WTO Ministerial Section • Volume 7 • Number 21 • 12th June 2003

Investment Negotiations: New Submission Signals Support, NGOs Highlight Pitfalls

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In advance of the 10-11 June WTO Working Group on the Relationship between Trade and Investment (WGTI), Canada, Korea and Costa Rica made a submission to the Working Group, stating their readiness to proceed to the next phase of work, i.e. negotiations on a multilateral framework for investment within the WTO. Also prior to the final meeting of the WTO Working Group on the Relationship between Trade and Investment, several NGOs organised a briefing in Geneva.

Submission supporting the launch of investment negotiations

The 5 June submission from Canada, Korea and Costa Rica (WT/WGTI/W/162, searchable at http://docsonline.org), emphasises that after almost seven years since its inception at the WTO first Ministerial meeting in Singapore, and particularly since Doha, the preparatory work of the WGTI is complete and the launch of negotiations is the next logical step. While, according to the submission, there is not agreement on all issues by all delegations, real progress has been made and issues have been clarified to such a degree that the time is ripe for negotiations.

The paper outlines the purpose of an investment agreement, noting that in the absence of investment rules, investment will continue to take place, "but well crafted rules at the multilateral level can contribute to a framework not only where investment can take place and flows enhanced, but which can facilitate transparency and predictability, and thereby enhance economic efficiencies — as well as defer to sustainable development priorities". The paper also recognises the needs of developing and least developed countries (LDCs), and stresses that a multilateral framework for investment can take into account the interests of all the Members in a balanced way. In conclusion, Canada, Korea and Costa Rica emphasise that "we can collectively commit to addressing the challenges and opportunities posed by the growth in importance of FDI to the trading system… or simply choose to observe this growth that will continue to evolve without our input. Further delay risks undermining prospects for investment rules in the WTO system".

NGO briefing and launch of new report

At an NGO briefing held on 10 June, John Hilary, Trade Policy Analyst with ActionAid, introduced a new report entitled "Unlimited Companies: the developmental impacts of an investment agreement at the WTO," highlighting the potential pitfalls of an agreement. Having investment issues within a WTO framework would conflict with the principle of the ‘right to regulate,’ he said. Examining evidence from countries including Haiti, Uganda, India and Brazil, the report takes a comprehensive look at the impacts of foreign investment by companies — such as Coca Cola and Nestlé — on developing countries. While recognising some benefits of FDI, the report highlights the importance of foreign investment policies, and the need for careful management and government regulation in order to maximise the benefits from and defend against the negative effects of foreign investment.

According to John Hilary, a forum outside the WTO, preferably within the UN system, would provide a better home for an agreement with binding commitments and responsibilities with regard to investment, both for host countries and corporations. He highlighted several international standards applying to investment operations, such as the Draft Human Rights Principles and Responsibilities for Transnational Corporations and other Business Enterprises. According to the ActionAid report, any investment framework "must have effective mechanisms for enforcing corporate liability at both national and international levels, as well as formal monitoring systems which include civil society participation".

IUP comments

Peter Rossman, Communications Director at the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations (IUF) felt that the nature of investment proposals being put forward at the WTO was reflective of business and corporate interests and would, if accepted, "entrench investor rights". Supporting governments’ rights to regulate foreign investment and capital flows, he pointed out that the present way the WTO functioned and was structured would imply that corporate interests would predominate and undermine legislative safeguards for protecting labour and other rights enshrined in national constitutions.Referring to a Trade Union Statement on the agenda for Cancun, Peter Rossman noted that while it recognised that multilateral investment rules could, in principle, help governments avoid engaging in destructive competition for foreign direct investment (FDI), the statement only supported multilateral investment rules that would govern FDI alone and which would be built around the promotion and protection of social and environmental policies as well as binding and enforceable investor obligations covering core labour standards.

Comments from the Third World Network

Chien-Yen Goh of Third World Network noted that there was little understanding of the elements of the relationship between the various issues related to potential negotiations on an investment agreement, including the question of modalities such as definition and scope of negotiations. He noted that while developed countries wanted to look at portfolio investment, developing countries wanted to confine discussions to FDI. He also highlighted the need to focus on home country obligations and obligations on the part of multinational corporations (MNCs.) He added that the work on understanding the implications of investment-related issues had only just begun, and countries were in no position to determine what an agreement should look like by Cancun.

The WTO Working Group on Trade and Investment Working Group was held from 10-11 June, and a report will follow in the next issue of BRIDGES Weekly.

The ActionAid report is available at http://www.actionaid.org/resources/pdfs/embargoed.pdf.

The Trade Union Statement on the Agenda for the 5th Ministerial Conference of the WTO is available at http://www.ictsd.org/ministerial/cancun/docs/trade_union_statement.pdf.

ICTSD Reporting.