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Negotiate, or continue to study?

Since 1997, WTO members have been engaged in analysis and debate about the relationship between international trade and investment, and its implications for economic growth and development. In the Working Group on the Relationship between Trade and Investment, members have examined a range of international investment instruments and existing agreements, and have debated the possible pros and cons of negotiating a multilateral framework of investment rules in the WTO. UNCTAD has played an important role in this analytical process, particularly in helping WTO delegations better understand the development dimension of this subject.

The WTO already has limited provisions on certain trade aspects of foreign investment. The Agreement on Trade-Related Investment Measures (TRIMs) elaborates on existing GATT provisions prohibiting government requirements for investors to purchase inputs locally or to sell their output domestically rather than exporting it. The General Agreement on Trade in Services (GATS) has rules relating to the establishment by a foreign service supplier of a “commercial presence” in an overseas market.

But the main way in which rules are applied to FDI at present is through government-to-government Bilateral Investment Treaties (BITs). UNCTAD estimates over 1,700 BITs are in operation today, along with around 1,900 double taxation treaties. Historically, most of these treaties were signed between developed and developing countries but recently, the number of BITs among developing countries has been increasing.

For the Doha Ministerial, a number of developed and developing WTO members are supporting proposals—similar to those tabled at the Seattle Ministerial—-recommending that a decision be taken to begin negotiating a WTO agreement on foreign direct investment (FDI). They argue that the existing international regime of individual BITs plus regional investment agreements lead to confusion. They say that a WTO agreement would establish a stable, non-discriminatory environment that would increase investment flows.

These members have made it clear that the agreement they are proposing to negotiate in the WTO bears no relationship to the OECD’s Multilateral Agreement on Investment (MAI)— in the WTO, negotiations would start from a blank sheet of paper.

At the same time, many developing countries have made it clear that they are opposed to negotiation on this subject in the WTO, at least for the time being, and prefer to continue the analysis and study in the Working Group. They argue that the existing BITs already provide adequate legal protection to investors, and question whether a WTO agreement would indeed increase investment flows. They have expressed concern that a multilateral agreement would add obligations to developing countries while limiting their ability to align investment inflows with national development objectives.

Reflecting these divergent views, the draft Ministerial Declaration issued on 26 September 2001 contains two options for a decision to be taken in Doha on the nature of the future work on investment in the WTO:

  • “We agree to negotiations which shall aim to establish a multilateral framework of rules to secure transparent, stable and predictable conditions for long-term cross-border investment, particularly foreign direct investment. The framework shall reflect in a balanced manner the interests of home and host countries, and take due account of governments’ regulatory responsibilities and economic development objectives. It shall include as core elements provisions on scope and definition, transparency, non-discrimination, pre-establishment commitments based on a GATS-type approach, and the settlement of disputes between governments. The special development, trade and financial needs of developing and least-developed country participants shall be taken into account as an integral part of the framework, which shall enable members to undertake obligations commensurate with their individual needs and circumstances. The negotiations shall pay due regard to other relevant WTO provisions and to existing bilateral and regional arrangements on investment. We commit ourselves to ensure that appropriate arrangements are made for the provision of technical assistance and support for capacity building both during the negotiations and as an element of the agreement to be negotiated.”


  • “The Working Group on the Relationship between Trade and Investment shall undertake further focused analytical work, based on proposals by members. A report on this work shall be presented to the Fifth Session of the Ministerial Conference.”