the HOD meeting.  It is the last meeting on investment before the second Cancun Text comes out on Sunday.

best wishes

Martin Khor





No consensus on investment, concludes Chair of WTO investment group

TWN Report, Geneva 22 August 2003 (by Martin Khor)

The Chairman of the Working Group on Trade and Investment has come to the conclusion that there is no consensus among WTO members on how to proceed with the investment issue or nor on what to advise the Ministers in Cancun on the issue.

Brazilian Ambassador Seixas Correa, who is also the Friend of the General Council Chairman on the investment issue, said he would accordingly advise the General Council Chairman of this conclusion.

He made this statement at the end of a WTO heads-of-delegation (HOD) meeting on investment this morning.

Correa said no member had suggested that the issue should be dropped from the WTO.  However there were many countries that supported the position that more information is needed and the issues required more clarification.  The proponents had also shown more flexibility by being willing to incorporate the concept of substantive modalities, and not just procedural modality.

He added the consultations did not provide us with a sufficient basis for a solution to the impasse between the members. 

During the discussion, members made use of the analogy of whether someone should be willing to jump into the river.   A proponent country, Norway had urged the developing countries to have courage to jump into the river and swim.  Taking the same analogy, many developing countries said they should only jump if they knew how to swim, if the temperature of the water was suitable, if the water was not too deep, and if there were no lurking dangers such as crocodiles and piranhas in the water.

The meeting had on the table two papers. One was by 11 African countries on Singapore issues, proposing text that negotiations should not begin on all the issues and that clarification of the issues should continue (WT/GC/W/510).  The other was by the European Communities, Republic of Korea, Switzerland, Taiwan and Japan with proposed text to begin negotiations on investment and containing their version of modalities for the negotiations (JOB (03)/172).

The meeting began with a briefing by Seixas who said he had held three informal consultations on investment on 30 June and 1 July with three different groups of countries.  From the consultations, it was clear the issue was unresolved.  Many members had said that there had not been enough clarification of the issues and the process of discussing the issues should continue.  On the other hand the proponents said the clarification had finished and it was time to move ahead to negotiations.

He added that on the question of modalities, a large majority of members had understood that a consensus had to be reached on substantive modalities, and if we are to abide by the Doha mandate, it would be necessary to identify the content of these substantive modalities.

He then asked for presentations to be made of the two papers. Japan introduced the proponents’ joint proposal.  The EC reiterated they  represent 25 countries, constitute 75% of world trade and account for some 60% of global investment flows. It said it had taken into consideration the importance of development policies and objectives and it had affirmed the right of host governments to regulate in the public interest in paragraph 1 of their proposed text.

Korea, a co-sponsor, added that all the clarification of issues had been made and iwe should give a clear indication to Ministers to start negotiations.

The joint proposal was also supported by Norway, which said that sufficient clarification had been done, and we must now be courageous enough to jump into the water and start swimming.

Introducing the paper by 11 African countries, Kenya stated there is too much divergence on the issues which meant there was no consensus.  On the issue of scope and definition, it appeared that the proponents are going further than what many members have been saying in the Working Group, that any discussion on investment must be confined only to foreign direct investment.

Kenya noted that the proponents had placed in square brackets the definition of foreign long term investment, indicating that they would like to have a far more expansive definition that could include portfolio equity investment and other kinds of capital flows.

Kenya also pointed out that the modalities presented by the proponents are inadequate and inappropriate for an informed and sound consensus to be  reached. The proposed modalities merely provides a list of the elements and states the logistical aspects of how negotiations will be undertaken.

Kenya also challenged the need for such multilateral investment rules. “We have not heard sufficient economic arguments that these rules will lead to increase in investment flows.”  Kenya reiterated its proposal that the clarification process should continue, instead of starting negotiations.

Many developing countries spoke in support of the African position.  The Philippines, replying to the EC statement, said it may be true that the EC countries account for 60% of investment flows, but the territories that the investors want to enter belong to us, thus implying that the view of host developing countries also had weight.

Many countries reverted to the Norway analogy of jumping in the water to portray their resistance to starting negotiations.

The Malaysian Ambassador said that in his country there were many crocodiles in the rivers and that was a good reason why it would not want to jump into the water. 

The China representative said he liked to swim, but before deciding whether to jump into into a pool, it was important first to know whether it is clean, whether the temperature is right and whether there are any other dangers.  So far he did not see clearly that the situation was appropriate.  

China pointed out that if the proponents wanted a multilateral agreement on investment, it is necessary to seriously look at the scope and definition and the modalities of such an agreement. The modalities proposed by the EC and others are simply not enough for this.

As far as it is concerned, the scope of foreign investment must be limited only to foreign direct investment, and the dispute settlement mechanism must not be a part of the multilateral rules on investment.

Some countries raised the concern that a proposed investment framework would affect their ability to make use of performance requirements.

Answering a point by Korea that a multilateral agreement is important for countries, India said that there was no indication that a multilateral agreement would replace or prevent the bilateral investment treaties.

The US stated that in its view, the coverage of a WTO investment agreement must include more than just foreign direct investment.

At the close, the Kenyan Ambassador, Amina Chawahir Mohamed, said the EC-Japan-Korea-Swiss paper cannot form the basis of the investment discussions in Geneva or Cancun.  She added, we are not ready  to jump into strange pools, or to blindly continue this exercise. She stressed that before ever starting negotiations, we must first clearly define the parameters, as even the US had indicated.

It was important at this stage to work on a realistic outcome on investment, she said. Therefore, there should be a text for Cancun that states that Ministers take note that there are serious divergences of views, that a lot of discussion is still required to clarify the issues in the Doha mandate as well as other issues, that developing countries have legitimate concerns that have to be addressed a priori, and the process of discussion and clarification should continue.

Kenya said this was not only the view of the 11 co-sponsoring countries, but that all the ACP countries are also supportive of the paper as well as a number of Asian countries.