China-led proposal on investment facilitation has systemic concerns for WTO, say experts

They said that the proposal talks about facilitating investments in the WTO member countries, but there is mixed evidence that such agreements help attract investors.
Last Updated 22 February 2024, 07:58 IST

New Delhi: The attempt of a group of countries led by China to integrate a proposal on investment facilitation into the World Trade Organisation has systemic concerns for the WTO and it would impact developing nations in pursuing their interest in future, experts say.

They said that the proposal talks about facilitating investments in the WTO member countries, but there is mixed evidence that such agreements help attract investors.

The concerns of the experts on the issue assumes significance as a China-led group of 130 countries are pushing to get an approval on their Investment Facilitation for Development (IFD) proposal in the WTO's 13th ministerial conference (MC) this month.

The four-day meeting of trade ministers of 164-member global trade rule making body WTO begins on February 26 at Abu Dhabi, UAE. MC is the highest decision making body of the WTO.

The experts also said that this is a proposal of a group of countries, which is called a plurilateral agreement or joint statement initiative, which is not accepted by a number of nations including India and South Africa.

India has stated that this agenda falls outside the mandate of the global trade body.

The group wants to bring the proposal through annexure-4 of the WTO under which the proposal would be binding on only the signatory members and not on those who are opposed to it.

India should oppose in that case also as it will gradually normalise plurilateral pacts and that will "really erode the influence of developing countries to advance their interest in the future", Abhijit Das, an expert on international trade and former head, Centre for WTO Studies, said.

"It is a systemic concern for the WTO and it has large systemic implications for the organisation," Das said, adding such agreements are trying to get into the WTO's system which functions on "consensus" based decisions and there is no consensus among member countries to discuss the proposal.

The WTO rules clearly states that plurilateral pacts can be integrated into WTO but only by consensus, he said.

"There are very good reasons to oppose the move of the group," Das added.

Sharing similar views, Biswajit Dhar, former professor of Jawaharlal Nehru University (JNU), said that the IFD has several issues which would have implications on developing countries like India.

"We should definitely oppose the IFD. China has a major interest in that. The agreement will restrict our policy space on foreign direct investments," Dhar said, adding, "this is quite detrimental to India's interest".

India's concern emanates from the fact that proponents of IFD should not be attempting to bring a non-mandated, non-multilateral issue to the formal process in the WTO, another expert said.

Such an attempt will be in violation of the WTO framework and fundamental rule of consensus-based decision-making.

There has not been any ministerial mandate for negotiations on investment-related matters.

Ranja Sengupta, Senior Researcher and Coordinator of the Trade Programme of Third World Network (TWN), said that India, along with South Africa, has been right to raise objections to the attempted coup at the General Council to get the IFD joint statement initiative (JSI) adopted as a plurilateral agreement in MC13.

"These JSI processes are illegal and if plurilaterals can be pushed in at will, very soon the WTO will cease to be a multilateral institution. India should hold onto its position and uphold the sanctity of WTO processes," she said

The IFD was first mooted in 2017 by China and other countries that depend heavily on Chinese investments, and countries with sovereign wealth funds are party to that pact.

Among major countries, the US is also sitting out of the agreement. Sri Lanka and Pakistan are also not part of it.

(Published 22 February 2024, 07:58 IST)

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