UPDATE (October 16 and December 13–18, 2023)
In General Council India alone opposes investment deal as a WTO agreement
SEE ALSO
Comment: on India’s claim that a plurilateral WTO deal is ‘illegal’
Technical note: types of plurilateral deals and adding them to WTO rules
Explainer: The 18 WTO plurilaterals and ‘joint-statement initiatives’
Technical note: Participation in WTO plurilateral talks
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All articles tagged “investment facilitation”
NOTE: An error has been removed from this. The possibility of voting under WTO Agreement Article 10 (on amendments), does not apply to amending Annex 4 of the agreement. Only Article 10.9 (requiring consensus without the option of voting) and Article 10.10 (other requirements) apply
By Peter Ungphakorn
POSTED JULY 7, 2023 | UPDATED JANUARY 26, 2024
(Developments after July 2023 are in italics. Now includes the final version of the proposed agreement)
Negotiators from over two thirds of the World Trade Organization’s members say they have reached agreement on a final text on “investment facilitation for development”, but they still have to persuade the rest of the membership either to join them or to stand aside so the deal can be added to WTO rule book.
The agreement would make investment conditions easier, more predictable and more transparent, with a focus on sustainability and development. (In November 2023 a final revision was circulated, replacing the version of July 2023, which still left some options open. See this 41-page explanation.)
“Despite the lack of high-level fanfare, this agreement represents important progress,” former WTO Deputy Director-General Alan Wolff wrote after the deal was announced on July 6, 2023.
He said it was “remarkable for several reasons” such as having no constraints on governments’ investment policies, being pro-development and focusing on process with positive encouragement.
“Participants firmly believe that the proposed […] agreement will contribute to creating a more transparent, efficient, and predictable environment to facilitate not only more investment, but also more sustainable investment, as well as to anchor and support […] participants’ domestic, bilateral, and regional reform efforts,” said the talks’ coordinators, ambassadors Sofía Boza (Chile) and Jung Sung Park (Rep. Korea), when they announced the deal had been struck on July 6, 2023.
The text “is the result of three years of intense text-based negotiations amongst over 110 participating WTO members at all levels of development, held in a transparent and inclusive manner since their launch in September 2020,” they said.
The whole exercise has taken five and a half years from the original joint statement issued by 42 WTO members at the Buenos Aires Ministerial conference in December 2017.
The aim is to “improve the investment and business climate, and make it easier for investors in all sectors of the economy to invest, conduct their day-to-day business and expand their operations”, the WTO says.
Provisions addressing ‘Responsible Business Conduct’ and ‘Measures Against Corruption’ … [break] new ground within the WTO
— Ngozi Okonjo-Iweala, WTO Director-General
The deal would include helping developing and least-developed countries participate more in global investment flows, in some cases with aid.
“The initiative does not cover market access, investment protection and investor-state dispute settlement,” the WTO clarifies.
WTO Director-General Ngozi Okonjo Iweala said: “The text also contains provisions addressing ‘Responsible Business Conduct’ and ‘Measures Against Corruption’ — again breaking new ground within the WTO.”
Participants said they would spend the rest of the 2023 and until the next Ministerial Conference in February 2024 on a major campaign to bring the rest of the membership onside, the talks’ coordinators said (see below).
The task could prove trickier than the past three years of negotiations on the text itself. The biggest and apparently unavoidable challenge will be to allow the agreement and its provisions to pass a consensus decision, meaning none of the WTO’s 164 members block it.
CONTINUE READING or JUMP TO:
● Plurilateral, multilateral and non-discrimination | Adding to the rulebook | Multilateral but not multilateral
● What the agreement includes| Cover note to the final text with a link to the final text | Next steps — official
● See also
Plurilateral, multilateral and non-discrimination
The aspiration was always to develop a “multilateral” agreement, meaning all WTO members sign on.
“Preparing for the next phase of multilateralization!” Okonjo-Iweala proclaimed on Twitter on July 6.
(Participants accepted in October 2023 that the efforts to bring other WTO members in had failed. The deal remains “plurilateral”, involving almost three quarters — 119 in January 2024 — of the WTO’s 164 members. Countries that have not participated include the US, India and South Africa.)
PARTICIPANTS
Investment facilitation for development
March 22, 2024
Afghanistan; Albania; Angola; Antigua and Barbuda; Argentina; Armenia; Australia; Austria; Bahrain; Barbados; Belgium; Belize; Benin; Bolivia; Brazil; Bulgaria; Burkina Faso; Burundi; Cabo Verde; Cambodia; Cameroon; Canada; Central African Republic; Chad; Chile; China; Colombia; Congo; Costa Rica; Côte d’Ivoire; Croatia; Cyprus; Czech Republic; Denmark; Democratic Republic Congo; Djibouti; Dominica; Dominican Republic; Ecuador; El Salvador; Estonia; European Union; Finland; France; Gabon; Gambia; Georgia; Germany; Greece; Grenada; Guatemala; Guinea; Guinea-Bissau; Honduras; Hong Kong; Hungary; Iceland; Indonesia; Ireland; Italy; Japan; Kazakhstan; Rep. Korea; Kuwait; Kyrgyz Republic; Laos; Latvia; Liberia; Lithuania; Luxembourg; Macao; Malawi; Malaysia; Maldives; Mali; Malta; Mauritania; Mauritius; Mexico; Moldova; Mongolia; Montenegro; Morocco; Mozambique; Myanmar; Netherlands; New Zealand; Nicaragua; Niger; Nigeria; North Macedonia; Norway; Oman; Panama; Papua New Guinea; Paraguay; Peru; Philippines; Poland; Portugal; Qatar; Romania; Russia; Saudi Arabia; Seychelles; Sierra Leone; Singapore; Slovak Republic; Slovenia; Solomon Islands; Spain; Suriname; Sweden; Switzerland; Taiwan; Tajikistan; Thailand; Togo; Tonga; Uganda; United Arab Emirates; United Kingdom; Uruguay; Vanuatu; Venezuela; Yemen; Zambia; Zimbabwe (128)
(As listed in the revised draft 2024 Ministerial Declaration and the WTO web page on investment facilitation (accessed March 22, 2024). Burkina Faso, Côte d’Ivoire, Dem. Rep. Congo, Venezuela and Tonga joined most recently. Colombia and Taiwan were restored to the list. Earlier, Ghana, Pakistan and Türkiye dropped out)
Sources are here
In other words, although reaching agreement is an achievement, the talks were always among like-minded countries. Therefore the task was easier than negotiations among the whole membership.
A deal among only some WTO members is a problem because India, South Africa and a few others oppose plurilateral agreements. Consensus will be needed to insert this text into the WTO agreements (In December 2023, India said it would block consensus.)
A paragraph in the original preface reflected the multilateral versus plurilateral options.
“This text does not prejudge the procedure for incorporating the […] Agreement into the WTO legal architecture,” the preface says, meaning that the legal steps for establishing this as a WTO agreement still have to be settled. This will not be easy.
Participants have tried to persuade the rest of the membership to sign the agreement. With or without further negotiation, that was going to be difficult. Some countries were clearly reluctant, otherwise they would have participated from the start. (In October 2023, participants gave up. The deal is now plurilateral.)
The July 2023 version of the text offered the options of “member” (all WTO members) or “party” (only those that sign) to describe the signatories. (By November 2023 only “party” was left.)
WTO JARGON BUSTER
Consensus — when no one says “no”, all objections dropped. In contrast, unanimous means everyone says “yes”.
Most-favoured-nation (MFN) — non-discrimination between trading partners. For example, a country’s commitment to lower or scrap a tariff applies equally to all WTO members: they are all equally “most favoured”. This is the default in WTO rules, but exceptions are allowed in specific situations
Multilateral — agreement or activity involving the whole WTO membership
Plurilateral — agreement or activity involving part of the WTO membership. Joint-statement initiatives (JSIs) are plurilateral when only some members sign the statements.
Schedules — individual countries’ lists of commitments to increase market access (tariffs, quotas for goods, access to services and government procurement markets) and to cut or scrap agricultural subsidies, with timetables for phasing them in. They are annexed to relevant agreements.
More jargon here
“MFN” or most-favoured-nation treatment is a key WTO principle. It means non-discrimination between others. It requires countries to treat other WTO members equally. (There are some exceptions.)
In earlier versions, how non-discrimination was going to work for investment facilitation was unclear. Would it mean treating all other WTO members equally? Or only those that have signed the agreement?
The July 6, 2023 version clarified that signatories would make their streamlined investment conditions available to all other WTO members, whether or not they have signed the deal.
5.1. Each Member/Party shall accord to investors of another Member and their investments treatment no less favourable than that it accords, in like circumstances, to investors of any other Member and their investments, in applying the provisions set out in this Agreement in its territory.
Then, a footnote added some conditions: non-signatories would have no obligations under the agreement (they would be free riders), but they would not be able to bring a legal case against a signatory accused of discriminating either:
5 For greater certainty, this paragraph shall not be construed as creating any obligation for Members that have not accepted this Agreement, nor shall it be construed as creating any right for those Members, including the right to refer matters arising from this Agreement to a dispute settlement proceeding under the Dispute Settlement Understanding.
Whether that creates a problem remained to be seen.
Adding to the rulebook
If the entire WTO membership had been on board, establishing the deal as a proper WTO agreement would have been straightforward.
There would be consensus support from all members and the deal would go through.
But since it is staying plurilateral, the next steps are more complicated.
There are two basic ways for a plurilateral agreement to take effect in the WTO. Only one of them seems to apply to Investment Facilitation — to add the deal formally to the WTO rulebook.
THE NATURE OF THE AGREEMENT
Participants have agreed on five “guiding principles” for the Investment Facilitation Agreement. It should
● be an integral part of the WTO treaty architecture
● be a standalone agreement
● apply horizontally to investment in all economic sectors
● provide benefits to all WTO members
● be open to all WTO members.
These are the two ways of incorporating a plurilateral agreement into WTO rules (for more details, see this technical note):
1. Consensus not needed: add the text to schedules (or lists) of commitments. This is unilateral and treats all other WTO members equally (they are all “most-favoured nations”, MFN). It’s the means used in a number of agreements such as for duty-free trade in pharmaceuticals and information technology products, under goods.
The plurilateral agreement on domestic regulation in services was turned into binding commitments when each participant added the text to its market-access commitments on services.
Participants say they want it to be a stand-alone agreement
Because these were unilateral additions to individual commitments already made equally to all WTO members (MFN), no decision was needed from the whole membership.
Even then, India and South Africa are holding up the services schedules that have been revised to include the domestic regulation agreement, although experts suggest they cannot delay confirmation (officially “certification”) forever.
There are three reasons why the Investment Facilitation Agreement is unlikely to use schedules:
- It does not fall under any of the sector annexes in the WTO Agreement. It’s not about trade in goods or intellectual property. At best it only partially comes under services
- Without market access commitments it has no schedules
- Participants say they want it to be a stand-alone agreement
2. Consensus needed: add the text as a new plurilateral agreement. Technically, that means adding it to Annex 4 of the WTO Agreement, joining plurilateral agreements on civil aircraft and government procurement.
The problem here is that adding a new agreement requires WTO-wide consensus.
The WTO rulebook might look like a package of separate agreements, from agriculture to trade policy reviews. But it’s really a single agreement with several layers of annexes, sometimes called a “single undertaking”.
Setting up a new WTO Investment Facilitation Committee could be blocked by a single opponent
That means that adding a new text amends the WTO Agreement. And to do that requires consensus among all 164 WTO members — the decision passes when no one says “no”, when all objections are dropped.
The outreach campaign after July 2023 and into 2024 has been to try to persuade countries like India and South Africa not to block consensus even if they do not sign the agreement. Judging by the arguments they have made so far, the campaign has a mountain to climb.
Multilateral but not multilateral
Participants can still push to make Investment Facilitation a multilateral agreement. It would need consensus among all WTO members, participants and non-participants.
But for now it’s plurilateral. The rules on adding a plurilateral deal to the main WTO Agreement are unusual. They require consensus without the option of voting. (Amending the agreement on dispute settlement is similar.)
The Ministerial Conference, upon the request of the Members parties to a trade agreement, may decide exclusively by consensus to add that agreement to Annex 4.
— WTO Agreement Article 10.9 on amendments
The rules also say this should happen at a Ministerial Conference, although the General Council can take decisions on behalf of the Ministerial Conference.
The only way to engineer a vote would be to try to amend Article 10.9 first. That would become very complicated.
The alternative would be to try to bargain with the handful of countries, led by India, that are saying they will block consensus. At the moment there’s no sign they will back down.
What the agreement includes
THE SEVEN SECTIONS
of the Investment Facilitation Agreement:
1. Scope and General Principles
2. Transparency of Investment Measures
3. Streamlining and Speeding up Administrative Procedures
4. Focal Points, Domestic Regulatory Coherence and Cross-Border Cooperation
5. Special and Differential Treatment for Developing and Least-Developed Country Parties
6. Sustainable Investment
7. Institutional Arrangements and Final Provisions
The proposed agreement has seven sections on investment measures and their administration.
The main ones deal with improving transparency (Section 2); streamlining administrative procedures (Section 3); promoting coherent domestic regulations and international cooperation between both ends of investment flows (Section 4); and technical assistance and capacity building for developing and least-developed countries (Section 5).
The agreement emphasises fostering sustainable investment for sustainable development. It includes responsible business conduct and measures against corruption (Section 6).
The core objectives are promoting greater participation for developing and least-developed countries’ participation in global investment flows and fostering sustainable development.
The initiative does not cover market access, investment protection and investor-state dispute settlement
— WTO
The agreement follows the example of the Trade Facilitation Agreement by putting developing and least-developed countries in three categories: those that will implement the agreement
- within one year
- after a transition period
- after a transition, so long as technical assistance and capacity building are also provided
The agreement explicitly excludes market access, investment protection, and investor-state dispute settlement.
(The final version has been amended to take account of the way it is eventually incorporated among WTO agreements. It also says participants have to ratify the deal. It will enter into force in the ratifying countries once 75 participants — 63% of 119 — have ratified it.)
Cover note to the final text
NEGOTIATIONS ON INVESTMENT FACILITATION FOR DEVELOPMENT
INVESTMENT FACILITATION FOR DEVELOPMENT (IFD) AGREEMENT
1. Following the completion of the legal review of the English version of the IFD Agreement, including technical adjustments and final provisions as indicated in the July 2023 Statement by the co-Coordinators1, this text represents the final result of the Investment Facilitation for Development (IFD) Agreement.
2. This text embodies the outcome of text-based negotiations amongst WTO Members IFD participants conducted in a transparent and inclusive manner since September 2020. With the two years of preparatory work preceding the text-based negotiations2, and building on the ‘Easter Text’3 and the subsequent ‘Draft IFD Agreement’4, this text of the IFD Agreement is the result of over five- and-a-half years of IFD participants’ intense work.
3. The open-ended plurilateral IFD Agreement includes the following seven Sections: Sections I (‘Scope and General Principles’); II (‘Transparency of Investment Measures’); III (‘Streamlining and Speeding up Administrative Procedures’); IV (‘Focal Points, Domestic Regulatory Coherence and Cross-Border Cooperation’); V (‘Special and Differential Treatment for Developing and Least- Developed Country Parties’); VI (‘Sustainable Investment’); and VII (‘Institutional Arrangements and Final Provisions’).
__________
1 Document INF/IFD/W/51 dated 6 July 2023.
2 Work conducted under the ‘WTO Structured Discussions on Investment Facilitation for Development’ launched after the December 2017 Buenos Aires Joint Ministerial Statement on IFD.
3 Document INF/IFD/RD/74 and subsequent revisions thereof, the latest being Revision 9 of 18 November 2022.
4 Document INF/IFD/RD/124 and subsequent revisions thereof, the latest being Revision 2 of 19 June 2023.
The document continues with the final text of the agreement.
Next steps — official
This is how the coordinators’ July 6, 2023 paper outlined remaining work.
IFD = Investment Facilitation for Development
LDC = least-developed countries
MC13 = the 13th WTO Ministerial Conference scheduled for February 2024 in Abu Dhabi
TACB = technical assistance and capacity building
NEXT STEPS IN THE SECOND SEMESTER OF 2023 AND RUN-UP TO MC13
6. In the second semester of 2023 and leading up to MC13, IFD participants will intensify their work along the following four parallel complementary tracks:
A. IFD participants will advance the discussion on legal incorporation of the IFD Agreement into the WTO legal architecture and further analyse the procedural aspects in full respect of the WTO Agreement. They will make the necessary adjustments to the relevant provisions based on these discussions;
B. IFD participants will reach out to and engage constructively with all WTO Members, including non-participating Members, in light of their objective to incorporate the IFD Agreement into the WTO legal architecture. Outreach efforts will become a main focus in this new phase. IFD participants encourage all WTO Members to participate in this Joint Initiative, highlighting the benefits of joining the IFD Agreement, and the TACB support available under it. In this regard, the IFD participants will step up their outreach efforts with individual and groups of WTO Members in a coordinated manner to explain the Agreement’s pro-development benefits;
C. IFD participants will intensify their support to the investment facilitation needs assessment process for developing and LDC Members, to help these countries identify their implementation gaps and TACB support needs, as well as to self-designate the different categories of commitments that they will notify for the implementation of the Agreement. In this context, a Self-Assessment Guide has been developed together with seven International Organizations,7 and needs assessments pilot projects8 are underway. A conference will be organized in due course for IFD donor and recipient Members as well as partner international organizations to discuss their engagement in the needs assessment process; and
D. IFD participants will complete the following final refinements to the text at the latest by the end of October 2023:
i. Textual adjustments that will emanate from relevant precedents and further discussions on legal incorporation;
ii. technical coherence refinements of the proposed IFD Agreement, including notably the legal review for rectifications of a purely technical and editorial character that do not affect the substance of the Agreement; as well as
iii. language consistency across the English, French and Spanish versions of the Agreement.
See also
● WTO members find a new (and successful) approach to negotiations by Alan Wolff, Peterson Institute for International Economics, August 16, 2023
● A new WTO deal to facilitate investment could be ready in 2023. It could not be more timely WTO blog by Anabel González, January 18, 2023
Updates:
January 24–26, 2024 — adding the final (November 2023) version of the agreement; editing the text to reflect the latest developments, mainly shown in italics; re-organising the headings and paragraphs more logically
January 15, 2024 — IMPORTANT — replacing paragraphs that had originally suggested voting might be possible based on Article 10 of the WTO Agreement. The corrected paragraphs now say paragraph 9 of Article 10 only allows plurilateral agreements to be added to Annex 4 by consensus and not by voting.
September 16, 2023 — updating participants
August 17, 2023 — adding the quote from Alan Wolff and linking to his paper
July 19, 2023 — adding the “multilateral but not multilateral” on voting and non-consensus decision-making for amendments
July 8–9, 2023 — adding information and quotes from the WTO website news story and linked documents; correcting next steps, with the outreach campaign aimed at the February 2024 Ministerial Conference, while the end of October 2023 is the target date for tidying the text; adding Okonjo-Iweala’s tweet and reflecting it in the text
Image credits:
Investment coins (main image) | Mathieu Stern, Unspalsh licence
Plurilateral (sunset) | Chang Duong, Unspalsh licence
Rulebook | Brandi Redd, Unspalsh licence
Investor| Tima Miroshnichenko, Pexels licence
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