A Risky Tango? Investment facilitation and the WTO Ministerial Conference in Buenos Aires
Most meetings at the recent 11th Ministerial Conference (MC11) of the World Trade Organization (WTO) were closed to non-governmental institutions. That left me, along with many others, stuck outside the delegates’ meeting rooms eager to find out about developments on investment facilitation going on inside.
As I spoke with delegates, I got the impression that investment facilitation was still an elusive concept. Most told me they did not really know what it would entail, but that they perceived it as important and risk-free for developing countries. The term “investment facilitation for development” seems enchanting, after all. How can anyone be against it?
The idea gained ground when Brazil introduced a new approach to investment treaties in 2014, moving away from the much-criticized paradigm of investment protection and costly investor–state litigation to a model aimed at investment facilitation and cooperation. Brazil’s approach puts forward concrete steps—setting up contact points, an ombudsperson to prevent and resolve disputes, new processes to facilitate visas and the like.
As Nathalie Bernasconi and I have argued in our analysis of Brazil’s investment treaties, the facilitation approach—if structured right—could reshape global investment law frameworks for the better. We are not of the view, however, that this solution-oriented cooperative approach is well suited for the WTO.
What happened in Buenos Aires?
A group of WTO members called Friends of Investment Facilitation for Development (FIFD), comprising 16 members, gained strength during MC11.
At the meeting, FIFD invited the 164 WTO members to adopt a decision to establish an Investment Facilitation Group within the WTO to carry out “structured discussions with the aim of developing a multilateral framework on investment facilitation.”
Even though FIFD failed to gather support for the consensus decision it sought, 70 WTO members (counting the European Union and all its member states) signed a Joint Ministerial Statement on Investment Facilitation for Development, calling for those “structured discussions” and envisioning “outreach activities” on investment facilitation.
Investment is out, most countries want it out, but why does it keep coming back?
Developing countries forming a majority of the WTO membership have long opposed bringing investment onto the WTO agenda. This opposition dates back to 1996, and in 2004 the WTO General Council decided that no work toward negotiations on investment would take place during the Doha Round.
In March and April 2017, FIFD, the MIKTA group (formed by Mexico, Indonesia, South Korea, Turkey and Australia) and other supporting countries, building on informal dialogues on investment facilitation organized at the WTO, advanced various proposals to include an item on “trade and investment facilitation” in the agenda of the General Council meeting of May 10. India and other countries opposed including the item and blocked the adoption of the agenda, expressing concerns about discussing investment at the WTO.
Given the impasse, the General Council chair suspended the meeting. After consultations, the chair resumed the meeting on May 18 and approved the agenda, rephrasing the item as “informal dialogues on investment facilitation.” The chair noted that “the proponents seek to share information on informal dialogues on investment facilitation” and were not proposing negotiations.
Opposition continued during MC11 as FIFD proposed holding “structured discussions with the aim of developing a multilateral framework on investment facilitation.” India’s Minister of Commerce and Industry stated that “shifting the priority from [Doha Round] issues to non-trade issues like investment facilitation, for which there is no mandate, is difficult to accept.” Zimbabwe’s Permanent Representative to the WTO recalled that “negotiations on new issues require consensus of the WTO membership.”
But these arguments didn’t prevent FIFD from getting a meeting slot at MC11 to discuss potentially bringing investment facilitation into negotiations.
The WTO secretariat appears sympathetic to the idea of discussing investment in the WTO. Even though the WTO has no mandate on investment, in June 2016 the secretariat renamed its “Trade in Services Division” to “Trade in Services and Investment Division,” despite protests by members of the African Group and Venezuela, among others.
It had also been noting, in advance of MC11, that investment facilitation could be discussed at the meeting. Director-General Roberto Azevêdo mentioned it in his letter to the media. The secretariat even prepared a briefing note to provide background information on the issue.
Why not the WTO?
It may well be that investment facilitation initiatives could be just as successful if implemented through domestic legislation. However, assuming a multilateral framework on investment facilitation is desirable, the WTO is not the most well-suited international forum for negotiations to that end.
An important element of any multilateral framework on investment facilitation should be the creation of cooperative approaches, including the provision of technical assistance and capacity building for developing countries that wish to develop and implement investment facilitation policies.
However, WTO processes typically lead to binding disciplines. While the scope of the investment facilitation measures to be potentially discussed at the WTO is still unclear, these discussions could result in the adoption of burdensome obligations by developing countries.
Further, the WTO lacks a sustainable development focus. Achieving the Sustainable Development Goals and addressing climate change depend on increased investment, but not just any type of investment— investment that advances those goals rather than works against them.
The WTO also has process issues. Discussions take place behind closed doors, shielded from stakeholders. (Even though I was not one of the 60 civil society representatives banned from attending MC11, I was not allowed to attend or watch the meeting on investment facilitation.) Any multilateral negotiating process concerning development mechanisms must be transparent and inclusive.
The United Nations Conference on Trade and Development (UNCTAD) already has a deep body of work on investment policy, including a framework for sustainable development and an action menu on investment facilitation. UNCTAD has the experience—and the mandate from its 194 members—to develop its work on investment facilitation “through policy formulation, technical assistance and consensus-building.” Would it not make sense to set up a new cooperation structure there?
What if the FIFD proposal moves forward?
The ministers who signed the FIFD statement guarantee that “discussions shall not address market access, investment protection, and investor–state dispute settlement,” and that “the right of Members to regulate in order to meet their policy objectives shall be an integral part of the framework.” They also commit to designing a framework that is “flexible, adaptable, and responsive to the evolving investment facilitation priorities of Members.”
That’s the language for now—and along with the uplifting buzzwords “investment,” “facilitation” and “development,” the FIFD proposal sounds rather inoffensive. However, as Professor Lauge Poulsen once told us in an interview for Investment Treaty News,
officials in many developing countries saw [investment] treaties as little more than diplomatic tokens of goodwill, which would be important signals for foreign investors but entailed no real liabilities or legal significance. … [B]y and large, the popularity of BITs in large parts of the developing world was due to a failure to appreciate their bite.
We can learn from the very example of investment facilitation that, at the WTO, a minority can smuggle in even a widely opposed debate. If investment facilitation makes it into the WTO, it could be followed by an enhanced push by some countries for multilateral negotiations on broader negotiations on investment-related issues with greater bite—including market access, investment protection and investor–state dispute settlement. In retrospect, the FIFD initiative will not have been as inoffensive as it may seem now.
You might also be interested in
The Risk of ISDS Claims Through National Investment Laws
This brief explores the risks that governments' COVID-19 measures may face from investor–state dispute settlement (ISDS) challenges under their national investment laws.
Rethinking investment policy to support sustainable development
IISD experts are pushing for reform and offering their expertise to ensure good policy isn't held back by the threat of arbitration.
The Proposed Multilateral Framework on Investment Facilitation
This paper examines the proposed multilateral framework on investment facilitation and how it relates to existing trade and investment agreements.
World in Progress: Arbitration courts - why citizens foot the bill for big investors
When foreign investors sue governments for losses due to policy changes in so-called arbitration courts, countries can end up paying billions.