Bridges Weekly Trade News Digest • Volume 6 • Number 15 • 23rd April 2002
Members Divided Over Transparency, Definition At WTO Investment Talks
At the first substantive session of the WTO’s Working Group on Investment since the November 2001 Doha Ministerial, Members on 18-19 April addressed the issues of ‘transparency’ and ’scope and definition’ in the context of preparing for possible negotiations on investment rules under the Doha mandate. Significant divergences emerged between industrialised countries and key developing country Members in these areas, pointing to a difficult forthcoming phase in reaching agreement on how potential negotiations on a multilateral investment treaty could be structured.
Members agreed in Doha that negotiations on investment would take place "after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that session on modalities of negotiations." The Declaration also notes that any framework should reflect the interests of home and host countries, and take into account the development policies and objectives of host governments as well as their right to regulate in the public interest. The Fifth Ministerial is expected to take place in September or October 2003 in Mexico.
The Working Group’s mandate until the Fifth Ministerial Conference is to focus its work on the clarification of scope and definition, transparency, non- discrimination; modalities for pre- establishment commitments based on a GATS-type positive list approach; development provisions; exceptions and balance-of-payments safeguards; and consultation and settlement of disputes between Members. It is chaired by Amb. Luiz Felipe de Seixas Correa (Brazil).
Developed, developing countries far apart
At the 18-19 April meeting, differences on how to approach investment were apparent between industrialised country Members (particularly the EC and Japan) on the one hand, and some major developing countries (including India, Brazil, Malaysia, Indonesia and China) on the other. Delegates were at odds over what constituted transparency obligations and on how to define investment in a potential multilateral agreement. Said one trade source, "there is a strong feeling among many developing country delegations that there is nothing much in it for them."
Transparency
The EC and Japan, the major demandeurs on investment at Doha, in separate papers said that lack of transparency on investment laws and regulations had been cited by their private sectors as the primary obstacle to investment in foreign countries. They said this pointed to the need for a multilateral investment agreement with strong transparency provisions. The EC and Japanese papers (WT/WGTI/W/110 and WT/WGTI/W/112 respectively, searchable at http://docsonline.wto.org/ gen_search.asp) called for a WTO investment agreement that would require Members to publish laws and regulations on investments and notify changes to the WTO.
The UN Conference on Trade and Development (UNCTAD), intervening as an observer and supported by India, Brazil, Malaysia, Indonesia and China, suggested that transparency disciplines should also apply to home countries (origin of investment) and transnational corporations. A number of developing countries, including Brazil, Venezuela, Chile and China, said that transparency requirements should not be burdensome to developing countries.
Scope and definition
On scope and definition of investment, three new discussion papers were tabled by Canada, Korea, the EU and Japan. Canada’s paper (WT/WGTI/W/113) urged that any definition should reflect business realities, and cited the broad definition of investment used in NAFTA. Korea (WT/WGTI/W/ 114) said definition of investment would be determined by the agreed objectives of a future agreement. The EC paper (WT/WGTI/W/115) said that three elements should be included in a definition of investment: direct investment enterprises, direct investment capital transactions and foreign direct investors. Japan’s paper (WT/WGTI/W/111) focused on the relationship between a possible investment agreement and the WTO General Agreement on Trade in Services (GATS), and says that direct investment in services is already covered by the WTO under GATS, while no such agreement exists for investment in the manufacturing area. Japan also said that the focus of WTO rules should be on foreign direct investment (FDI), and not on speculative short-term capital flows.
Japan’s views on short-term investment were echoed by a number of other countries, including India, Brazil, the Czech Rep., Cuba, Malaysia, Egypt, China and Poland. These Members argued that any definition of investment should concentrate on long-term FDI and exclude speculative, short-term capital flows. India said that a definition of investment should be based on the Doha Declaration’s reference to long-term FDI. The Indian delegate said that the Working Group must be very clear on its remit under the Doha Declaration, in that negotiations could only begin after a consensus decision at the Fifth Ministerial, and Members should not at this time anticipate any kind of decision. India added that the Working Group also needed to take into account the needs of developing countries and not impinge on their right to regulate investment to protect public interest. Malaysia said it should be left to individual governments to make their own definition of investment.
The Working Group also discussed a comprehensive programme of technical assistance in investment by the WTO Secretariat, including four regional training courses and five regional seminars for 2002. A technical workshop for Geneva-based delegates and officials from capitals is being organised for 2 July 2002. The Doha Declaration emphasises technical assistance and capacity building to assist developing countries to better evaluate the implications of closer multilateral cooperation for their development policies and objectives, and for human and institutional development.
The Working Group is scheduled to meet on 3-5 July 2002, with focus on the next three issues cited in the Doha Declaration: ‘non- discrimination’, ‘modalities for pre-establishment commitments based on a GATS-type, positive list approach’ and ‘development provisions’.
"WTO off to slow start on global investment pact," REUTERS, 22 April 2002; ICTSD Internal Files.