Bridges Weekly Trade News Digest • Volume 6 • Number 42 • 12th December 2002

WTO: India, Others Propose Rules On Conduct Of Multinational Enterprises


Following a 4-5 December meeting of the WTO Working Group on Trade and Investment, developing countries remain widely noncommittal to the idea of launching WTO negotiations on multilateral rules for cross-border investment, despite efforts by the EC and Japan to convince them otherwise. India and Malaysia are strongly opposed to the idea of launching negotiations on investment at the Cancun Ministerial in September 2003. Also at the 4-5 December session, Members discussed a paper submitted by India — co-sponsored by China, Cuba, India, Kenya, Pakistan and Zimbabwe (WT/WGTI/W/152, available online at http://docsonline.wto.org) — that calls for multilateral rules on corporate responsibility and corporate accountability.

The paper proposes obliging multinational enterprises (MNEs) to take on commitments in areas such as preventing restrictive business practices, ensuring technology transfer, providing sufficient autonomy to foreign subsidiaries, respecting consumer and environmental protection standards abroad, and ensuring transparency in financial transactions and accounting. Countries home to MNEs would also be obliged to institute measures requiring MNEs to behave and operate with full corporate responsibility and accountability in their operations in countries where they operate. Developed countries, particularly the US and Japan, objected to the paper.

At the current phase of discussions around investment, it is difficult to say whether negotiations on this issue will be launched after the Cancun Ministerial or not. According to Yoshihiko Sumi, Deputy Director- general at Japan’s Ministry of Economy, Trade and Industry, "It’s hard to predict how it will go but my observations so far are that a majority of developing countries…are waiting to see how others react, what the issues are, and what the implications of a multilateral investment agreement would be on their policies."

So far, India and Malaysia are the countries most opposed to the idea of WTO talks on investment, but in general, developing countries have not been supportive (see BRIDGES Weekly, 18 September 2002). India played a key role in blocking an agreement to include investment in the Doha round negotiating mandate when trade ministers launched the round in Qatar last November. Instead, ministers agreed that a decision to launch negotiations on investment would be made at the Cancun Ministerial, with an agreement to proceed to be based on "explicit consensus" of the entire WTO membership.

The EU and Japan have tried to placate India and Malaysia as well as other developing countries by advocating a negotiating approach similar to that taken under the WTO’s General Agreement on Trade in Services (GATS). Under GATS, countries pick and choose the areas in which they wish to make commitments (see BRIDGES Weekly, 10 July 2002). Adopting this approach to investment would allow governments to open up areas where they want to attract foreign investors and exclude those considered too sensitive for political, economic, or developmental reasons.

ICTSD reporting; "Developing Countries Take ‘Wait And See’ Attitude Towards WTO Talks on Investment," WTO REPORTER, 6 December 2002.