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Info Service on WTO and Trade Issues (May24/18) Geneva, 28 May (D. Ravi Kanth) — At a World Trade Organization General Council meeting held on 22-23 May, India reiterated that the controversial Investment Facilitation for Development Agreement (IFDA) cannot be part of the WTO rule-book, even as the United States, without joining IFDA, supported its integration into Annex 4 of the Marrakesh Agreement, said people familiar with the development. At the General Council meeting that concluded on 23 May, the US said that despite not participating in the IFDA, it does not want to object to its incorporation into Annex 4 of the Marrakesh Agreement, which covers plurilateral agreements. Interestingly, the US is understood to have said that economic development is fostered by attracting the private sector, adding that the proposed agreement brings transparency, which is a critical element for attracting investment. At a time when the US administration has slapped numerous measures on Chinese investments in the US market, it seems somewhat ironical that Washington echoed a different stance on investments at the WTO vis-a-vis IFDA’s integration into Annex 4 of the Marrakesh Agreement, said people familiar with the development. Interestingly, the battle over IFDA’s integration into Annex 4 is proving to be somewhat similar to the battle to fill vacancies at the Appellate Body where the US has continued to block since December 2019 a joint proposal from 130 members, said people who asked not to be quoted. The only difference between the two issues is that IFDA never secured a ministerial mandate ever since the WTO’s fifth ministerial conference in Cancun, Mexico, in September 2003, said people familiar with the negotiations. The US action to block the appointment of members to the Appellate Body is a unilateral decision, and is contrary to the WTO rules, said people, who asked not to be quoted. IFDA DISCUSSION Allegedly contrary to the rules of conduct outlined in the Marrakesh Agreement concerning the WTO Director- General, the DG, Ms Ngozi Okonjo-Iweala, threw her weight behind IFDA at the General Council meeting. She said, “the other priority repeatedly mentioned during my consultations was the Investment Facilitation for Development Agreement – that is, how to insert the Agreement into Annex 4 of the WTO Agreement.” She said, “I am aware that the co-convenors and other signatories have been hard at work on this, and I look forward to hearing their update under agenda item 12 [of the General Council meeting].” The DG said that “this agreement now has 128 WTO Members of which 90 are developing country Members.” She added that, “as we look at issues of development, we will also enlarge our definition by looking at not just what is happening with special and differential treatment, but also to ask what this organization can do to help developing and LDC Members improve their economy.” For the DG to apparently come out against the WTO rules, particularly consensus-based decision-making, as well as past decisions not to consider investment facilitation since the WTO’s fifth ministerial conference, is rather disconcerting, said people who asked not to be quoted. During the discussion on IFDA, the proponents led by Chile, drove home the message that an agreement must be concluded before the General Council meeting in July, said people who asked not to be quoted. Chile said that 125 members (Burkina Faso becoming the latest member) support incorporating IFDA through an amendment procedure under Article 10.9 of the Marrakesh Agreement. Chile said that the IFDA proponents sought bilateral consultations with three members – India, Turkiye, and South Africa – who expressed concerns about IFDA’s integration into Annex 4 of the Marrakesh Agreement, said people familiar with the discussions. Chile said open and constructive dialogue is indispensable, adding that discussions were held in small groups to clarify several issues. Antigua and Barbuda, on behalf of the Caribbean countries, supported IFDA on grounds that it would promote investment and trade facilitation reforms, while the Philippines said the proponents will be seeking to incorporate IFDA into the WTO framework. Cameroon, which is slated to host the WTO’s 14th ministerial conference in 2026, said that its government is committed to structural transformation and attracting foreign investment. It said that IFDA provides an avenue for diversifying trade and technology transfer. China, the main driving force behind investment facilitation for development since 2016, sought consensus “on the important development issue of the IFDA incorporation.” Echoing the statement made by the IFDA co-coordinator, Ambassador Sofia Boza of Chile, China said that it welcomes “the continued discussion at the GC [General Council], with the aim to building convergence and ultimately reaching consensus for the IFDA incorporation at the GC at an early date, and that is the July GC.” China said that “the value and benefits of an agreement hinge entirely on its implementation.” “As an instrument to attract investment flows and foster sustainable economic development, the IFDA has gained broad support for early incorporation and implementation at the March GC,” China emphasized. It suggested a dedicated process “under the auspices of the GC, and if needed, the leadership of the GC Chair.” “Finally,” China said, “as the development issues are extensively deliberated and explored at this GC, it is noteworthy that the IFDA, characterized by its unique development-oriented approach, could greatly contribute to our Sustainable Development Goals by attracting foreign investments.” China touted the IFDA “as one of the latest and foremost development achievements under the WTO development agenda.” Notwithstanding the seeming fragmentation of the multilateral trading system amidst rising geo-political and geo- economic tensions, including the impairment of the enforcement function of the WTO, China said that “the WTO should demonstrate itself as a relevant, deliverable, and solidified organization again, by adopting an agreement that promotes development and serves the interests of all members.” New Zealand said that it supports the call for a July General Council decision on IFDA, suggesting that such a development would signal that the WTO is responding to the calls made by stakeholders and developing countries and LDCs who support the initiative. Other countries that intervened in support of IFDA included El Salvador, the Russian Federation, Argentina, Costa Rica, Cambodia, Malaysia, Gabon, the European Union, Chinese Taipei, Nigeria, Ecuador, Singapore, the United Kingdom, Korea, and Kazakhstan among others. CONCERNS OVER IFDA At the General Council meeting, Turkiye said that it met with the proponents and is ready to continue the discussions over its concerns over IFDA. South Africa, which had also expressed concerns at the General Council meeting in March, said that its interest in “this matter is to ensure an integrated, viable MTS [multilateral trading system] as envisaged in the Marrakesh Agreement.” While acknowledging the constructive discussions with the IFDA proponents, South Africa said that it looks forward to inclusive, transparent and member-driven consultations. India said somewhat categorically that its position against IFDA remains unchanged both on process and substantive issues. India said that its concerns are spelt out unambiguously in document WT/GC/262 that was issued at the General Council meeting in December 2023. In document WT/GC/262, India had said that “negotiation on Investment does not belong to WTO”. “India’s concern emanates from the fact that proponents of IFD, a Joint Statement Initiative (JSI) process, should not be attempting to bring a non-mandated, non-multilateral issue to the formal process in the WTO in violation of the WTO framework and fundamental rule of consensus-based decision-making for starting a negotiation.” In the document, India said that “there has not been any Ministerial mandate for starting negotiations on investment-related matters.” It added that “several attempts have been made in the past to push this agenda, starting from the 1st MC and till the 11th MC. However, these attempts ended with a negative mandate every time.” Further, it said “the negative mandate did not allow the Members, desirous of IFD, to pursue it in a multilateral forum upon a consensus.” Therefore, India said, “to circumvent the negative mandate and short-circuit the consensus requirement that is fundamental to initiating any formal discussion in WTO architecture, certain Members began an informal process that did not have any legal sanctity, and now, at the end of their informal process, these members are back to consensus seeking on their outcome of an informal process the foundation of which is devoid of consensus.” “What could be more ironic in WTO than this, i.e., violating the treaty-embedded right of members to start consensus-based negotiations on mandated issues, and then at the end of such unrecognized and unlawful process, seeking consensus from those very members whose treaty-embedded right was intentionally vitiated in the first instance,” India said. It may be recalled that in the July 2004 framework agreement, it was explicitly stated that on the Relationship between Trade and Investment, Interaction between Trade and Competition Policy and Transparency in Government Procurement, “the Council agrees that these issues, mentioned in the Doha Ministerial Declaration in paragraphs 20-22, 23-25 and 26 respectively, will not form part of the Work Programme set out in that Declaration and therefore no work towards negotiations on any of these issues will take place within the WTO during the Doha Round.” In short, when some powerful members are allegedly undermining the WTO by not adhering to the rules through their new industrial subsidy and carbon border adjustment policies, IFDA cannot be another path to undermine the rules-based trade body, said people familiar with the development. +
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