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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 291  November 16, 2020
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Riccardo Loschi ([log in to unmask])
*Investment facilitation and the GATS: Do overlaps matter?*
* <#m_-4666022797068798280_x__edn1>
Rudolf Adlung, Pierre Sauvé and Sherry Stephenson**

Discussions on investment facilitation have generated more traction than
any other recent WTO initiative. Launched by a Joint Ministerial Statement
(JMS) at the WTO’s 2017 Ministerial Conference
they currently involve over 100 WTO members. They wade into new territory
by developing investment facilitation (IF) disciplines applicable to all
sectors. The discussions overlap with two ongoing negotiations on the
domestic regulation of service sectors: one proceeds from a mandate
enshrined in Article VI:4
of the General Agreement on Trade in Services (GATS); the second flows from
endorsed by some 50 WTO members.

The broad modal definition of services trade includes suppliers’ commercial
presence (Mode 3—akin to FDI) in host countries. It is the most important
means of supplying services internationally, accounting for some two-thirds
of world FDI stocks and flows. While WTO members often scheduled services
commitments at low levels of market opening in the Uruguay Round, their
propensity to undertake commercially meaningful Mode 3 commitments on
market access and/or national treatment is generally high. This reflects
positive attitudes toward the contribution of services FDI to economic

GATS commitments trigger follow-up obligations, concerning, *inter alia*,
the administration of measures in a reasonable, objective and impartial
manner and the observance of regulatory disciplines, pending the outcome of
the Article VI:4 negotiations. Focusing on licensing and qualification
requirements, technical standards and the like, these negotiations have
lingered inconclusively for 25 years. Sparked by recent developments, they
have, however, attracted renewed interest in an IF context.

Navigating the interaction of IF disciplines and domestic regulation
requirements is a challenge. Issues include admission criteria and
processes, license fees, timeframes, transparency and notification
requirements, opportunities to comment on proposed measures, and the
administrative review of decisions. Responsibilities at the national level
tend to be scattered across various ministries and agencies that are not
necessarily used to coordination and cooperation. This, in turn, raises the
risk of substantive and procedural overlaps that, compounded by
uncertainties surrounding the respective mandates,[1]
<#m_-4666022797068798280_x__edn3> might give rise to inconsistencies.

Most conflicts leading to FDI withdrawals stem from alleged adverse
regulatory changes, breaches of contract, *de facto* expropriations,
transfer and convertibility restrictions, and more recently from lack of
transparency and predictability in dealing with public agencies and delays
in obtaining the necessary government permits to start or operate

There are several areas of overlap between the IF and domestic regulation
discussions. For instance, GATS Article III obligations on enquiry points
already extend to investment in services. Yet, similar provisions are
included in the draft Reference Paper on Domestic Regulation Disciplines
for Services and the draft IF text. However similar, parallel sets of
administrative procedures and notification obligations would entail costly
duplication and confuse services exporters and investors. Similar overlaps
could arise in such other areas as the substantive criteria to be used to
determine whether qualification and licensing requirements and technical
standards for investors are unnecessarily burdensome. Conflicts could arise
if IF disciplines defining “more burdensome than necessary” differ from
GATS language.

These examples underscore the critical importance of coordination among
parallel negotiating efforts and the need for a continuous review of
emerging legal texts. No such coordination currently exists. Doing so now
would lessen the need for future legal revisions and potential delays in
negotiated outcomes.

Beyond this coordination challenge, the relationship between these
negotiations raises important policy questions worth pondering:

*A variable geometry of hard and soft law*. While key GATS Article VI
obligations apply solely to sectors in which specific commitments are
undertaken, prospective IF disciplines apply to investment in all sectors,
regardless of GATS commitments. The coexistence of two agreements with
differing scope might produce a variable geometry of relevant obligations.
Meanwhile, domestic regulation disciplines are largely framed in hortatory
terms, encouraging best-practice compliance by members. Provisions covering
the same or similar issues could thus only be enforceable under an IF

*Free riding*. Will IF-agreement signatories extend treaty privileges on an
unreciprocated most-favored-nation (MFN) basis to non-signatories (assuming
it is a plurilateral agreement)? Experience with the WTO’s Trade
Facilitation Agreement suggests that free-riding concerns are low when
market-access issues are not involved. Absent liberalizing content, IF
disciplines are tantamount to unilateral measures enhancing host countries’
investment climate. But other considerations may arise, e.g., concerning
public services, data localization requirements and state-owned enterprises.

A final, critical, question is whether an IF agreement will need the
endorsement of all WTO members. Given the* de novo* nature of the
discussions—in particular the extension of Mode 3-type disciplines to
non-service sectors—there is virtually no other option. The 2015 Nairobi
Ministerial Conference
provides that “*[a]**ny decision to launch negotiations multilaterally on
such issues [i.e., non-Doha Development Agenda issues] would need to be
agreed by all Members*.” Accordingly, non-participants could yet exert
significant leverage, notably by calling for concessions on unrelated
issues, such as those listed above. Things are less problematic regarding
domestic regulation, where participants can undertake additional
commitments (via Article XVIII) within the agreement's existing structure,
as was done in the Reference Paper on Basic Telecommunications

* <#m_-4666022797068798280_x__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
** <#m_-4666022797068798280_x__ednref2> Rudolf Adlung (
[log in to unmask]) is a former Counsellor in the Trade in Services
Division of the World Trade Organization; Pierre Sauvé ([log in to unmask])
is a Senior Trade Specialist in the World Bank Group’s Macroeconomics,
Trade and Investment Global Practice; Sherry Stephenson (
[log in to unmask]) is a member of the Services Network of the
Pacific Economic Cooperation Council. The views expressed in this note are
those of its authors and should not be attributed to the World Bank Group
or its shareholders. The authors wish to thank Roberto Echandi for the
valuable comments and drafting suggestions as well as Julia Calvert, Juan
Marchetti and an anonymous peer reviewer for their helpful peer reviews.
[1] <#m_-4666022797068798280_x__ednref3> While the JMS on IF explicitly
excludes market access, investment protection and investor-state dispute
settlement from the discussions, it remains silent on the (remaining) role
of national treatment.
*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Rudolf Adlung, Pierre Sauvé and Sherry
Stephenson, ‘Investment facilitation and the GATS: Do overlaps matter?,’
Columbia FDI Perspectives, No. 291, November 16, 2020. 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,
Riccardo Loschi, [log in to unmask]

*Most recent Columbia FDI Perspectives*

   - No. 290, Roberto Echandi, ‘The blind side of international investment
   law and policy: The need for investor-state conflict-management mechanisms
   fostering investment retention and expansion,’ November 2, 2020
   - No. 289, Maria Adele Carrai, ‘Outward FDI under China’s Belt and Road
   Initiative: Between regulation and adaption,’ October 19, 2020
   - No. 288, Ivan Anton Nimac, ‘COVID-19 and FDI: How should governments
   respond?,’ October 5, 2020

*All previous FDI Perspectives are available at *
*. *

*Other relevant CCSI news and announcements*

   - CCSI’s 15th annual International Investment Law and Policy Speaker
   will be virtual this fall! The series will focus on the perspective of
   policy makers on central topics in investment law and policy.* Dec 1:
   Chantal Ononaiwu*, Trade Policy & Legal Specialist, Office of Trade
   Negotiations (OTN), CARICOM Secretariat; *Dec 4: Heidi Hautala*, MEP and
   Vice-President of the European Parliament; and* Dec 7: H.E. Ambassador
   Albert Muchanga*, Commissioner, Department of Trade and Industry,
   African Union Commission. Each session will allow for Q&A and discussion
   with the speakers. The series is co-sponsored by Arnold & Porter. *Please
   visit our website
   the schedule and to register.*
   - CCSI announces a *call for papers* for the 2020 edition of
   the Yearbook on International Investment Law and Policy. Original
   contributions to be considered for publication in the Yearbook will be
   accepted on a rolling basis until *February 28, 2021.* More information
   can be found here
   - *CCSI is accepting applications until March 31, 2021* for its
   Executive Training on Sustainable Investments in Agriculture, which will
   take place online June 15-25, 2021. Please visit our website
   for more information, including on how to apply.

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
*Copyright © 2020 Columbia Center on Sustainable Investment (CCSI), All
rights reserved.*
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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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"Note on the Costs and Financing of an Advisory Centre on International
Investment Law", "Insulating a WTO Investment Facilitation Framework from
ISDS", "A G20 Facility to Rekindle FDI Flows", "Enabling the Full
Participation of Developing Countries in Negotiating a WTO Investment
Facilitation Framework", "Advancing Sustainable Development by Facilitating
Sustainable FDI, Promoting CSR, Designating Recognized Sustainable
Investors, and Giving Home Countries a Role", "Making FDI more
Sustainable", "An International Framework to Discipline Outward FDI
Incentives?", "The Case for an Advisory Centre on International Investment
Law", "An Advisory Centre on International Investment Law: Key Features",
"The Potential Value-added of a Multilateral Framework on Investment
Facilitation for Development", "International Investment Facilitation: By
Whom and for What?" are available at .

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