9:40 AM Jun 3, 1997

MANY CONCERNS SURFACE AT WTO GROUP ON TRADE & INVESTMENT

Geneva 2 June (Chakravarthi Raghavan) -- The World Trade Organization's working group on the relationship between trade and investment, which has been mandated to undertake a study process, heard a range of issues and concerns raised by developing countries many of whom stressed the need for a careful study, without any pre-conceived notions.

The working group, chaired by Amb. Krirk-Krai Jirapet of Thailand, at its first meeting heard some presentations and received papers from the OECD, UNCTAD, and the World Bank on the issues in this area dealt with by them, as also a WTO secretariat note and a document from the European Commission.

There were also statements by delegations (some 20 delegations spoke, some with written texts) setting out their views on how they would like the working group to proceed.

The EC paper, as well as some of the presentations by the sponsors of this issue at the WTO (Canada and Japan) seemed to attempt to steer the study process towards the contents of a multilateral agreement, and away from whether an agreement is at all needed and whether it is one merely related to trade (thus that could be negotiated at WTO) or a wider range of issues beyond the WTO's ken.

Many developing countries stressed that the study process envisaged was not to be one of "trade and investment" alone or as ends in themselves, but in terms of the overall objectives of the WTO -- raising living standards, full employment, large and steadily growing volume of real income and effective demand, expanding production of and trade in goods and services -- all aimed at the objective of sustainable development.

The WTO secretariat note, identifying various agreements at the WTO which are now being presented as those dealing with property rights and protection of rights of foreigners and their entitlement to 'national treatment'(rather than as the trade and trade-distortion issues as projected during the negotiations and its conclusions), seemed thus to steer the discussions in the direction of protecting foreigners investment rights as an end in itself.

The UNCTAD presentation, by its division on TNCs, outlined its work on investment at UNCTAD, focusing on the World Investment Reports and the division's promotional activities, and discussions of FDI and development in the WIRs -- but with little or no reference to the substantive analysis of interdependent issues of investment and development and the experiences of successful developing countries found in UNCTAD's Trade and Development Reports -- and to the work of the division on possible elements of an MAI to reflect development dimensions.

Participants said there was no clear answer to the question how UNCTAD secretariat could proceed to a conclusion that an MAI or an MIA was needed, when an intergovernmental study process was just getting under way at UNCTAD and the WTO.

Several of developing countries in their presentations also raised the issues of effects on national sovereignty and autonomy of development policies, ability to pursue industrialization and promoting investment, the compatibility of the profit maximisation motives of Transnational Corporations and the development objectives of developing countries.

A number of them, including some who (before Singapore) had supported the idea of discussing the issue in the WTO, stressed that the current WTO process was not a negotiating process towards an multilateral investment agreement, but rather one of an education and study process, exploring the range of issues, to enable governments to decide whether a multilateral framework is necessary and of advantage, and whether the WTO should engage in such a process or merely set some standards.

Several African countries, in a reference to the EC/Japan proposals to curb what they call "competitive incentive bidding", also raised the issue of the role of incentives by their governments, as also the reasons for the FDI to go to the developed countries and the newly industrializing countries with fast growth, as also need to look into some of the macro-economic and other implications such as effects on the balance-of-payments situations.

Implicit in some of these observations was a rejection of the IMF/WTO theology that liberalisation of investments and trade and current and capital accounts would automatically take care of the BOP problems.

This view which used to be aggressively promoted has taken a slight back-seat, after the Mexican peso crisis and its aftermath, but has not disappeared from their policy prescriptions.

The working group has been mandated by the Singapore Ministerial Conference of the WTO "to examine the relationship between trade and investment". It has been asked to do so in terms of an overall chapeau, "having regard to the existing WTO provisions on matters relating to investment and competition policy and the built-in agenda in these areas, including the TRIMs Agreement, and on the understanding that the work undertaken shall not prejudge whether negotiations will be initiated in the future."

The working group is due Tuesday to agree on a check-list of issues to form the basis of the work programme.

Several delegations made clear that the issues raised by them were just initial ones and more issues needing to be studied would come up.

The United States saw the working group's activities as a significant contribution to the discussions on investments taking place in other fora, and suggested a step by step approach to the WTO process.

The US suggested five subjects for discussion: trade and investment linkages, how trade affected investment and vice versa; economic analysis of benefits of FDI; stocktaking of existing WTO rules on investment; other investment instruments like bilateral and regional agreements; similarities and differences between WTO rules and other international instruments.

Many delegations stressed that there could be no prejudgment about negotiations having to be made. But Norway and Switzerland noted that the working group was expected to make a report by 1998.

[The Singapore declaration provides for the WTO General Council to keep the work of the study groups on trade and investment and trade and competition policy under review and determine, after two years, how the work of each body should proceed.]