DON'T PUSH MIA AT WTO, WARN SOME SOUTH NATIONS

9:43 AM Nov 1, 1996

DON'T PUSH MIA AT WTO, WARN SOME SOUTH NATIONS
Geneva 1 Nov (Chakravarthi Raghavan) -- Eight developing countries, in a joint statement for the information of all WTO members have come out against bringing up the trade and investment rules issue and setting up a work programme at the Singapore Ministerial Conference of the WTO.

The eight have warned that persisting with this issue, when there is no consensus within the WTO, could arouse greater controversies with adverse and undesirable spill-over effects on other issues.

Indonesia, on behalf of the eight (Egypt, Ghana, Haiti, India, Indonesia, Malaysia, Tanzania and Uganda) has asked for the statement to be circulated to all WTO members. Copies have been made available to the media.

The eight countries have urged there should be no further consideration of the issue within the WTO until the processes envisaged in UNCTAD on this are "sufficiently mature".

Canada and Japan have proposed a decision to be taken at Singapore for establishing a working party in the WTO to study the issue, and report to the next Ministerial Conference, with a view to begin negotiations. The European Commission, which originally proposed that the WTO should take up negotiations for a Multilateral Investment Agreement (MIA) is backing the Canada-Japan move.

The WTO Director-General Mr. Renato Ruggiero has also been canvassing support for these moves, both in numerous speeches outside, and in informal discussions with groups of delegations inside the WTO.

A draft ministerial declaration that has been prepared for consideration at the informal Heads of Delegation process (chaired by Ruggiero) suggests that the Ministers at Singapore should agree to "begin an examination of the relationship between trade and investment leading to a report to the General Council" and that in the conduct of work there should be "close cooperation with the UNCTAD Secretariat, both to make the best use of available resources and to ensure that the development dimension is fully taken into account."

The UNCTAD process -- mandated at Midrand UNCTAD-IX in May -- for study of various aspects of FDI including implications for development of a multilateral framework on investment is an inter-governmental process.

The eight countries, in their joint statement, have said they wished to collectively convey their views on the trade and investment issue and the initiatives to lay the groundwork for a multilateral framework on investment at the WTO. They note that in the less than two years of the WTO, many developing countries, and the least developed (LLDCs) in particular, have are facing numerous problems of implementation of their obligations, including notifications and adjustment of domestic policies to the new trade regime. The introduction of new issues on the trade agenda would put great strain on delegations and policy-makers of developing countries, and could also overload the WTO structure, with negative implications for its functioning.

All their countries welcome Foreign Direct Investment (FDI) and are adopting measures to promote inflows of FDI which has an important role to play in the development of developing countries.

However, the joint statement points out, the investment-development nexus, its link to trade and any multilateral rules in this area are complex. Information and analysis of the relationships between various aspects of the linkages between trade, investment and development are still lacking. The implications of a multilateral investment framework on the ability of national governments to regulate FDI flows so as to support national development objectives and priorities are not clear. Equally unclear is the nature of the potential benefits and costs of FDI and its relationship to the 'Globalization' process and the accompanying phenomenon of marginalization.

Available literature on these questions is quite mixed, the eight note.

"Investment and investment policy have many critical economic and social dimensions. Trade is only one of them. Other aspects include domestic savings and consumption patterns, finance, technology, ownership of productive and financial assets, implications of the balance of equity holdings between domestic and foreign investors, and within various communities in a country, strategic and development policies at sectoral level (agriculture, industry, commerce, services, employment, culture etc), macroeconomic policy implications and sustainability of the development process.

"In any consideration of investment policy, primacy has to be given to the link between investment and development as a whole, with the trade aspect constituting one element in this overall development framework and objective. For this reason, there is need for more empirical and objective research and analysis and for a study of these complex relationships in a more relaxed environment where discussion is not constrained by the tensions of possible contractual commitments.

"These should be conducted in a forum which is competent to deal with all these complex questions. The UN Conference on Trade and Development (UNCTAD) has been mandated to study these various aspects of FDI, including the implications for development of a multilateral framework on investment. Not being a contractual organization, and mandated to building inter-governmental consensus (that may lead to rule-making decisions in appropriate fora) on various trade and development issues, UNCTAD is the appropriate venue for study and open discussions, with the help of outside expertise and non-government sectors, including business sectors, of investment, investment policy, relationships of trade and investment and Development.

"In the meantime, it is imperative to avoid unnecessary duplication so that the scarce human and other resources of the WTO and of its members are not overstretched. Moreover, UNCTAD is a universal forum, where all WTO member-governments are represented, as also the non-members of the WTO; and it is open to other inter-governmental and non-governmental bodies that are concerned with various aspects of the investment question. When discussions at UNCTAD on the issue of investment, investment policy and a framework on investment is sufficiently mature, they could serve to provide guidelines for followup in the appropriate fora."

The eight countries point out that the Marrakesh Final Act and the Uruguay Round Agreements have established a balance of rights and obligations among members. The WTO now has rules to deal with "some limited aspects of investments: those having a direct and distorting effect on trade and causing material injury to trading partners."

The Agreement on Trade-Related Investment Measures (TRIMs), has a built-in agenda for a review of the operations of the Agreement by the Council for Trade in Goods (CTG) and, as appropriate, to propose amendments to the text. This review will depend on experience gained and difficulties that may arise in the process of implementation. In the course of the review of the operation of the Agreement, the CTG is to consider whether the TRIMs should be complemented with provisions on investment policy and competition policy.

"These provisions were decided after long negotiations on the scope of the TRIMs Agreement, and reflect the careful balance that was achieved in the Uruguay Round. We are therefore of the view that any review of the adequacy of the treatment of trade and investment in the WTO should take place only in the course of the review of the TRIMs at the appropriate time. Any attempt to introduce the issue through a separate track, and use it to revive old demands that were given up to establish a balance of rights and obligations and conclude the Uruguay Round negotiations, would upset this balance."

"The first WTO Ministerial Conference, is not an appropriate place or time for introducing the issue of trade and investment. Attempts to do so would be contentious, and would distract and detract from the many important items already on the agenda, including a review and implementation of the Uruguay Round Agreements, the unfinished business, trade and environment, and other issues already on the WTO agenda."

"It is obvious," the joint statement of the eight said, "that there is no consensus in the WTO on this issue. Reservations, uncertainties or outright difficulties on the part of some delegations have already been registered on this issue. Given the lack of consensus, we urge there should not be any further consideration of this issue within the WTO, until the processes envisaged in UNCTAD is sufficiently mature. We fear that otherwise greater controversies may arise with adverse and undesirable spillover effects on other issues on which members have worked very hard and on which more time needs to be spent. These other issues are more immediately relevant to members of the trade organization and more in line with the objectives of the Singapore Ministerial meeting.

Therefore, in the very short time still available, preparations for the SMC should focus on the many real and serious problems and issues confronting the developing countries, and in particular the least developed among them, especially review of the problems of implementation of the Uruguay Round Agreement and problems of adjustment in meeting the obligations. The SMC would be a great success if it could do a thorough job of this review in order to put the enormous task of implementing the Uruguay Round agreements on a proper track."

The statement added. "In taking this position, we would like to reiterate that our countries are not against foreign direct investment. On the contrary, a very high national priority has been set in our countries for attracting FDI. There is however no contradiction between our countries' need for FDI for development objectives, and our desire to treat the issue of trade and investment in an appropriate manner. This needs to be reiterated to avoid any misunderstandings that countries that are cautious over a multilateral trade and investment process in the WTO at this time are somehow against FDI inflows. We hope this paper will contribute to the avoidance of any misunderstanding or misrepresetation of our position on this matter."