TWN Info Service on WTO and Trade Issues (Feb18/10)
7 February 2018
Third World Network

Brazil seeks "structured discussions" on investment facilitation
Published in SUNS #8615 dated 6 February 2018

Geneva, 5 Feb (D. Ravi Kanth) - Despite the rejection of multilateral discussions on the controversial issue of investment facilitation at the eleventh ministerial meeting (MC11) in Buenos Aires nearly two months ago, Brazil has chosen to fire the first salvo for "structured discussions on investment facilitation" at the World Trade Organization.

More than 90 countries, including India, South Africa, and the United States among others, rejected any further discussion on IF (investment facilitation) at the heads of delegations meeting during the Buenos Aires ministerial on 12 December 2017.

Immediately after they failed to secure multilateral consensus at the heads of delegations meeting, 70 countries, led by Argentina, Brazil, and China among others announced the proposed plurilateral initiative on investment facilitation.

In a four-page communication dated 31 January 2018 to the General Council, Brazil said 70 members circulated a joint ministerial statement on the margins of the Buenos Aires meeting calling for the beginning of "structured discussions with the aim of developing a multilateral framework on investment facilitation."

The structured discussion, according to Brazil, will address the following objectives:

i. A multilateral framework of principles and rules for facilitating sustainable investment flows as a means of promoting the economic growth of all trading partners and the development of developing countries;

ii. The importance of ensuring coherence regarding the legal framework applicable to the facilitation of investment in services and non-services sectors;

iii. To provide investors with a transparent, predictable and efficient regulatory and administrative framework;

iv. To facilitate the dialogue between governments and investors on matters related to investments;

v. To stimulate mutually-beneficial business activity;

vi. To facilitate the increasing participation of developing countries in investment flows including, inter alia, through the strengthening of their domestic regulatory environment and its efficiency and competitiveness.

Brazil issued several caveats saying the structured discussions on IF will not apply to:

(a) Government procurement;

(b) Public concessions and the conditions thereby established, provided that the Agreement applies to investments made as a result of concessions;

(c) Market access and right to establish, provided that nothing in this Agreement shall be construed as to modify members' obligations and commitment under the General Agreement on Trade in Services (GATS).

Further, it argued that the proposed agreement will not cover "any dispute resolution procedure not foreseen under the dispute settlement understanding, according to Article 20.6 of the DSU," and "investment protection rules."

Significantly, Brazil maintained that "a member's obligations under this [Investment Facilitation] Agreement shall apply to measures adopted or maintained" by the national government or any national state enterprise.

Brazil also listed other provisions such as "most-favoured nation treatment", "right to regulate," "electronic documents," "transparency," and "institutional governance."

Brazil's proposal for structured discussions on investment facilitation includes 20 articles.

Although Brazil has stated that 70 countries endorsed the plurilateral initiative on investment facilitation, it has not listed all the countries in its latest proposal.

There are doubts whether all the 70 countries that signed off on the plurilateral initiative on investment facilitation still continue to support the structured discussions, said a trade envoy who asked not to be quoted.

China is the major demandeur for investment facilitation along with Brazil, Argentina, Nigeria, and MIKTA (Mexico, Indonesia, Korea, Turkey, and Australia) countries among others.

Last year, the US had blocked any discussion on investment facilitation at the G20 sherpas meeting.

Consequently, the issue did not even remotely figure at the G20 leaders' meeting in Hamburg last year.

On 10 May 2017, India had blocked the proceedings of the General Council for listing investment facilitation on the agenda.

The chair for the General Council, Ambassador Xavier Carim of South Africa, was forced to hold consultations to break the impasse. Later, he had issued a compromise statement suggesting that the issue will not form part of the GC agenda.

Ambassador Carim's statement which recalled the July 2004 framework agreement as well as paragraph 34 of the Nairobi ministerial declaration suggested 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."

In short, the GC chair's statement made it unambiguously clear that investment facilitation can only be discussed informally outside (the WTO) without any specific mandate, said a trade envoy who asked not to be quoted.

Citing the objections raised by India, South Africa, Uganda, Venezuela and other countries, the chair said "some members believe that investment facilitation does not lie within the scope of the WTO and hence the General Council."

At the GC meeting on 18 May 2017, India issued a strong statement against investment facilitation stating that discussions on investment facilitation go against the very principles set out in the Marrakesh Agreement for establishing the WTO.

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," India had said at the same GC meeting. (See SUNS #8466 dated 19 May 2017).

At the WTO's eleventh ministerial conference in Buenos Aires, a large majority of countries strongly opposed investment facilitation following which around 70 countries went out of the room to issue a joint statement that has no bearing on the WTO, said a trade envoy who asked not to be quoted.

Against this backdrop, Brazil's latest attempt to start structured discussions on investment facilitation at the General Council is a concerted attempt to "plurilateralize" the WTO, the multilateral trade body, said a trade envoy who asked not to be quoted.

Brazil, which is hitherto known as the champion of developing countries for reforming global trade through the G20, has now changed course by being the front runner for investment facilitation in a matter of 16 years.

Worse still, without resolving any of the substantial issues in the global farm trade, particularly the trade distorting domestic subsidies, the permanent solution for public stockholding programs for food security, the continued tariff peaks and tariff escalation, the special safeguard mechanism for developing countries, and several other issues, Brazil has now embarked on investment facilitation, which will undermine its credibility in the global trade negotiations, according to several trade envoys who asked not to be quoted.

Knowing full well that investment facilitation is a replica of the failed effort at a Multilateral Investment Agreement promoted by the Paris-based Organization for Economic Cooperation and Development (OECD), Brazil, the country that founded the G20 for developing countries to reform global agricultural trade in July 2003, can now create a G20 for investment facilitation, said a trade envoy who asked not to be quoted.