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From: Karl Sauvant <[log in to unmask]>
Date: Mon, Dec 16, 2019 at 5:06 PM
Subject: Another brick in the wall: the EU-India investment-facilitation
mechanism (Columbia FDI Perspective No 267)

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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 267  December 16, 2019
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Alexa Busser ([log in to unmask])
*Another brick in the wall: the EU-India investment-facilitation mechanism*
* <#m_6324030568017623389_m_-41282713691748333__edn1>
Maria Laura Marceddu** <#m_6324030568017623389_m_-41282713691748333__edn2>

Almost unnoticed in the discussions on investment facilitation, the
EU-India investment-facilitation mechanism (IFM) was officially launched in
July 2017. Moved by a reciprocal interest in re-launching negotiations for
a mutually beneficial free trade agreement (the negotiation of which had
stalled after 12 negotiating rounds and only recently resumed), India and
the EU opted for a practical approach, implementing a non-WTO related
mechanism. The IFM does not concern attracting potential investors that
have not yet selected an investment destination (investment promotion), but
starts at the pre-establishment phase, when an investor shows interest in a
location, and touches upon the policy framework. The EU-India IFM is a
platform to address issues faced by existing EU investors in India—and to
some extent affects companies that consider investing in India, as some of
the IFM’s policies may discourage new investments.

India is the fourth largest services exporter to the EU, and the sixth
largest destination for EU services exports.[1]
<#m_6324030568017623389_m_-41282713691748333__edn3> The IFM builds on the
outcome of the 13th EU-India summit
held in Brussels in March 2016, and is expected to ensure a more
predictable business environment for EU investors, seeking to identify and
solve problems faced by investors regarding operations in the country. Invest
is the country’s official investment promotion and facilitation agency. It
serves both as a contact point, to which EU investors can direct their
queries, and as a single-window entry point for EU investors that need
assistance with their operations at the central or state level.

The value-added of an instrument such as the EU-India
investment-facilitation mechanism lies in its simplicity and
practicability. Like the WTO structured discussions on investment
facilitation, the EU-India mechanism focuses on transparency, streamlining
procedures and eliminating bottlenecks for foreign investors, also
echoing India’s
proposal for a trade-facilitation agreement for services
circulated among WTO members in July 2017. Although excluded from the
discussions on investment facilitation, market access remains one of the
most sensitive issues for India, which strongly opposed a multilateral
agreement that encompasses market access as it would amount to surrendering
policy space.[2] <#m_6324030568017623389_m_-41282713691748333__edn4>
India’s position, however, appears more nuanced within the bilateral
context. The EU mechanism addresses issues that implicate market access,
for instance, repeated and sudden customs duties in the information and
communications technology or automotive industries, which increase the
costs of inputs of companies that have invested in India and thus make the
business environment unpredictable.

Almost two years down the road, the IFM is working with mixed results. FDI
from the EU decreased in 2017-2018, but over the same period services
exports increased modestly for the EU (+0.1 million EUR) and more
remarkably for India (+2.2 million EUR), in line with India's current
policies to favor local production at the expense of imports. Most of the
problems faced by EU investors so far have been policy and regulatory
issues, not always straightforwardly manageable and/or solvable by the IFM.
As a consequence, the more company-specific issues have been left to be
dealt with at the bilateral level between India and the EU member state
concerned. These complications notwithstanding, the EU expects that, by
raising problematic issues continuously through the IFM, some improvements
in the ease of doing business will come eventually.

What can be learned from this experiment? Bilateral initiatives, like the
EU-India mechanism, should be seen as bricks for building and shaping the
structure of a multilateral investment-facilitation framework. Bilateralism
offers insights on how public policies could evolve, and it is instrumental
for understanding countries’ positions and strategies. The IFM revealed
that India is more lenient about sensitive issues like market access
bilaterally rather than multilaterally.

Bilateralism, however, enhances the fragmentation of international economic
law, by proceeding in an uncoordinated and piecemeal manner.[3]
<#m_6324030568017623389_m_-41282713691748333__edn5> It exposes countries
(especially least developed countries) to the risk of being left behind
because of their inability to mobilize international support for technical
assistance and capacity building, necessary to effectively attract and
retain investment. Good practices such as transparency and fast-track
procedures can improve domestic institutional frameworks and help attract
FDI. However, it would be unrealistic to expect that such practices would
be implemented unless substantial technical assistance were provided.
Arguably, therefore, least developed countries should be more supportive of
discussions on investment facilitation at the WTO than expect technical
assistance on a bilateral basis.

In the absence of a multilateral investment-facilitation framework,
bilateral initiatives are instrumental for understanding how far countries
are willing to go. But what is achieved bilaterally cannot automatically be
transplanted into a multilateral agreement, unless the level of ambition
remains low. One first step for multilateralists could be to adopt a
flexible approach that leaves states enough autonomy to define policies to
implement commonly agreed principles and that builds upon the sharing of
knowledge and experience of other countries, thus imitating the BRICS’
approach.[4] <#m_6324030568017623389_m_-41282713691748333__edn6> As often
is the case in the multilateral trading system, the higher the ambition,
the harder the negotiations.

* <#m_6324030568017623389_m_-41282713691748333__ednref1> *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.*
** <#m_6324030568017623389_m_-41282713691748333__ednref2> Maria Laura
Marceddu ([log in to unmask]) is teaching fellow at the University of
Edinburgh, visiting lecturer at King’s College London and co-executive
treasurer of the Society of International Economic Law. The author wishes
to thank Federico Ortino, Pietro Ortolani and Markus Wagner for their
comments on an earlier draft, and Marika Jakas, Premila Nazareth and
Kavajlit Singh for their helpful peer reviews.
[1] <#m_6324030568017623389_m_-41282713691748333__ednref3> Eurostat
[2] <#m_6324030568017623389_m_-41282713691748333__ednref4> Subhayan
Chakraborty, “Why India has opposed investment facilitation talks at
WTO,” *Business
Standard*, May 15, 2017
[3] <#m_6324030568017623389_m_-41282713691748333__ednref5> ICTSD, “Crafting
a framework on investment facilitation,” June 2018, p. 11.
[4] <#m_6324030568017623389_m_-41282713691748333__ednref6> Ninth Meeting of
the BRICS Trade Ministers Brasília, 11 November 2019
*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Maria Laura Marceddu, ‘Another brick in the
wall: the EU-India investment-facilitation mechanism,’ Columbia FDI
Perspectives, No. 267, December 16, 2019. Reprinted with permission from
the Columbia Center on Sustainable Investment (***
A copy should kindly be sent to the Columbia Center on Sustainable
Investment at **[log in to unmask]* <[log in to unmask]>*.*

For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Alexa Busser, [log in to unmask]

*Most recent Columbia FDI Perspectives*

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*All previous FDI Perspectives are available at *
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*Other relevant CCSI news and announcements*

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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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*Karl P. Sauvant, PhD*

*Resident Senior Fellow*
*Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
| p: (212) 854 0689 | cell: (646) 724 5600 e: [log in to unmask]
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of FDI Statistics!", and "Towards an Indicative List of FDI Sustainability
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