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Columbia FDI Perspectives
Perspectives on topical foreign direct investment issues
No. 224 April 23, 2018
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Marion A. Creach ([log in to unmask])
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Investment facilitation has been gaining in popularity in recent years’ policy debates, surely inspired by the successful adoption of the WTO’s Trade Facilitation Agreement. “Investment facilitation” refers to actions, mainly by host countries, to make legal and administrative rules and procedures more transparent, predictable and efficient. Home countries can support investment facilitation by, e.g., assisting host countries to implement the necessary reforms. Considering that international investment policy-making faced severe criticism in recent years, proponents stress that investment facilitation is not about market access, investment protection or investor-state dispute settlement.[1] As all countries want to attract foreign investment, some argue that investment facilitation should be a “no-brainer.”[2]
The idea of an investment-facilitation agreement was born in the discussions of the E15 initiative in 2015.[3] During the Chinese presidency, the G20 ventured into new areas by advancing a comprehensive work agenda on investment.[4] Although the adoption of the nine “Guiding Principles for Global Investment Policymaking” received more attention at the time, the G20 also encouraged international organizations such as UNCTAD, the World Bank, the OECD, and the WTO to work on investment facilitation to inform future G20 discussions.
The discussions were continued during the German G20 presidency, aiming to agree on a non-binding investment-facilitation package that included the fostering of open and transparent business climates and actions to promote inclusive economic growth. However, negotiations collapsed at the last minute, due to the opposition of India, South Africa and, unexpectedly, the US. The final G20 Hamburg Summit declaration included only a vague reference: “We will seek to identify strategies to facilitate and retain foreign direct investment.”[5] Investment facilitation is not part of the agenda of the 2018 Argentinian G20 presidency.
The WTO has a troubled history with attempts to negotiate investment rules. Rules on trade-related investment measures and services trade (covering also commercial presence) were agreed upon in the Uruguay Round. Attempts, however, to advance an investment agenda through a dedicated WTO working group ended during the 2003 ministerial conference in Cancun in a spat between emerging and advanced economies.
It is interesting, therefore, that recent attempts to initiate WTO rule-making on investment facilitation are mainly driven by emerging economies, including China and Brazil. In the run up to the 11th WTO Ministerial Conference in Buenos Aires (December 2017), a number of emerging economies tabled proposals to inform the other members of an informal process on investment facilitation that they wanted to launch. Investment facilitation was not part of the official negotiation agenda in Buenos Aires. This did not prevent a group of 41 countries and the European Union from adopting, on the margins of the Conference, a Joint Ministerial Statement on Investment Facilitation for Development that called for the start of “structured discussions with the aim of developing a multilateral framework on investment facilitation.”[6] Subsequently, Brazil circulated an illustrative text to facilitate discussion on the issue,[7] and 86 delegations met for a first structured dialogue on investment facilitation on March 13, 2018 in Geneva. Recent media reports indicate that India is rethinking its opposition to multilateral talks on investment facilitation.[8]
There are three scenarios how the international investment-facilitation discussion can move forward:
- Countries can unilaterally reform their domestic regulatory environments for foreign investment. These national actions, however, could be encouraged and guided by a set of binding international rules that may be necessary to catalyze deep-rooted national reforms.
- Countries interested in developing international investment-facilitation rules can pursue a plurilateral agreement. Given the momentum that has been building up, this approach seems to be the most promising—at least for now. Ideally, such a plurilateral approach would be housed within the WTO and its rules would apply on a most-favored-nation basis.
- Investment-facilitation rules can be negotiated multilaterally, among all WTO members. A multilateral framework is preferable to reconcile interests. It would provide better possibilities to discuss the responsibilities of home countries of foreign investors, and, similar to the Trade Facilitation Agreement, it would allow linking the implementation of rules with provisions on capacity building.
International investment-facilitation discussions have been dynamic since the idea was proposed by a group of experts in 2015. This shows, contrary to popular belief, that WTO members can act swiftly if a topic is ripe for action. However, the unexpected difficulties encountered in getting the trade facilitation agreement done should serve as a reminder that, even when it comes to no-brainers, anything can happen in multilateral negotiations.
* The Columbia FDI Perspectives are a forum for public debate. The views expressed by the author(s) do not reflect the opinions of CCSI or Columbia University or our partners and supporters. Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed series.
** Axel Berger ([log in to unmask]) is a Senior Researcher at the German Development Institute/Deutsches
Institut für Entwicklungspolitik (DIE). The author is grateful to Michael Gestrin, Alejandro Jara and Rashmi Jose for their helpful peer reviews.
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The material in this Perspective may be reprinted if accompanied by the following acknowledgment: “Axel Berger, ‘What’s next for the investment facilitation agenda?’ Columbia FDI Perspectives, No. 224, April 23, 2018. Reprinted with permission from the Columbia Center on Sustainable Investment (www.ccsi.columbia.edu).” A copy should kindly be sent to the Columbia Center on Sustainable Investment at [log in to unmask].
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For further information, including information regarding submission to the Perspectives, please contact: Columbia Center on Sustainable Investment, Marion A. Creach, [log in to unmask].
- No. 223, David Chriki, “Investment arbitration liability insurance: a possible solution for concerns of a regulatory chill?” April 9, 2018.
- No. 222, Makane Moïse Mbengue, “Facilitating investment for sustainable development: it matters for Africa,” March 26, 2018.
- No. 221, Karl P. Sauvant and Howard Mann, “Sustainable FDI for sustainable development,” March 12, 2018.
All previous FDI Perspectives are available at http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/.
Other relevant CCSI news and announcements
- Save the Date: September 27-28, 2018: This year, CCSI’s Annual Columbia International Investment Conference (CIIC) is on “Multinationals in the Age of Sustainable Development: New Thinking on the Role of International Investment Agreements.” The Conference, taking place alongside the 73rd Session of the UN General Assembly in New York, will build on a multi-year effort to identify guiding principles and practical approaches for aligning international investment treaties with the Sustainable Development Goals (SDGs). Additional information will be posted shortly on our website here.
- CCSI is still accepting applications for our upcoming executive training: Investment Treaties and Arbitration for Government Officials (July 30-August 9, 2018). The program is designed to equip participants with the necessary skills, analytical tools, and frameworks to address relevant challenges and opportunities, and to encourage a rich dialogue about best practices from around the globe. More information about the training, including the brochure and application, is available at the link above.
- CCSI has released its 2016-2017 Annual Report. The full report is available here.
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Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
Ph: (212) 854-0689
Fax: (212) 854-7946
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