Investment at the WTO

Investment was introduced onto the World Trade Organisation (WTO) agenda in 1996 at the First WTO Ministerial Conference held in Singapore, when member states proposed the inclusion of investment, competition, government procurement and trade facilitation issues (commonly known as the Singapore issues) on the WTO Agenda. A Working Group was established and directed to inter alia examine a possible future for a multilateral investment agreement within the WTO.

In 2003, the Working Group reported that the member states could not reach consensus. Consequently, investment was dropped from the WTO Agenda, along with competition policy and government procurement. Trade facilitation negotiations proceeded, culminating in the WTO Trade Facilitation Agreement (which entered into force on 22 February 2017, when two thirds of the WTO membership had ratified the agreement).

Current WTO rules on investment are embedded in the GATS (mode 3) and the Agreement on Trade-Related Investment Measures (TRIMs). Negotiations to establish a multilateral investment framework within the WTO are ongoing but focused on investment facilitation.

In March 2018, a group of WTO countries commenced structured discussions to establish a multilateral framework on investment facilitation. Similar discussions are taking place under the auspices of the OECD, UNCTAD and G20. African countries are participating in these fora.

What is investment facilitation?

There is no generally agreed definition of investment facilitation. The WTO, OECD, UNCTAD and G20 differ in their concepts of investment facilitation and trade and investment treaties include varying provisions on investment facilitation.

However, investment facilitation generally focuses on what countries do to enable or expedite investments into their economies. Investment facilitation typically includes: removing of bureaucratic impediments to investment, easing investment permits, simplifying personnel entry, capacity-building on investment issues, cooperation and coordination of investment facilitation institutions.[1] Investment facilitation is, for instance, what one-stop-shops do but it does not cover issues like market access, investment protection and investor-state dispute settlement that are found in legal instruments.

Divergence among WTO members

WTO members are split on the need for a multilateral investment facilitation agreement. Proponents of such a framework hold that binding disciplines on investment facilitation promote predictability, certainty and transparency and would expedite and increase foreign investment flows to and among developing countries.

By contrast, critics argue that a WTO multilateral investment facilitation framework is inconsistent with the Marrakesh objectives and priorities; not part of the current WTO negotiating mandate; and could constrain the ability of members to regulate investment in their territories.[2] Equally, members differ on the form any agreement could take – whether multilateral, plurilateral or voluntary guidelines.

Why a multilateral investment facilitation agreement within the WTO?

The WTO appears to be the most appropriate forum to discuss investment issues at a multilateral level for many reasons. The WTO is a rule-making body with an established dispute settlement system. Notwithstanding contemporary concerns (to reform and modernise the WTO), the WTO has established universal rules governing global trade. Its dispute settlement mechanism has effectively resolved trade disputes between member states and fostered the implementation and application of the WTO agreements.

An investment facilitation agreement within the WTO could provide policy coherence across areas of investment, trade (in goods and services) and intellectual property rights. That is, investment will be negotiated in line with areas already covered by the WTO agreements including trade in goods, trade in services and intellectual property rights.

In addition, the WTO subscribes to the principle of special and differential treatment between member states. For instance, WTO agreements contain special provisions for developing and least-developed countries, and also make provision for technical or financial assistance to such countries. A multilateral agreement in this context could accommodate the varying needs of developing members, including in Africa, to accommodate the fact that this is an area where countries carefully guard their domestic policy space.

The development of any multilateral investment agreement outside the WTO is highly unlikely. The failure of the Multilateral Agreement on Investment under the aegis of the OECD in the 1990s attests to this. Investment is a sensitive and complex issue, countries lack consensus on substantive investment governance issues and the international investment regime is fragmented – enshrined in bilateral and regional investment treaties and free trade agreements with investment chapters/protocols/annexes.

Is a multilateral investment facilitation agreement necessary for Africa?

African countries acknowledge that investment is essential for growth and development. They are already facilitating investment through national, bilateral and regional arrangements. More than two thirds of African countries are members, acceding or observers in the WTO.[3]

In November 2017, senior officials from ECOWAS and other countries from within (and outside) Africa hosted a ‘High-Level Trade and Investment Facilitation Forum for Development’ in Abuja, Nigeria. One of the central objectives of the Forum was to examine how the WTO could contribute to facilitating the required investment, as well as trade by developing multilateral approaches to improving transparency, cutting red tape, streamlining procedures and strengthening international cooperation with the aim of expanding sustainable pro-development investment.

The Forum adopted a joint statement (Abuja Statement) titled ‘Deepening Africa’s Integration in the Global Economy through Trade and Investment Facilitation for Development’’ which was submitted to the WTO General Council at the Eleventh Ministerial Conference, in Buenos Aires, Argentina in December 2017. Among other things, the Abuja Statement notes several challenges that Africa is facing including growing population, demand for jobs and need for prosperity across the continent. It affirmed that trade and investment are inseparable and remain indispensable for economic growth, modernisation and development of Africa. The Abuja Statement urged WTO Members to undertake more focused discussions aimed at developing a multilateral framework to facilitate investment for development.

Attracting more investment is good but not enough. Africa needs responsible and quality investment. Investment that will promote sustainable development, create jobs, improve living standards, transfer technology and know-how, enhance the host economy’s productive capacity and spur domestic investment through creation of local supplier linkages. African countries (e.g. in SADC, COMESA) are calling for investment that supports their development plans.

Foreign investment in strategic connectivity infrastructure (ports, transport corridors, telecoms), globally competitive industries (including services) will enable Africa to participate in and benefit from the interconnected and digital global economy.

Over the years, African countries have facilitated investments through unilateral, bilateral or regional measures without any multilateral obligations. A multilateral agreement on investment facilitation is important for Africa. It would reinforce, complement or advance the existing national, bilateral or regional measures. A multilateral agreement on investment would reduce uncertainty and cut red tape and FDI-related transaction costs – enhance rules-based governance, predictability and transparency. It would also improve the investment climate and expedite or smooth investment to and among African countries. It would help Africa participate in and benefit from global investment flows.

A WTO agreement on investment facilitation could assist in achieving Africa’s goals to increase investment in productive capacity. ‘Investment facilitation can assist with promoting investment and also help stimulate the process of industrialisation and structural transformation of host economies if aligned to national development strategies and objectives’.[4]

Recommendations for an investment facilitation agreement that is good for Africa

An investment facilitation agreement focused on achieving sustainable development, enhancing transparency, improving efficiency and promoting cooperation is most likely to enthuse WTO members.

The WTO should adopt a flexible negotiating approach particularly on complex issues like investment, where consensus is hard to reach among 164 member states. The investment facilitation framework could be adopted as a plurilateral agreement that would only bind state parties (i.e. those who ratify the agreement); but also be open for accession by non-state parties.

Global rules on investment facilitation will likely bring about new and complex commitments for African countries with respect to legislative requirements, new technology and equipment and human capacity. Consequently, the WTO should adopt the special and differential treatment in the investment facilitation agreement in a similar way to the Trade Facilitation Agreement to allow member states to commit to what they feel comfortable to achieve within specified timeframes. Equally, the WTO should build in support and capacity-building to the investment facilitation agreement like the Trade Facilitation Agreement to ensure that a focus on sustainable development can be realised in practice.

---

[1] See https://www.ictsd.org/opinion/towards-a-multilateral-investment-facilitation-framework-elements-in-international.

[2] See https://www.wto.org/english/thewto_e/minist_e/mc11_e/briefing_notes_e/bfinvestfac_e.htm.

[3] See https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm.

[4] See pdf Outlines for BRICS Investment Facilitation (103 KB)