TWN Info Service on WTO and Trade Issues (Apr17/06)
14 April 2017
Third World Network
Large majority of South nations opposed to "investment
Published in SUNS #8442 dated 12 April 2017
Geneva, 11 Apr (D. Ravi Kanth) - A large majority of developing and
least-developed countries, including India and South Africa, remain firmly
opposed to attempts by Russia, China, Brazil, and five members of the MIKTA -
Mexico, Indonesia, Korea, Turkey and Australia - group for starting discussions
on investment facilitation at the World Trade Organization, trade envoys told
Russia, China, Brazil, and the MIKTA coalition along with the traditional
supporters of investment such as the European Union, Japan, Switzerland,
Norway, Canada, Singapore, New Zealand, and Hong Kong-China among others want
to target investment and e-commerce as two major deliverables for the WTO's
eleventh ministerial meeting in Buenos Aires later this year, according to
several trade envoys who asked not to be quoted.
Significantly, the push for investment - which is an embodiment of the failed
efforts (at the Paris-based OECD) for a Multilateral Agreement on Investment
(MAI) of 1998 and which subsequently failed to become a part of the Doha Work
Program in 2003 - is not coming from the traditional proponents such as the EU,
Japan, Korea, Switzerland, and Canada.
Ironically, the latest move for investment facilitation which is a softer
version of the MAI that was sought to be finalized at the Paris-based
Organization for Economic Cooperation and Development (OECD) during 1995- 1998,
is coming from countries such as China and Brazil.
These two major developing countries had aligned with developing countries at
the WTO's fifth ministerial meeting in Cancun, 2003, for negotiating a
developmental agenda in which agriculture was at the core of the outcomes as
opposed to four Singapore issues - trade and investment, competition policy,
government procurement, and trade facilitation.
Almost 14 years after the failed Cancun meeting that pronounced the death knell
for investment along with other Singapore issues, China and Brazil have now
become the demandeurs for investment even though a large majority of developing
and poorest countries remain as opposed now as they were at Cancun, according
to trade envoys who asked not to be quoted.
To complement the sustained pressure from the eight countries on investment
facilitation, the WTO director general Roberto Azevedo has joined the bandwagon
of cheerleaders for investment.
Azevedo said on 20 March that the "MIKTA initiative" is "a
testament to how much can be accomplished when developing and developed members
find common ground and decide to work together."
In effect, the WTO director general and the eight countries are working jointly
to produce almost identical proposals on investment facilitation.
While Russia and MIKTA members came into the open by tabling their proposals
last week, China and Brazil have informally shared their submissions.
All the four proposals reviewed by SUNS are modelled on the lines of India's
proposal on trade facilitation for services and included language as proposed
The four papers on investment facilitation carry nearly identical features as
well as language - with the underlying intention of launching negotiations on
investment facilitation at the Buenos Aires meeting.
The hand of the WTO Secretariat is visible for all to see in the four
investment proposals and it is unprecedented that the effort on investment is
an aggressive drive to rope in as many developing countries as possible, said a
trade envoy who asked not to be quoted.
"We are witnessing a concerted attempt to ratchet up pressure on
developing and least-developed countries to agree to a comprehensive discussion
on investment at the WTO on grounds that it is good for them," the envoy
Close on the heels of the Russian proposal for starting discussions on
multilateral investment facilitation (MIF) rules (see SUNS #8436 dated 4 April
2017), the five MIKTA members circulated their proposal based on their seminar
which was held last month.
The WTO director general Roberto Azevedo congratulated "the MIKTA group
for taking the initiative to organize this workshop. Indeed, I think that MIKTA
itself is a testament to how much can be accomplished when developing and
developed members find common ground and decide to work together."
Without offering concrete evidence, Azevedo said "trade and investment are
now important development issues - and their expansion is of growing interest
to all WTO members, not just advanced ones."
It is somewhat disingenuous for the director general to say trade and
investment is a developmental issue when a large majority of developing and
poorest countries shot it down at the WTO's fifth ministerial meeting in
Cancun, in 2003, a trade envoy pointed out.
At that meeting, Brazil's former foreign minister Celso Amorim, who had led the
G20 developing country coalition, called agriculture and issues such as
harmonization of rules of origin that remain as the major bottleneck for
exporters from the least-developed and developing countries as the real
"developmental" issue unlike "fake developmental issues such as
trade and investment" as now promoted by Azevedo, said a trade envoy who
asked not to be quoted.
Further, the second major change, according to Azevedo, is "the way trade
and investment are increasingly interlined in the real economy."
He went on to extol how trade and investment will strengthen the global value
chains as was the case with the Trade Facilitation Agreement.
"The director general's statements on trade and investment are misleading
and false as there is no evidence to show that a multilateral/bilateral
investment agreement will enhance the flow of foreign direct investment as an
investor will always go to a country with large market and purchasing power,
and low wages," the trade envoy said.
Instead of focusing on areas where developing and least-developed countries
will benefit most, like the harmonization of non-preferential rules of origin,
which are also critical for global value chains, the director general wants WTO
members to enter into negotiations on trade and investment that will not only
impose extraordinary conditions but will impede economic development in
developing and the poorest countries, the trade envoy said.
The MIKTA proposal says "the WTO has an important role to play in
discussions on investment given its broad membership and as the only global
international organization dealing with the rules of trade."
Like the Russian proposal, the MIKTA argues that "investment is covered in
a piecemeal way across the WTO agreements," specifically referring to the
Mode 3 in the General Agreement on Trade in Services (GATS).
The MIKTA says that the recent trends in FDI flows to developing countries
would make investment a strong candidate for further discussions at the WTO.
It emphasizes that discussions in the WTO could contribute to: (I)
strengthening trade and investment policy coherence; (II) facilitating trade
and investment flows; (III) mobilising trade and investment for development;
(IV) exploring where multilateral rules could be usefully strengthened or
expanded to support these objectives.
Without credible evidence, the MIKTA says that "there is a high-level of
interest and willingness among some WTO Members to engage in open and inclusive
discussions on investment" provided the proponents avoid known
sensitivities, particularly around investor dispute settlement and investment
To bolster its case for investment facilitation, the MIKTA says that it is
"a good starting point for discussions to complement the recently
concluded Trade Facilitation Agreement and current discussions on trade
facilitation for services."
Elements involving investment facilitation, according to the MIKTA, would
involve transparency, predictability and non-discrimination in investment
policies; efficiency and streamlining of administrative procedures to minimise
investment barriers; and international cooperation, capacity-building and
The language and elements in the MIKTA proposal were repeated in the Chinese
proposal called "possible elements of Investment Facilitation" that
was shared with select countries a fortnight ago.
The two-page proposal from China almost contained the same elements of the
MIKTA proposal such as "enhancing transparency of investment policy
framework," "improving the efficiency of administrative procedures
relating to investment," and "responding to the actual needs of
developing members and least developed members."
As part of enhancing transparency of investment policy framework, China has
proposed the following elements:
1.1 Make publically available all laws and regulations relating to investment
to stakeholders, including through electronic means.
1.2 Establish one or more points for enquiry to respond to reasonable enquiries
regarding investment policies and applications to invest.
1.3 Provide regular notification of any new laws and regulations relating to
investment, or any substantial changes to existing ones.
1.4 Formulate generally applicable screening guidelines and clearly-defined
criteria for investment assessment.
1.5 To the extent practicable and in a manner consistent with Members'
respective domestic laws and regulations, provide stakeholders with proper
opportunities to comment on the drafts or amendments of any laws and
regulations relating to investment.
For improving the efficiency of administrative procedures relating to
investment, China has listed the following elements:
(a) Encourage establishing clear and consistent criteria and procedures for
investment screening, appraisal and approval, specify the materials to be
(b) Streamline licensing and qualifications requirements and procedures
relating to investment, specify the reasonable timeframe for screening and
decision of investment applications by the relevant regulatory authorities, and
provide timely notice of the screening decisions to the applicants.
(c) Specify, according to members' respective domestic laws and regulations in
the case of incomplete applications, additional information needed to complete
the application and provide the opportunity to make up.
(d) Encourage and foster institutional cooperation and coordination among
members' domestic regulatory authorities, establish "one-stop"
approval institution where possible. Clarify roles and accountabilities of
different levels of government, and of various agencies, where more than one
agency is involved in the investment screening process.
(e) To the extent possible, keep costs for the investor in the investment
approval process to a minimum, and make fees charged commensurate with the
administrative cost of processing an application.
(f) Facilitate the entry and sojourn of personnel relating to investment.
(g) Endeavour to accord investors with easy access to basic public
Finally, for responding to the actual needs of developing members and least
developed members, China has suggested the following elements:
I. Safeguard the special and differential treatment for developing members, and
enable developing members flexibility commensurate with their development
circumstances as regards investment facilitation.
II. Provide more technical assistance and capacity building to strengthen
developing members' domestic services capability, efficiency and
competitiveness, including technical support and assistance in organizing
investment promotion fora, commercial activities and business-government
III. Encourage improving the efficiency of outward investment screening and
approval, provide policy support in proper ways to outward investment,
including investment insurance and guarantee, political risk coverage and
investment promotion services.
IV. Encourage investors to perform corporate social responsibilities.
V. Give priority consideration to the special economic situation and
development needs of least developed members.
Finally, Brazil, which has abandoned the G20 developing country coalition long
ago, has now taken the mantle to champion investment facilitation.
Unlike the MIKTA and the Chinese proposal on investment facilitation, Brazil
delivered a comprehensive proposal calling for a "WTO Instrument on
"From a public policy perspective," says Brazil, "there seems to
be no reason for Members to adopt or adjust institutional and regulatory
measures to facilitate investment in services and not investments in
Therefore, serious consideration should be given to the establishment of a
common framework encompassing facilitation of investment in general, that is,
in both services and goods, it has argued.
Without credible headcount and evidence, Brazil says that "there seems to
be a very solid majority of Members, including Brazil, that firmly believe that
any WTO discussion or negotiation on investment will only succeed if it avoids
well known contentious issues, such as protection rules (rights to
establishment/market access, compensation for expropriation, etc) and dispute
settlement clauses, in particular Investor-State Dispute Settlement - ISDS. In
other words, if any multilateral effort in this area is to succeed, it must be
strictly circumscribed to facilitation."
In effect, the Brazilian proposal is a repeat of the Russian, the MIKTA, and
the Chinese proposals with different sentences. But the underlying elements and
structure are almost the same like the three proposals.
The Brazilian proposal says that a "WTO Instrument on Investment
Facilitation" must include the following elements:
1. SCOPE: a WTO instrument on investment facilitation would apply to
measures taken by Members to facilitate investment. It would cover FDI and, as
indicated above, would not include investment protection rules and dispute
settlement disciplines. Government procurement and public concessions would not
be covered by the instrument.
2. TRANSPARENCY: Members shall notify to the WTO all laws relating to
investment policy issues of general application and regulatory issues of a
cross-cutting nature. Members could also be called to provide, whenever
possible, opportunities for investors and stakeholders to comment on existing
or proposed investment-related measures.
3. FORMALITIES AND DOCUMENTATION REQUIREMENTS: Members would
periodically review formalities and documentation requirements applicable to
foreign investors and their investments and ensure, as appropriate, that such
formalities and documentation requirements are, for example: (i) not in
themselves a barrier to admission and establishment as per domestic legislation
(the instrument would not rule on admission and establishment; rather, it would
seek to ensure that formalities are not misused); (ii) adopted or applied so as
to ensure that the time and cost of establishing an investment are as low as
possible; and (iii) not maintained, including parts thereof, if no longer
4. ACCEPTANCE OF COPIES: Members would commit to make their best efforts
to facilitate documentation requirements, such as accepting paper or electronic
copies of supporting documentation required for the expansion, management,
conduct, operation, and sale or other disposition of investments in their
5. PROCESSING OF APPLICATIONS: Establishing a common set of principles
regarding processing of applications for investment screening and licensing
would significantly contribute to creating a stable framework for investors.
6. SINGLE ELECTRONIC WINDOW: There would be a single electronic entry
point to competent authorities (single electronic window). The single window
would unify electronic procedures for the admission of investments,
establishment of an enterprise, licensing and qualification procedures for an
investment. Documents submitted to the single window would be accepted by all
national agencies or regulatory bodies.
7. NATIONAL INSTITUTIONAL ARRANGEMENTS: A National Focal
Point/Ombudsperson (nomenclature to be decided by each Member) would be
established and given practical responsibilities such as providing
information/clarifying doubts on investment policies and other regulatory
issues of a cross-cutting nature; to the extent possible and without prejudice
to specific competencies of pertinent national agencies, assisting investors in
resolving specific government-related difficulties. The Focal
Point/Ombudsperson would seek to prevent disputes between Members.
8. COOPERATION AMONG NATIONAL FOCAL POINTS/OMBUDSPERSONS: Cooperation
among competent authorities of Members is quite important in facilitating
investment. The areas for cooperation under this provision could include
exchange of information on procedural requirements and associated formalities
and documentation. Other areas of cooperation could address the sharing of
experiences regarding implementation, best practices for collection and
compilation of data relating to investment, exchange of statistics as well as
technical guidance or assistance and support for capacity building for small
and medium enterprises.
9. MULTILATERAL INSTITUTIONAL ARRANGEMENTS: a Committee for Investment
Facilitation would be set up and be given three basic mandates: a. follow the
implementation of a WTO instrument on investment facilitation; b. discuss
issues related to investment facilitation of general interest; c. propose new
cooperation and facilitation agendas; d. exchange experiences in investment
facilitation; and e. compile and disseminate international best practices.
10. CORPORATE SOCIAL RESPONSIBILITY: Members could be called to advocate
for the voluntary adoption by investors of principles and standards for
responsible business conduct.
11. IMPLEMENTATION: Following the example of the Trade Facilitation
Agreement, obligations under a WTO instrument on investment facilitation could
be divided into three categories, one for immediate implementation (Category A)
and two others (B and C Categories) with different schedules of implementation.
12. SPECIAL AND DIFFERENTIAL TREATMENT: the WTO instrument would contain
special provisions for developing countries and LDCs pertaining to the entry
into force of this Agreement due to their special economic and developmental
situation as well as trade and financial needs. While LDCs would not be
required to implement any obligations, they would be encouraged to do so.
13. TECHNICAL ASSISTANCE: Technical assistance would be provided to
developing countries and LDCs in order to advance and strengthen their
institutional and regulatory capacities in investment facilitation. The provision
would entail obligations that help build the supply capacity of developing
countries and LDCs.
Until now, there has been no formal or informal discussion on these proposals
at the WTO. The first test will come when the Russian proposal on Multilateral
Investment Facilitation rules submitted to the General Council comes up for
discussion. China and Brazil are yet to submit their proposals formally to the
In reality, the proposals on investment facilitation will garner support from
the traditional proponents who are largely major industrialized and some
developing countries, as well as the new evangelical spreaders of the
investment gospel such as Russia, China, Brazil, Indonesia, and Turkey.
During an informal discussion among select trade envoys outside the WTO last
week, India and South Africa questioned the need for investment facilitation.
India and South Africa told Japan, Canada, and the European Union that
"rules that you are proposing here will reduce our policy space and that
policy space is what we need to develop what you had done in the past and today
you want to tie our hands."
India said that there is no evidence that multilateral investment facilitation
rules will contribute to enhanced investment flows. Without any bilateral/multilateral
investment facilitation agreements, India is easily able to secure investments
from the US.
"If anything, investment agreements will only become millstones of
commitments for poor countries," India argued.
In a nutshell, the Buenos Aires meeting could represent the watershed moment
for the developing and poorest countries as their developmental agenda may not
only be drowned forever but they will be forced to deal with electronic
commerce, investment facilitation, and disciplines for micro, small, and medium
enterprises, several trade envoys said.