No case for a multilateral framework
Is there the need for a multilateral framework to govern investments?
Absolutely not. Firstly, foreign direct investments (fdi) may crowd out domestic investments and leave the host country worse off. Moreover, if the agreements were the major factor for fdi, then China should not be receiving any fdi. It does not even have a bilateral treaty with the us on investment and yet the us is its most important source of investment. On the other hand, sub-Saharan African countries have done everything that was asked of them by the International Monetary Fund, the World Bank (wb) and the us but yet they receive no fdi. It is the macroeconomic potential and prevalent conditions, such as the purchasing power, market size and infrastructure, in a country that attracts fdi.
Besides, the whole agenda put forward by developed countries takes the investor's point of view. The issue of both the investor's and home government's obligations was put on the table for the first time by India, China and a few other countries in the Working Group on the Relationship between Trade and Investment in the World Trade Organization (wto) in November 2002. But, developed countries are resisting this proposal.
But, if such a balanced agreement were to evolve, would you be in favour of a multilateral framework?
Prima facie, there is no case for a multilateral agreement. If one wants the protection of host governments, a multilateral framework is a very expensive way of getting it. Currently, there are various organisations and institutions, which provide both a framework for investor protection and the freedom to host governments to exercise whatever policy they feel is in their interest. Even officials of the eu, the strongest proponent of a multilateral framework, are unable to cite any case, which cannot be handled by the existing mechanisms.
Wouldn't developing countries be in a better bargaining position collectively through a multilateral framework rather than individually negotiate bilateral agreements with developed countries?
There is a standard pattern of bilateral investment treaties, which basically says investments that are allowed by the country will receive protection and equal treatment. They are also fairly balanced as they provide the flexibility needed by developing countries. The host country's policy framework is not touched. At the same time, the investor gets assurances of protection by way of compensation in the event of his/her assets being taken over, the repatriation of his/her profits and the freedom to sell his/her assets and take the money back if it is not doing well.
The issue is already in the wto. How do you think India should tackle this issue, not just within this forum but also within the broader international political framework?
In the wto, it is a matter of coalition building. There has been great resistance in the developing world on bringing issues related to investments into wto negotiations. But these issues are already in this forum, albeit in a limited way, in the form of the agreements on Trade Related Investment Measures and the Global Agreement on Trade in Services. Countries like India, that are taking a position against such a framework, need to work this matter out with other developing countries before the ministerial conference in Cancun, Mexico. This meeting is very critical because the decision whether to have a negotiating mandate on multilateral agreements will be taken here.
Should a coalition of developing countries, perhaps led by India, act more proactively by taking the issue out of the WTO and introduce a more balanced proposal in the UN?
It is premature right now because it is the developed countries who have raised demands on multiateral agreements in the wto. So, we first have to ensure that these demands are stalled in the wto and consequently taken out of this forum. We will then have to see that the pros and cons are discussed in appropriate fora such as the un.
Do you believe it is realistically possible to take the issue out of the wto?
If you read the mandate of Doha on investment, you will see that it is subject to explicit consensus, which means that even one country can stop it. So, it is quite possible.
Related Content
- Building disaster resilience: a study of disaster events and financial lending streams
- Building disaster resilience: a study of disaster events and financial lending streams
- Facilitating BioTrade in a challenging access and benefit sharing environment
- Budget 2013-2014: speech of P. Chidambaram, Minister of Finance
- Alternative architecture for climate change: Major economies
- "We need to think about all of us as being citizens of the same world"