WTO Ministerial Section • Volume 7 • Number 22 • 18th June 2003

Investment: Members Disagree on Negotiations, Informal Consultations to Proceed

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The last meeting of the WTO Working Group on the Relationship between Trade and Investment before the fifth WTO Ministerial in Cancun in September was held from 10-11 June. At the meeting some Members — notably Canada, Costa Rica and Korea — sought to pave the way for investment negotiations to begin at Cancun. However, most developing countries remained non-committal, clearly signalling a lack of willingness to begin negotiations despite arguments advanced by Members who considered the time ripe to launch negotiations.

Canada, Costa Rica, EU defend investment negotiations

In a joint submission (WT/WGTI/W/162, available at http://docsonline.wto.org) Canada, Costa Rica and Korea argued that after seven years of talks, the Working Group had completed the preparatory work, and Members should move to the next phase — negotiations on a WTO Agreement on Investment (see BRIDGES Weekly, 12 June 2003). Introducing the paper to the Working Group, Canada said that a WTO agreement could complement the large network of bilateral investment agreements. While admitting that a multilateral framework would not guarantee investment flows, Canada felt it could contribute to an overall conducive framework, enhancing economic efficiencies and setting sustainable development priorities.

According to the paper, any WTO investment framework should reflect in a balanced manner the interests of home and host countries, and take due account of the development policies and objectives of host governments as well as their right to regulate in the public interest. Further, special development, trade and financial needs of developing and least-developed countries should be an integral part of any framework, enabling Members to undertake obligations and commitments commensurate with their individual needs and circumstances. Costa Rica stated at the meeting that as a developing country, it supported an agreement with built in special provisions for developing countries.

Many of the views contained in submission, including the timeliness of launching negotiations at Cancun, found support with the EU, the main demandeur for negotiations, as well as with the US, Japan, Norway, Switzerland, Australia and Hungary. Some developing Members, notably Chile, Chinese Taipei and Hong Kong also supported the launch of negotiations. Chile in particular called for negotiations as part of a ’single-undertaking,’ stating that all Members would benefit.Developing countries call for further clarification, oppose negotiations

Many developing countries including China, India, Malaysia, Indonesia and Kenya disagreed with the assumptions made in the Canadian submission. China, supported by India, Indonesia and Kenya, considered the work of the Working Group far from complete, as the Group had reached no agreement on definition, scope and many other complex issues for potential negotiations. Indonesia pointed out that the impact on developing countries was an area that required ‘more study’. Terming the assumption that negotiations will be launched at Cancun as incorrect, India reminded Members that at Doha, the Chair had set ‘explicit consensus’ as a precondition for negotiations. Indonesia considered investment as beyond the scope of the WTO, while India felt investment was not part of the WTO’s core competence.

Thailand said it had an open mind regarding negotiations, but expressed disappointment with proposals on the table. Stating that technical assistance on investment had been insufficient thus far, Thailand said special provisions for developing countries should be built into any agreement, and added that developing countries should be allowed to attach conditions to investment. Malaysia reiterated that developing countries need policy space in the area of investment, and that costs outweighed benefits for developing countries in a multilateral investment agreement. According to Malaysia, active discussions did not mean the Working Group was ready for negotiations.

Key differences expressed by Members

According to trade sources, one key reason for the deadlock was different perceptions among Members as to what exactly constituted ‘explicit consensus’ on modalities, the pre-condition for negotiations. The demandeurs of investment negotiations felt that a clarification of what constituted the key issues was a sufficient pre- condition. Most developing countries, on the other hand, pointed either to the incomplete clarification process, or to a lack of convergence on some of the substantive aspects of these issues.

Statements by Members at the meeting reflected these differing perceptions. While Kenya stated that "the clarification of elements contained in paragraph 22 of Doha Declaration should lead to a convergence in understanding of the issues," the EU said that the mandate of the Group was "to clarify issues, not agree on them". One developed country trade diplomat was of the opinion that Members had shown an adequate level of sophistication and understanding of the issues while making detailed and technical submissions. He said that while the shape of any new agreement could not be predicted, some of the substantive aspects and disagreements with regard to the issues could only be worked out through negotiations. Stating that appropriate flexibilities in an agreement could cater to the sustainable development needs and priorities of Members, he pointed out that the nature of those flexibilities would be determined primarily by the kind of obligations Members would agree through negotiations.

On the issue of negotiating modalities, a developing country negotiator felt that substantive, rather than just procedural issues, needed to be addressed. The contours, nature and direction of the obligations that would flow from an investment agreement had to be addressed as part of an agreement on modalities. He added that plunging into negotiations, while leaving wide divergences among members on key issues such as definition and scope, would leave many developing country negotiators uncomfortable, and said they could possibly lose control of the process — as had happened earlier during the negotiations on trade related aspects of intellectual property rights.

Informal consultations to proceed

A major development at the Working Group meeting was the announcement by Chair Luiz Felipe de Sixas Corrêa (Brazil), that he and the other chairs of the groups on the four so called Singapore issues of investment, government procurement, trade facilitation and competition policy would conduct informal consultations. The purpose of the process — agreed on at an informal meeting of the the WTO Director- General with Heads of Delegations on 6 June — was to determine whether the General Council could make recommendations to the Fifth Ministerial Conference on the Singapore issues. Some developing countries voiced concerns regarding transparency, and the potential side-stepping of divergent views. Agreeing that consultations needed to go on, one delegate hoped that the process would be sufficiently transparent and participative.

ICTSD reporting; "Many Developing Countries Don’t Want To Start Investment Negotiations," THIRD WORLD NETWORK, 11 June 2003.