MC11 in brief
Relationship between trade and investment
In April 2017, the "Friends of Investment Facilitation for Development" (FIFD) – comprising 14 developing and least-developed country members – proposed an Informal WTO Dialogue on Investment Facilitation for Development.
Open to all WTO members, the aim of the Dialogue was to discuss the growing linkages between trade and investment in the global economy, to examine what WTO members are currently doing to facilitate investment, and to explore whether and how the WTO could help members to advance and build upon these efforts. These proponents suggest that such an agreement could facilitate global investment in the same way that the WTO is helping to facilitate global trade with its Trade Facilitation Agreement, which entered into force in February 2017.
Proponents argue that investment facilitation is about creating a more efficient, predictable and "investment-friendly" business climate – by making it easier for investors to establish operations, conduct their day-to-day business, and expand their investments. The focus, they say, is not on changing members' investment policies, but on implementing and administering these policies transparently, efficiently and predictably. In many cases, the bottlenecks, inefficiencies and uncertainties that investment facilitation seeks to address arise mainly from unnecessary "red tape" and bureaucratic entanglements.
Another aim is to encourage more international cooperation to facilitate investment - both between governments and investors, and between "home" and "host" countries. Promoting increased developing and least-developed country (LDC) participation in global investment flows is another core objective. The proponents point out that UNCTAD has estimated that developing countries will need an additional $2.5 trillion in investment annually to achieve the 2030 Sustainable Development Goals (SDGs) – and that according to UNCTAD's 2017 World Investment Report, foreign direct investment (FDI) remains the largest and most constant external source of finance for developing economies, compared with portfolio investments, remittances and official development assistance.
However, other members oppose discussions of investment facilitation in the WTO on the grounds that it is not part of the current negotiating mandate. Moreover, opponents suggest that a WTO framework could hinder the ability of members to regulate investment coming into their home markets. Questions have also been raised about the extent to which developing country and LDC members would actually benefit from an investment facilitation agreement.
The Informal Dialogue has held six meetings thus far, with Ambassador Marcelo Cima (Argentina) acting as coordinator. To date, participants have exchanged views and shared experiences in four key areas:
- Improving regulatory transparency and predictability – such as publication/notification of investment-related measures, enquiry points/single window;
- Streamlining and speeding up administrative procedures – such as procedural aspects of investment applications, approval processes, licensing and qualifications, formalities and documentation requirements, one-stop shop/single window;
- Enhancing international cooperation and addressing the needs of developing members – such as exchange of information among competent authorities, technical assistance and capacity building for developing countries and LDCs;
- Other investment facilitation-related issues – such as government-investor cooperation, resolving investors' grievances/ombudsperson, and corporate social responsibility.
Issues such as market access, investment protection and investor-state dispute settlement (ISDS) are not part of the Investment Dialogue discussions.
Investment is not a new issue for the WTO. In fact, at the origin of the multilateral trading system the issue was on the agenda. In 1947, negotiations to create an International Trade Organization (ITO) extended beyond world trade disciplines to include rules also notably on international investment. As the ratification of the so-called Havana Charter proved impossible, the 1947 General Agreement on Tariffs and Trade (GATT) became the only multilateral instrument governing international trade from 1948 until the establishment of the WTO in 1995.
As a result of the Uruguay Round negotiations, the WTO in 1995 for the first time put important obligations on governments with regard to the treatment of foreign nationals or companies within their territories – particularly in the General Agreement on Trade in Services (GATS), the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and in the plurilateral Agreement on Government Procurement (GPA).
The integration of investment and cross-border trade is most evident in the GATS, which contains elements applying directly to certain investment measures. The GATS defines four "modes" of supplying services, one of which is the supply "by a services supplier of one Member through commercial presence in the territory of another Member".
The Agreement on Trade-Related Investment Measures (TRIMs) prohibits the application of certain investment measures related to trade in goods to enterprises operating within the territory of a member. The TRIMs Agreement is concerned with the discriminatory treatment of imported and exported goods, and trade restrictions. It is not specifically oriented to the treatment of foreign legal or natural persons. But the agreement prohibits, in most instances, WTO members from mandating that enterprises use locally produced goods in their manufacturing or that they impose export requirements on companies.In 1996, members decided at the WTO's First Ministerial Conference in Singapore to establish a working group on trade and investment, with a mandate to carry out analytical and exploratory discussions. Investment was originally included in the Doha Round agenda launched in 2001 but ministers in Doha decided to postpone the decision on whether to launch negotiations on investment for two years. At the 2003 Cancún Ministerial Conference, ministers were unable to reach consensus on the start of negotiations. On 1 August 2004, unable to bridge their differences, members agreed to drop investment from the Doha Round agenda.