Bridges Weekly Trade News Digest • Volume 6 • Number 31 • 18th September 2002
Developing Country Concerns Emerge At WTO Investment Group
On 16-18 September, WTO Members met in the Working Group on Trade and Investment, where they addressed, inter alia, dispute settlement, foreign direct investment and technology transfer, and exceptions and balance-of-payments safeguards. As at the Working Group’s last meeting on 3-5 July, many developing countries remain sceptical as to the need for an investment regime at the WTO, and are proceeding cautiously in the discussions (see BRIDGES Weekly, 10 July 2002).
According to the Doha Declaration agreed last November, Members will decide on modalities (including whether/when) for launching negotiations on investment, competition and other ‘new’ issues at the next Ministerial meeting (scheduled for Cancun in September 2003). The EU is the WTO’s main demandeur for establishing a multilateral framework on these issues.
Dispute settlement
A split along broadly north-south lines emerged in discussions around whether an investment agreement at the WTO would be covered by dispute settlement. Canada, Chinese Taipei, the EC and Japan submitted papers in support of having such an agreement come under the WTO dispute settlement system. An additional proposal from Chinese Taipei — of considering investor-state disputes in the WTO through a dispute settlement mechanism — drew objections from many delegations, including India, Malaysia, Hungary, New Zealand and Hong Kong, China.
India, holding its traditional line against investment at the WTO and echoed by Pakistan, said investment is not a trade issue and therefore does not belong in the organisation. It said that while it had considerably liberalised its investment regime, it would not be willing to bind it under a WTO agreement. Pakistan said that an investment agreement would weaken the bargaining position of host countries vis-à- vis investors. It further said it was "premature" to discuss dispute settlement when Members were not even close to an agreed definition of investment. It said a WTO investment agreement would only add to existing imbalances in the WTO against developing countries. Indonesia said that investment disputes are being taken care of in bilateral and regional trade agreements, and should not be brought to the WTO.
Foreign direct investment (FDI) and technology transfer
Interventions in this area focused around a 16 August document (WT/WGTI/W/136) produced by the WTO Secretariat on FDI and technology transfer. Brazil, which originally requested the note, said that because of its importance the Working Group should continue discussions of this subject even if it was not covered in the Doha mandate. India said the report highlighted the very low share (4 percent) of developing countries in global research and development, adding that studies have shown that rising FDI flows are not necessarily accompanied by transfer of technology. Indonesia expressed concern that developing countries tend only to receive low-level type technology. The US, which supports strong intellectual property right protection, said the report highlighted the importance of adequate intellectual property protection in attracting technology. Japan said that there is no "one size fits all" in technology transfer as it is difficult to replicate success from one country to another. The EC said fewer restrictions, such as joint venture requirements, on FDI would encourage more technology transfer.
Exceptions and balance-of-payments safeguards
Papers submitted by Canada, Chinese Taipei, Japan and Korea acknowledged that a possible WTO investment agreement would need to contain exceptions from disciplines when the host country faces a balance-of-payments (BOP) problem. Chinese Taipei, however, warned that exceptions should not be used as invisible barriers to investment. The US went further, saying that the right of free transfer of capital is crucial, and that BOP restrictions are a "self-defeating strategy" in the long term. In response, Egypt said that financial instability is a major concern for developing countries, stressing that they need "safety valves" during crises, and suggested linking this subject with discussions in the new WTO Working Group on Trade and Finance. Mexico and Norway said they would support BOP exceptions patterned after that of the General Agreement on Trade in Services. Pakistan said that current GATT BOP exceptions are inadequate for developing countries. The EC voiced its support for the incorporation of flexibility for host countries in an investment agreement.
Technical Assistance
The WTO Secretariat reported that it had organised or would be conducting 22 regional and national seminars on trade and investment this year, mostly in partnership with the UN Conference on Trade and Development (UNCTAD).
The Group will hold its final meeting for the year on 2-3 December to consider its draft report to the General Council and to discuss activities for 2003. The Chairman said that the Group could probably hold two meetings during the first half of 2003, and focus "in a more compact way" on the seven items mentioned in the Doha mandate and the interrelationship between them.
The seven items referred to in the Doha Declaration include: development provisions; transparency; non-discrimination; scope and definition; modalities; exceptions and balance-of-payments safeguards; and consultation and the settlement of disputes between Members.
ICTSD reporting.