The Case For and Against a WTO Multilateral Framework On Investment Facilitation



Washington International Trade Association

Note: This is a summary on the interactive Webinar hosted by the International Centre for Trade and Sustainable Development on Tuesday, October 9, 2018. 

The Case for and Against a WTO Multilateral Framework On Investment Facilitation

By: Mariana Jo-Bonilla

In December of 2017, a coalition of 70 World Trade Organization (WTO) members published the Joint Ministerial Statement on Investment Facilitation for Development. This statement reflected the group’s interest on crafting a “multilateral framework on investment facilitation”. The International Centre for Trade and Sustainable Development (ICTSD) hosted a interactive webinar with 3 panelists that included: the Permanent Representative of Colombia to the WTO, Juan Carlos Gonzalez, the Minister Counselor from the Mission of Brazil to the WTO, Felipe Hees, and the Senior Counsel of King & Spalding, Abdel-Hamid Mamdouh. The discussion revolved around five questions initiated by the Moderator, Resident Senior Fellow of CCSI and Senior Fellow of ICTS, Karl P. Sauvant. The questions included: Why a binding multilateral framework? Why should such a framework be negotiated in the WTO? What could such framework contain and would it promote sustainable FDI? What are the specific needs of and benefits for developing countries?

Ambassador Gonzalez started the discussion providing a background on the framework’s origin, which developed from dialogue about an informal agreement amongst WTO members. The panel illustrated the unquestionable link between trade and investment. Then furthered the notion that development proliferates through global value chains. Additionally, Ambassador Gonzalez noted that, despite the increase of investment companies worldwide, only a few initiatives, which facilitate investment, have taken place domestically. The framework includes improving transparency, speeding-up administrative procedures, and facilitating the participation of global investment flows. Nevertheless, this framework will not include market access, investment protection rules, or an investor-state dispute settlement. Overall, the main focus of this framework is to improve transparency, enhance international cooperation and both the participation of developing countries and least developed countries (LCDs) in investment flows, through transparent, inclusive and open processes for investors in every country. Ambassador Gonzalez highlighted that the 70 members who joined the declaration and other members have shared their own experience with investment so they can come up with solutions based on common issues.

Felipe Hees spoke about what the Brazilian government is doing in regards to the framework, and further noted that they have already submitted a draft framework with suggestions of what they think would be good policy to be included. He then talked about why there should be an investment facilitation agreement. His answer included two key elements. First, he examined investment facilitation and mentioned how important it is to set a positive agenda to have a better relationship between investors and the State. He stated, ”If there is a positive or better relationship between countries (host country and home country), this will increase investment flow”.The idea is to increase investment flows in LDCs, which will help these countries to retain the investment. The second element Felipe discussed was: why make it a multilateral framework under the WTO? This question was raised due to existing talks in the World Bank, the OECD and UNCTAD on how to attract investment in developing countries and LDCs. According to Hees, the difference relies on the nature of the WTO. They provide a different approach aimed to create a positive environment between investors and host states. This dynamic does not exist with other international organizations; because of the WTO’s unique dispute settlement structure. Additionally, under the WTO, this would have a binding effect, becoming an obligation that implements measures internationally.

In addition to Felipe’s remarks, Abdel-Hamid discussed why a binding agreement should be negotiated under the WTO. He highlighted “policy coherence”, which cannot be argued against by any country, stating: “There is a need of coherence between trade policy and investment policy. Every country knows what they want in order to have positive trade and investment policies but, at the same time, they are looking for the regulatory coherence, meaning how they want to get there.”Additionally, he wanted to clarify that this framework onlyincludes Foreign Direct Investment (FDI), pointing out: “If the WTO is already dealing with FDI as part of the trade agenda, it is a natural to discuss an agreement or a WTO framework on investment facilitation.”

During the second round of questions, the Moderator asked what elements this framework should have. Ambassador Gonzalez, who is leading the talks of the framework, said that members are focusing on identifying the issues that could stop or delay investment processes. He pointed out the desirability of the Information and Communication Technology (ICT), a publication of proposed measures by each country, the modalities of notifications, and the notifications to the WTO made by each member. This seeks to connect the use of the Single Window for transparency and predictability, establish time limits of applications of the measures. Elements included in the framework are meant to make it easier for investors. The framework attempts to benefit developing countries in general, including LDCs. He noted that the framework would assist the country that is sending out the investment to navigate the institutional structure of the country and the bureaucratic processes they have to go through. Ultimately, it forces the host government to look at the environment they want to facilitate in order to receive FDI. The WTO strives to make the investor-state a sustainable partnership that will increase production and efficiency in the long-term. Once you have FDI, they will look for other specific types of investment.

Hamid examined LDCs very limited capacity to increase investment. He postulated that the WTO framework would help them to implement whatever is agreed on it and will encourage a regulatory reform, which is crucial because most countries lack the capacity to do so. He made clear that this framework about investment is not a silver bullet to achieve development, but that it is an enabling factor, which will foster pro-growth situations such as rule of law, infrastructure and other investment spurring initiatives.

Ambassador Gonzalez mentioned that this framework is important because investors will go to countries that facilitate their work. The majority of the countries have Investment Promotion Agencies (IPAs) to identify the issues that affect the investment climate and give this feedback to the government. However, they can’t change the environment itself. But an international framework will allow the issues that are important for each country and potential changes to the environment to be included.

Felipe suggested that the agreement should help investors with the institution framework of the country, empower the institution in charge of applying those rules because IPAs are not government and finally, change the elements that are not facilitating the investment environment.

Finally, the Moderator asked the panelists to answer what do they think it should be the priority issue for the work of the WTO for this agreement? Hamid said to focus on the specific elements of the framework and make them into one and not split it into different elements. Felipe said not to lose the bigger picture and include what investors are looking for at the moment. Ambassador Gonzalez said in order to continue the outreach to different members and having the opportunity to continue to learn more about the process to start the negotiations.