RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/WGTI/M/18 
15 August 2002 
 (02-4444) 
Working Group on the Relationship 
between Trade and Investment  
 
   
REPORT ON THE MEETING HE LD ON 3-5 JULY 2002 
 
Note by the Secretariat
 
 
 
1. The Working Group on the Relationship between Trade and Investment met on 3 to 
5 July 2002 under the Chairmanship of Ambassador de Seixas Corrêa (Brazil).  The Working Group adopted the agenda contained in WTO/AIR/1840. 
2. The Chairman
 stated that the purpose of the present meeting was three-fold:  (i) to receive 
an update from the Secretariat and other agencies on technical assistance, and to give delegations 
an opportunity to make any comments they might wi sh on the subject;  (ii) to begin consideration 
of the issues of "development provisions", "non-discrimination", and "modalities for pre-
establishment commitments based on a GATS-ty pe, positive list approach", as identified in 
paragraph 22 of the Doha Ministerial Declaratio n, and to continue discussion on other issues 
identified in paragraph 22, notably "scope and definition" and "transparency";  and (iii) to give 
the Working Group – if it wished – an opportunity to  continue discussion of issues that had been 
raised in the course of the Group's work so far.   
A. PARAGRAPH 21 OF THE DOHA MINISTERIAL DECLARATION  
(i) Technical assistance and capacity-building 
3. The Secretariat  introduced the second report on investment-related technical assistance 
and capacity-building, following on from the first report it had presented at the Working Group's meeting in April.  It noted that the activities to date formed an integral part of the WTO's overall 
technical assistance plan - as outlined in WT/C OMTD/W/95/Rev.3 - and that this programme had 
been drawn up in response to requests from interested Members.  It also reaffirmed that it was 
placing the highest priority on regional events, in particular on training courses for negotiators 
and regional policy seminars, so that the maximum number of Members and observers could be included.  Furthermore, the Secretariat was making every effort to leverage the strengths and 
comparative advantages of other international organizations by organizing the largest possible 
number of events in cooperation with UNCTAD .  Finally, where possible, the Secretariat was 
attempting to organize national seminars in conjun ction with regional seminars in order to better 
focus scarce resources.  
4. Since mid-April, the Secretaria t had participated in the following regional activities:  a 
policy seminar for Asian countries, in cooperat ion with UNCTAD, in Singapore on 6-8 May 
(participation of 22 Members and 3 observer countries);  a policy seminar for francophone African countries, again in cooperation with UNCTAD, held in Gabon on 19-21 June WT/WGTI/M/18 
Page 2   (participation of 27 Members, including a representative from Haiti);  a policy seminar held in Thailand on 27 June (participation included seni or officials from Latin American, Asian, African 
and Caribbean developing countries);  an intensive training seminar for francophone African countries, organized by UNCTAD, held in Egypt from 27 May to 5 June, as well as the OECD/APEC Global Trade Forum on the Develop ment Dimensions of the Singapore Issues, 
which was held in Hong Kong, China on 19-20 June.  In addition, the Secretariat had also participated in the following national seminars:  China on 13-14 May; Indonesia on 16-17 May;  and Thailand on 28 June.  The programme of activ ities for the remainder of the year included 
regional seminars for Latin America, Asia and Af rica, as well as various national seminars - the 
details of which would be outlined by the observer representative of UNCTAD. 
5. The Secretariat had also held its first Workshop for English-speaking Geneva-based 
officials on 2 July, and this exercise would be repeated on 13 September, for French-speaking 
delegates, and on 13 November for Spanish-speaking delegates.  An additional workshop for 
English-speaking delegates would be held in early 2003 on the basis of the scheduled activities of the Working Group.  It was also the Secretariat's intention to organize a workshop in 2003 geared 
to countries in the process of accession, and to delegations which had not been able to participate 
to date in these exercises.  The list of part icipating Members for each event was included in 
WT/WGTI/INF/2.  From past experience, t hese events worked best with a maximum of 
30 participants, and therefore special account had been taken of factors such as the working language of the workshop, as well as the special needs of developing and least-developed countries (LDCs).   
6. The Secretariat had already made significant pr ogress in planning its technical assistance 
activities for 2003 - including regional events for countries of the Caribbean, the Middle East, and Asia, as well as for countries in transition - and it urged delegations who had not already done so 
to make their technical assistance needs known to the Secretariat as early as possible. 
7. In response to questions raised at the last meeting of the Working Group regarding the 
evaluation of technical assistance activities, the Secretariat said that at each seminar participants 
were asked to complete an evaluation form, and that these were carefully analyzed internally with 
a view to making necessary changes or corrections to the future programme of activities.   
8. The observer representative of UNCTAD
 outlined how UNCTAD had begun 
implementing the post-Doha technical assistance programme, especially those projects that were 
jointly organized with the WTO, as well as its plans for future work.  Preparations were underway 
for the intensive training courses for Latin America and the Caribbean, scheduled for 7-18 October this year to take place in Peru, and for Asia and the Pacific, scheduled for 25 November to 7 December this year to take place in India.  Planning was also advanced with regard to the regional seminars for Latin America and the Caribbean, to take place in October in Costa Rica, and for Anglophone Africa, to take pl ace in December in Bots wana.  Notifications for 
these events would be sent out shortly.  In additio n, UNCTAD was in the process of setting up 
joint national seminars for Colombia, Guatemal a, Sri Lanka, Tunisia and Venezuela, and the 
workshops for Geneva-based delegates – the first one of which took place on 2 July – were also 
in the pipeline.  Finally, several LDC member  countries had requested UNCTAD to organize 
another round of bilateral investment treaty (BIT) negotiations between LDCs and capital-
exporting countries.  This round was scheduled to take place in Geneva from 11-20 November of 
this year.  In all, it was UNCTAD's impression that significant progress had been made in 
implementing the joint technical assistance work and that, as far as these joint activities were 
concerned, the programme was on schedule.  WT/WGTI/M/18 
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  9. There was one caveat, however.  He had made a statement as regards UNCTAD's 
financial situation at the meeting of the Working Group in April, but unfortunately, since then, 
little had happened in terms of UNCTAD actually receiving the required extra-budgetary funds.  
However, he was pleased to report that progress h ad been made informally and that, as far as he 
understood, several donor countries were by now considering making funds available to 
UNCTAD to pursue this programme of work.  He also understood that administrative issues 
concerning cooperation with the WTO were progressing satisfactorily.  
10. Nevertheless, the issue remained that UNCTAD would be in a difficult position to 
participate in a good part of the future work in th is area unless the resources to do so were made 
available as soon as possible.  This held true also for the additional activities arising out of 
UNCTAD's post-Doha consultations with all delegations in Geneva, as well as the WTO Secretariat.  He referred in particular to the activities related to policy analysis and policy 
development, and to institutional capacity-building.  The need for these activities had been emphasized repeatedly, not the least also in the context of recent joint workshops and seminars in Asia and Africa, but UNCTAD had made little progre ss in initiating this work.  He noted that 
UNCTAD would appreciate if financi al support for these activities could be forthcoming as well. 
11. Finally, he mentioned the outcome of the recent UNCTAD Expert Group Meeting on 
"Experiences with bilateral and regional approac hes to multilateral cooperation in the area of 
long-term cross-border investment, particularly foreign direct investment".  The meeting, which 
took place from 12-14 June in Geneva, revealed that experts could agree on what elements form 
common ground in the formulation of international investment agreements (IIAs) (e.g. certain 
treatment standards), which elements were subject  to divergences (e.g. the extension of treatment 
provisions to the pre-entry stage and the treatment of performance requirements), and in which manner the development dimension could be effectively addressed in IIAs (e.g. through flexible 
approaches in treaty provisions, the application of  special and differential treatment to IIAs, 
objective criteria for transition periods, etc.).   The discussion yielded a checklist for future 
reference in the form of a chair's summary of the salient points of the discussion that could be 
taken into account when discussing and/or negotiating international investment rules, be it at the bilateral, regional or multilateral level.  C opies of the chairs' summary were available to 
delegations.  He noted that materials produced by UNCTAD in this area of work, in particular the 
"pink papers" that appeared relevant to the Working Group's discussion on National Treatment , 
Most-Favoured-Nation Treatment , Fair and Equitable Treatment , and Flexibility for 
Development  had been made available for the present meet ing.  In addition, delegations had been 
given advance copies of the most recent editions of UNCTAD's Compendium of International 
Investment Agreements.  
12. The representative of Singapore
 noted that his country had recently hosted a regional 
investment seminar - from 6-8 May - pursuant to par agraph 21 of the Doha Declaration.  The title 
of the seminar was "An Evaluation of the Implications of Closer Multilateral Cooperation in the 
Area of Long-Term Cross-Border Investment, Pa rticularly Foreign Direct Investment".  The 
seminar had been financed by Singapore, in coll aboration with the WTO, under the Singapore-
WTO Third Country Training Programme, and had also been carried out jointly with UNCTAD.  
The seminar marked the sixth training programme of Singapore's partnership with the WTO since 
it had begun in 1996.  A total of 93 officials had participated in the last five joint training 
programmes. On this most recent occasion, 26 senior officials from 22 WTO Members and 
countries in accession from the Asia-Pacific region participated.  The seminar attracted 
senior-level officials from Finance, Trade and For eign Ministries, and he noted that the seminar 
had gone well in terms of the active involvement and interests of participants.  The lecturers were WT/WGTI/M/18 
Page 4   able to cover the whole Doha Agenda on Investment in two and a half days, and went into considerable depth on many of the difficult issues.  His delegation believed that the participants 
valued the opportunity to learn more about the post-Doha WTO Work programme on trade and 
investment and to discuss its implications fo r their development policies and objectives.  The 
seminar had been timely in view of the mand ate from Ministers in Doha.  Ministers had 
recognized the needs of developing and least-developed countries for enhanced support for technical assistance and capacity-building in the area  of investment, and they had instructed that 
the WTO work in cooperation with other relevant intergovernmental organizations, including UNCTAD, to provide strengthened and adequately resourced assistance to respond to these 
needs.  His delegation believed that the seminar had contributed towards meeting these goals. 
13. The representative of China
 observed that as a new member of the WTO, a developing 
country, and a major host country for foreign direct investment (FDI), China had a major stake in 
the discussions of the Working Group, especially regarding technical assistance.  He reported that 
the technical assistance programme carried out in China on 13-14 May involved some 30 officials responsible for the regulation of foreign investment , including representatives of the Ministry of 
Foreign Trade and Economic Cooperation, the State Development and Planning Commission, the 
State Economic and Trade Commission, the Nati onal Taxation Bureau, and the State Foreign 
Exchange Regulatory Administration.  In addition to the seminar itself, participants were given 
the opportunity to exchange views with investment experts from the WTO and UNCTAD on a range of issues - including the relationship betw een bilateral, regional and multilateral investment 
arrangements.  As part of the programme, a special roundtable discussion was organized focusing 
on the implication of a possible multilateral fram ework on investment for China.  His delegation 
believed that this kind of technical assistance significantly helped Chinese officials responsible 
for investment policy to understand more fully the issues at stake, as well as the current status of discussions in the WTO.  He added that China would like to see more investment-related issues 
addressed in the technical assistance programme - with a more focussed treatment - so as to help 
developing countries like China take part in the discussions more effectively and fully.   
14. The representative of Indonesia
 reported on the one-day national seminar on investment 
held in Jakarta on 16 May.  The seminar had been attended by officials from various ministries 
and agencies involved in trade and investment  matters, including the Investment Coordinating 
Board, the Ministry of Foreign Affairs, the Ministry of Trade and Industry, and the Bank of 
Indonesia.  The main focus of the presentations had been the elements specified in paragraph 22 
of the Doha Ministerial Declaration.  Indonesia felt that the seminar was informative and useful, 
enabling a better understanding of the issues being di scussed in the Working Group.  As useful as 
the seminar was, Indonesia found that one day was not adequate to address all of the complex 
issues related to investment, and his delegation hoped that Indonesia would have another opportunity to receive additional technical assistance in the future.   
15. The representative of Egypt
 noted that the recent training seminar for investment 
negotiators in Alexandria, organized by UNCTAD , had concentrated on familiarising participants 
with the main concepts and elements found in international investment agreements.  In addition to raising the awareness of officials in Egypt and elsewhere about the different options and 
modalities for developing investment rules, it had  provided intensive training on the practical 
challenge of negotiating investment treaties.  He noted that the seminar could be judged as a 
success, providing officials not only with relevan t policy tools and techniques, but also with a 
useful context for the exchange of views.    WT/WGTI/M/18 
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  16. The representative of Gabon
 briefed delegations on the regional policy seminar for 
francophone Africa held in Libreville in June.  51 participants representing 26 countries took part 
in this seminar, where a central focus had been the elements set out for further clarification in paragraph 22 of the Doha Ministerial Declaration.  The point had been made that most existing bilateral and regional investment agreements dealt mainly with investment protection, while the 
multilateral approach could be more oriented towards investment liberalization.  Ways would need to be found to ensure that the two types of agreements – bilateral and multilateral - could co-exist.  A general discussion had taken place on the value of greater multilateral cooperation on 
investment from the perspective of developing countries – highlighting both the importance for 
developing countries of attracting FDI, and  the shortcomings of current approaches.  
17. The representative of Thailand
 briefed delegations on the regional and national policy 
seminars that had been held in Bangkok on 27-28 June.  25 senior officials from 12 countries had 
attended the regional meeting, where discussion had focused on paragraphs 20 to 22 of the Doha 
Ministerial Declaration.  At th e national seminar, which had been attended by private-sector as 
well as public-sector representatives, the main emphasis had been on the core elements in the 
Doha Ministerial Declaration on which the Working Group had been mandated to carry out 
further examination.  At both of these events, it was clear that participants had gained a better 
understanding of the substantive issues at hand.  But it was also clear that a great deal more was 
needed in terms of providing developing countries such as Thailand with more information on 
this complex subject.  In this respect, Thailand  believed that the technical assistance and capacity-
building programme should be extended on a c ontinuous basis, regardless of the specific 
decisions taken on investment at the 5th Ministerial Conference. 
18. The representative of Japan  felt that in order to achieve successful results from the 
technical assistance programme Members needed to bear in mind two points.  First, future 
programmes should be organized in a demand-driven manner so as to respond to developing 
countries’ needs.  In this regard, the comments made by Indonesia, Gabon and others were useful.  
Second, each programme should undergo systematic review and evaluation, the results of which 
should be fed back into the process to ensure that improvements and adaptations were properly made.  A stock-taking exercise was necessary,  and if possible Japan would like to see a 
comprehensive progress report after each event.  In addition, Japan would like to see more 
cooperation from the recipient countries in the fo rm of comprehensive capacity-building plans, of 
which WTO technical assistance would form an in tegral part.  Coherent national capacity-
building plans would further ensure the effectiveness of WTO programmes. 
19. He then outlined Japan’s future investment-related technical assistance plans, which were 
four-fold.  First, Japan was funding an investment seminar in South Africa early next year, spear-headed by the OECD Trade Committee, with a particular focus on identifying local needs.  Second, Japan was organizing a seminar for trade and investment officials from Asia-Pacific Members geared to institutional development and human capacity-building.  Third, Japan and Egypt were hosting a joint seminar on investment and competition policy next March mainly for African officials.  Lastly, Japan, in cooperation with the WTO Secretariat, was organizing for 
next year in Geneva a joint seminar on the Singapore issues mainly for capital-based officials.   
20. The representative of Zambia
 said that his delegation, in assessing WTO technical 
assistance and capacity-building, had been guided by paragraph 21 of the Doha Declaration, as 
well as by the minutes of the last meeting of the Working Group.  As stated in paragraph 21, 
technical assistance and capacity-building were needed to assist developing and least-developed 
Members in policy analysis and development, so that they could better evaluate the WT/WGTI/M/18 
Page 6   developmental implications of a possible multilate ral framework on investment.  Zambia believed 
that technical assistance in this context (and in  all other areas) should be guided by the following 
objectives.  First, the programme should assist Members to understand WTO rules and disciplines and to strengthen their capacity to better exercise their rights under the Agreements.  Technical 
assistance should help Members identify elements of existing Agreements and, in the case of 
proposals for potential multilateral negotiations, sh ould assist in identifying those elements which 
act as obstacles in meeting their economic developmental needs so as to enable them to formulate proposals and undertake actions to address them. 
21. Second, the programme should enhance national capacity in the private sector, civil 
society and research and training institutions and other national stakeholders to enable them to 
participate in the formulation and implementation of  trade policies that would reflect strategies of 
national development and poverty reduction. 
22. Third, the programme should encourage the WTO to work jointly with other inter-
governmental institutions, multilateral and regional , as well as national stakeholders in order to 
ensure that technical assistance was coherent with nat ional developmental priorities.  Trade policy 
coherence, in this regard, was not simply coherence among inter-governmental institutions, but 
should be based on identified development options and priorities within a national development strategy developed in association with all stakeholders. 
23. In light of these objectives, it was Zambia’s view that technical assistance should not 
merely consist of training exercises, but rather it should be a long-term process of objective and 
empirical analysis aimed at explaining the implications of FDI for economic development.  The 
various financial crises affecting many parts of the world, and the differing opinions on their 
causes, underscored the complexity of this issue.  It further emphasized the heterogeneity of 
views and opinions, which must be brought into the Working Group's discussions if delegations were to properly understand and carry out the work before them.  As his delegation provided preliminary views on the issues proposed in the agenda, it also identified questions for which 
answers were sought.  He therefore looked forw ard to technical assistance in the form of 
empirical and analytical studies that woul d help Members find these answers, and make 
appropriate decisions. 
24. He also highlighted the importance of UNCT AD - and its cooperation with the WTO – to 
the success of the technical assistance work programme.  The agenda for this meeting had stated that “delegations [were] encouraged to address, in particular, their individual needs for technical 
assistance in this area and the extent to which they [were] satisfied that needs [were] being 
adequately met”.  His delegation's needs start ed with funding which was the foundation of 
technical assistance.  The picture painted by th e minutes of the Working Group's last meeting 
regarding lack of funding for UNCTAD did not refl ect well on the post-Doha mandate.  It was 
disheartening to note that, despite having completed its work programme on technical assistance 
needs early in the year, UNCTAD had still not re ceived the funding it needed to make a positive 
contribution to capacity-building in developing a nd least-developed countries.  Furthermore, it 
was unfortunate that while virtually all dono r Members appreciated and applauded UNCTAD’s 
expertise in this area of work, no concrete steps had been taken to provide UNCTAD with the 
necessary funding.  At least Norway had promis ed to transmit UNCTAD’s concerns to its capital 
for consideration.  What was needed in this Working Group was to make as firm a decision as 
was made in the context of the Doha Trust Fund.  It was in the interests of both developing and 
developed countries to assist UNCTAD to part icipate effectively in the joint WTO/UNCTAD 
programme for building capacity for developing count ries.  His delegation hoped that the minutes  WT/WGTI/M/18 
 Page 7 
  of the present meeting would reflect firm and concrete steps that would be taken as soon as possible to allow UNCTAD to participate activel y in the work programme.  His delegation made 
an earnest appeal to donor colleagues to lubricate the UNCTAD engine.  
25. The representative of Nigeria
 said that his delegation attached the utmost importance to 
the Doha-related technical assistance and capacity-building programme, especially in the area of 
investment.  Nigeria joined others in congratula ting the WTO and UNCTAD Secretariats for the 
considerable progress they had made in impl ementing the technical assistance plan and capacity-
building activities on investment.  His delegation was satisfied with the progress made so far in 
this regard and said that the momentum should be maintained and sustained.  Nigeria had participated actively in - and benefited from - both the regional policy Seminar that was held in 
Bangkok on 27 June 2000 and the Workshop for Geneva-based delegates held on 2 July.  
Generally speaking, the organization of the Seminar and Workshop had been excellent, and he 
extended his delegation’s thanks to Thailand for the excellent hospitality that was accorded to the 
participants during the Seminar.  He noted that  these events had helped his delegation to deepen 
its understanding of the complex issues invol ved and in the context of the Doha mandate on 
investment.  In this regard, Nigeria supported and endorsed the statements by Japan and Zambia 
calling for more technical assistance to be offered to Africa, both at the national and regional 
levels.   
26. The representative of Paraguay
 noted there were no plans for technical assistance and 
capacity-building activities in the southern cone of South America, and emphasized that it was 
important to rectify this shortcoming as soon as  possible.  In its initial protocol, MERCOSUR 
included the negotiation of an instrument to encourage the mutual promotion and protection of 
investment, but it was necessary to strengthen this existing investment expertise and capacity in order to prepare officials and negotiators for th e much broader and more complex multilateral 
context.  His delegation supported the points made by Japan, Zambia, and Nigeria, regarding the 
need to guarantee technical assistance at the region al level.  By expressi ng the interest of his 
delegation in this matter, Paraguay wanted to signal its willingness to  help organize such an event 
for the region. 
27. The representative of Brazil
 recalled that his delegation had requested at the last meeting 
of the Working Group that the Secretariat prepa re a paper on the contribution of foreign 
investment to the transfer of technology to developing countries – and that this proposal had received significant support from other Me mbers (by his calculation, approximately 
20 delegations took the floor to support Brazi l).  His delegation had mentioned that the study 
should examine the relationship between FDI and technology transfer requirements, drawing on the experience of existing regional arrangements, such as NAFTA, while also looking at the role of domestic policy.  He noted that this study tied in well with the recommendations contained in 
paragraph 21 of the Doha Ministerial Declaration.   Given the fact that the Working Group would 
be discussing development provisions at the pr esent meeting, his delegation felt it would have 
been useful to have had some additional input, alth ough he noted that in the Secretariat’s paper on 
non-discrimination (WT/WGTI/W119) the topi c was mentioned.  He asked whether the 
Secretariat could indicate when the Working Group might expect to have a study at its disposal.  
28. The representative of Australia
 said that her delegation was encouraged by the positive 
reports on seminars and workshops to date, and congratulated the WTO and the UNCTAD 
Secretariats on their efforts.  Against this backgroun d, she wished to highlight four points.  First, 
technical assistance should be focused on WT O-specific issues, particularly on enhancing 
Members’ understanding of the implications of a multilateral framework on investment, and WT/WGTI/M/18 
Page 8   preparing Members to participate in possibl e negotiations on this issue following the 
5
th Ministerial Conference.  Second, technical assistance should be tailored to Members' needs 
and targeted appropriately.  Activities should be reviewed periodically to assess whether they were meeting those needs.  Third, in order  to design and carry out technical assistance 
programmes, it was important to have a comprehens ive understanding of each Member's needs.  
Her delegation encouraged Members to communicate their specific priorities and needs to both the Secretariat and the Working Group.  She noted that this imperative was reflected in the meeting's agenda.  Fourth, in order to ensure the most efficient utilisatio n of scarce financial and 
human resources, the WTO should coordinate with  other inter-governmental organizations on the 
design and delivery of technical assistance.  It wa s important that each organization focus on what 
it was best suited to deliver.  While it was important to develop well-rounded technical assistance 
programmes that addressed the full range of trad e policy issues, it was also necessary to ensure 
that the WTO clearly focused on issues directly related to the decisions that would be taken at the 5
th Ministerial Conference. 
29. The representative of Mexico  said that his delegation saw technical assistance and 
capacity-building as key to enabling developing countries, particularly the least-developed, to 
identify their needs and problems in the investment area.  In this context, Mexico thanked the 
WTO Secretariat for accepting its offer to host a regional seminar.  He also took the opportunity 
to brief delegations on the positive results of the recent seminar on bilateral and regional investment agreements held under the auspices of APEC on 17-18 May.  The purpose of the event had been to provide a forum for dialogue in whic h participants from vario us sectors – academic, 
private, public – could have informal discussion s in order to gain a better understanding of the 
issues related to international investment agre ements.  The participants had concluded not only 
that investment continues to be an essential component of development strategies, but also that the links between investment and trade were growing stronger – underscoring the synergies of parallel liberalization in both spheres. 
30. The seminar had also noted the significant changes underway in national and 
international policies regarding FDI, which had been expressed in the explosion of bilateral, regional and multilateral investment  instruments.  It had also been pointed out that a multilateral 
approach could be useful in reducing the conflicts and ambiguities arising out of the complexity 
of existing international investment rules and r egimes.  Finally, it had been recognized that 
investment has traditionally been a highly controversial subject, and therefore it was important to 
be realistic about the possibilities for consensus in the WTO and to avoid discussion on sensitive 
subjects which might harm the negotiating process. 
31. The representative of Malaysia
 felt it was important to take stock of the various forms of 
technical assistance that were being provided.  He asked the Secretariat to explain the distinction between seminars directed toward “senior policy o fficials” and those directed towards technical-
level officials.  In what way did the content of the seminars differ?  His delegation believed there 
were always opportunity costs – or trade-offs – involved in trying to provide generalized technical assistance, and that one-off seminars would not on their own bring countries to the 
negotiating table.  Finally, he emphasized some of  the contradictions inherent in the concept of 
“demand-driven” technical assistance.  Many developing and least-developed countries were so 
ill-equipped to understand even the basic issues invo lved in investment negotiations that they did 
not know what to ask for in terms of technical assistance – rendering concepts like “demand 
driven” meaningless.  The essential point was the need to make the best use of scarce resources.  WT/WGTI/M/18 
 Page 9 
  32. The representative of Hong Kong, China
 briefed delegations on the recent OECD 
workshop on the development dimensions of Singapore Issues which was held in Hong Kong, China on 19-20 June.  Some 80 capital-based representatives attended the event, where inter alia  
the issue of capacity-building was addressed.  It  was felt that capacity-building should develop a 
clear understanding of the benefits and impli cations of closer multilateral cooperation on 
investment.  The question arose as to how best to address the needs of developing countries, including specific development objectives. 
33. The representative of Canada
 also encouraged close inter-agency cooperation in the 
development and delivery of technical assistance to ensure that financial and human resources were fully and effectively utilised.  Canada had taken note of the many activities that were 
planned for the months ahead.  His delegation as ked if the Secretariat could provide delegations 
with an updated calendar of forthcoming events on which the WTO and UNCTAD were 
cooperating, as well as other events that they may be aware of.  This would assist Members in 
scheduling possible participation.  Canada believed that developing and least-developed countries were best placed to assess their technical as sistance and capacity-building needs, and his 
delegation was willing to participate in these col lective efforts.  Finally, Canada drew a link 
between technical assistance and broader development objectives, and said that reinforcing this 
link would be important to achieving Members' collective goals, both before and after the 
5
th Ministerial Conference. 
34. The representative of Switzerland  was impressed by the extent of the WTO’s and 
UNCTAD’s efforts in the past few months.  Members needed to acknowledge that there were still 
a number of questions on investment that had not been satisfactorily answered, making intensive 
technical assistance all the more vital.  His del egation also believed that the programme of work 
should be focused, concentrating on the issues listed for clarification in paragraph 22 of the Doha 
Ministerial Declaration.  Finally , he said that when technical assistance moved into its second 
phase it would have to shift the emphasis from th e general to the specific, focusing on developing 
countries' existing regimes and the kind of mu ltilateral framework on investment that was 
envisaged.   
35. The representative of India  noted that the relationship between trade and investment was 
a complex one, and that his delegation’s know ledge of the subject was still inadequate.  
Investment essentially involved money flows;  money changed hands many times before it became a concrete investment leading to the expansion of trade and development.  Developing countries had little knowledge of the technical aspects of the flow of capital at present.  
Moreover, trade negotiators had inherent limitations when handling this complex subject, which was essentially the remit of central banks and treasury departments.  An iterative exercise of training in various aspects was thus unavoidable.  He also suggested that capacity-building was of far more significance to developing countries that one-off training programmes.  Hence, it would 
be necessary to identify institutions in each countr y, jointly with the concerned governments, for 
creating necessary capacities relating to all issues  connected with investment and money flows.  
Considerable spadework, therefore, needed to  be done before an informed decision could be 
taken.  He made these points without prejudice to his delegation's views regarding the suitability 
of the WTO as a forum for an issue whose relationship with trade was only tenuous. 
36. The representative of Chinese Taipei
 said that technical assistance was indispensable to 
the operation of the overall mechanism of inter national organizations, and that an understanding 
of the rules of the game by developing and least-developed countries was key to the WTO's future 
success.  This was especially true in light of the fact that new Members joined the WTO every WT/WGTI/M/18 
Page 10   year, none of whom had any opportunity to participate in the negotiations and processes of past rounds.  For this reason, Chinese Taipei felt that  some of the training curricula offered by the 
Secretariat should take the needs of new Member s into consideration, and that new Member 
countries should be made a priority for national workshops. 
37. He noted that FDI was one of the driving forces  in the process of globalization, and that 
multinational corporations were the main actors in this process.  From a legal standpoint, the 
influence of international instruments on domest ic law and policy was continuously increasing, 
gradually eroding the ability of domestic governm ents to administer economic matters at home 
and abroad.  A definition of FDI determined the scope and applicability of a domestic legal instrument, and for this reason his delegation felt  that two issues should be carefully reviewed and 
brought into harmony in deciding whether to adopt  a broad or a narrow definition of FDI.  First, 
the relationship between general FDI law and the legal systems governing specific economic 
sectors.  For example, telecommunications and energy were frequently state-run industries in host 
countries and were subject to a high degree of control; their jurisdictional laws and the general 
legal systems governing FDI, therefore, contained numerous differences.  Second, multinational 
enterprises frequently invested in different countr ies at the same time, and differences in legal 
systems often led to increased costs.  In additi on, determining the nationality of an investor 
involved the practical operation of international la w – e.g., the recognition of dual nationality, and 
the question of whether the nationality of a company was determined by the place of its 
establishment, the location of its headquarters, or by the nationality of its major shareholders.  His 
delegation suggested that investors and investment issues should be discussed again at the next 
Working Group meeting in order to better clarify th ese issues for policymakers in the majority of 
Member countries. 
38. The representative of Kenya
 explained that his delegation’s main concern was the timing 
of the technical assistance programmes offered.  As Members were well aware, the objective of 
technical assistance was to assist developing coun tries to understand the complex issues involved, 
and to participate effectively in the Working Gr oup’s discussions.  How ever, if these programmes 
were running in parallel with substantive discussions in the Working Group, delegations could not participate in an informed or balanced way.  It  was important to give delegates time to reflect 
on issues at hand - and to digest them - so Members could be in a position to provide their own 
standpoints and perspectives.  Therefore, his delegat ion reserved to right to return to most of the 
substantive issues that had already been discussed by the Working Group.  He also agreed with 
Zambia that developing countries needed more programmes targeted towards policy analysis.  As 
Mexico had noted, investment had historically been a very controversial subject and therefore 
policy analysis was of central importance.  He  also agreed with Malaysia that, given the 
complexity of the issues, many Members did not know what kind of technical assistance to request.  Perhaps delegations needed technical assistance to identify the sort of technical 
assistance they should request.  
39. The representative of Pakistan
 was gratified that Members were engaging in a serious 
discussion of technical assistance and capacity-building.  Everyone recognized that the relationship between trade and investment was a complex one – hence the importance of technical assistance and capacity-building.  He emphasized that the WTO's technical assistance needed to 
be both reactive and proactive - reactive to the needs or demands of Member countries, but also 
proactive in the preparation of policy analysis by the Secretariat.  He also agreed with Zambia's 
observation that technical assistance needed to be tailored to national development priorities - 
which in turn meant that programmes should be drawn up in consultation with national 
governments.  According to the minutes of the Working Group's last meeting, this point had  WT/WGTI/M/18 
 Page 11 
  already been effectively made by India.  Most developing countries did not fully understand the complex relationship between trade and investment.  This made the identification of various forms of investment - and their implications for the expansion of trade - an essential element in capacity-building.  It was also important to fully understand the development policy ramifications of a multilateral framework on investment, which needed to be kept at the forefront of technical 
assistance work.  Finally, it was important to recognize the need for sustained, long-term 
capacity-building if developing countries were to be fully and actively engaged in the process.  He expressed his delegation's hope that Pakistan wo uld be the recipient of at least one intensive 
national seminar soon. 
40. The representative of Korea
 agreed with Pakistan about the need to focus the WTO's 
technical assistance efforts.  Furthermore, he sugges ted that this focus should be on the elements 
set out for clarification in paragr aph 22 of the Doha Ministerial Decl aration, so that the seminars 
and workshops would facilitate discussions in the Working Group.  He hoped that this suggestion 
might be a partial answer to concerns raised by Malaysia, Kenya and other delegations. 
41. The representative of Morocco  said that his delegation was pleased to see effective 
coordination between the WTO and UNCTAD in th e implementation of what Ministers had 
decided at Doha.  Morocco had participated actively in  the recent regional programmes – both in 
Egypt and Gabon - and felt that officials had been able to reach a better understanding of the 
complex questions involved.  He informed Members that, in cooperation with UNCTAD and the 
Economic Commission for Africa, a regional workshop on targeting investors would be organized 
for North African countries in September 2002.  This workshop would have as a main objective 
the strengthening of the understanding of concepts and trends in international investment, and to 
provide countries with the necessary tools to identify potential investors.  Furthermore, it would enable officials to review current "best practices" in  targetting investors.  Finally, he recalled that 
Morocco had communicated with the Secretariat regarding his country's technical assistance 
needs in the field of investment.  
42. The representative of Hungary
 underlined the value of the workshop that had been 
organized by the Secretariat on 2 July.  He added that in his capital too there was little 
understanding of concepts like a "GATS type positi ve list approach" - which further underscored 
the importance of training a handful of people in the details of multilateral  trade negotiations.  It 
was his delegation’s view that this was not an insurmountable challenge. 
43. The representative of Chile  said that the main objective of technical assistance was to 
provide Members with sufficient understanding of the issues at stake so they could make 
informed decisions regarding negotiations in Mexico next year.  His delegation felt that the 
discussions that had taken place in the Working Grou p so far were already an important form of 
technical assistance and capacity-building.  He also emphasized his delegation's view that the documents prepared by the Secretariat had been very helpful - being both objective and pragmatic 
in their treatment of the issues. 
44. The Secretariat
 reminded delegations that the Secretariat needed before the end of July to 
draw up the technical assistance schedule for 2003, bearing in mind that this would be a truncated 
programme since the Mexico Ministerial Confer ence was taking place in September.  The 
Secretariat had also taken note of the suggestion s for a stock-taking exercise as regards technical 
assistance.  The Secretariat already had its own internal processes of evaluation, but it would 
endeavour to provide a summary of the results so far to distribute to Members.  The Secretariat 
would also circulate to delegations a summary of the upcoming schedule of activities.  In WT/WGTI/M/18 
Page 12   response to Malaysia's question, he explained that the different types of seminars were targeted to different audiences - which ranged from workshop s for Geneva-based officials, to training 
programmes for negotiators, to policy seminars for senior officials.  He assured delegations that 
the Secretariat was making progress on preparing a study on FDI and technology transfer - with 
the aim of completing it well before the Septem ber meeting - bearing in mind that priority 
continued to be placed on completing the series of  stock-taking papers related to paragraph 22 of 
the Doha Ministerial Declaration, as inst ructed by delegations earlier in the year. 
45. The Latin American region would be the focus of technical assistance activities in the 
second half of the current year - and the Secretariat took note of the request of Paraguay for technical assistance, in addition to existing plans  for Venezuela, Colombia, and Guatemala.  He 
recalled that the WTO had signed an agreement with the Inter-American Development Bank, in 
addition to existing cooperation with UNCTAD, which would further facilitate ongoing work in 
Latin America. 
46. The representative of UNCTAD
 pointed out that detailed reports on each of the technical 
assistance programmes so far were available to de legates, and that these reports also included 
evaluations by participants.  He also mentioned that UNCTAD had engaged the services of an 
outside evaluator to assess its post-Doha work programme, the results of which would be available in December.  On the question of FDI an d the transfer of technology, he drew delegates' 
attention to two recent pieces of work that UNCTAD had undertaken in this area - the 1999 
World Investment Report, which included a chapter on this subject, as well as a "pink paper" on 
"Transfer of Technology and International Investment Agreements". 
47. The representative of Zambia
 asked where delegations went from here with regard to the 
funding problems faced by UNCTAD?  He noted that least-developed countries had already 
provided input for UNCTAD's technical assist ance needs "matrix" - in other words the 
developing country’s side of "demand-driven" t echnical assistance had in large measure been 
met.  But when would the corresponding funding for this programme materialize?  How would 
the minutes of the next meeting of the Working Group differ from the last set of minutes as 
regards this central question for developing countri es?  He noted that he was addressing these 
questions to donor countries.   
48. The representative of the United States  reminded delegations that the Secretariat had 
already prepared a paper on FDI and technology transfer several years earlier, and wondered if the Secretariat could clarify whether this paper wa s being updated in response to Brazil's request. 
49. The Secretariat
 confirmed that a paper on the subject had been prepared in 1998.1  He 
also noted that delegations and other agencies (i.e., the World Bank and UNCTAD) had also submitted written contributions. It  was the Secretariat's intention to examine this material and, if 
necessary, to update its 1998 paper.  
50. The Working Group took note
 of the statements. 
                                                      
1 WT/WGTI/W/65.  WT/WGTI/M/18 
 Page 13 
  B. P
ARAGRAPH 22 OF THE DOHA MINISTERIAL DECLARATION  
51. The Chairman  recalled that at the Working Group's last meeting it had been agreed to 
focus discussions on "development provisions", "non-discrimination", and "modalities for pre-
establishment commitments based on a GATS-type positive list approach" wh ich were the third, 
fourth and fifth items listed for clarification in pa ragraph 22 of the Doha Ministerial Declaration. 
(i) Development provisions 
52. The Chairman  drew Members' attention to the background Note that had been prepared 
by the Secretariat on "development provisions" (WT/WGTI/W/119), as well as to written 
contributions on this subject that had been received from the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (WT/WGTI/W/126), and Canada (WT/WGTI/W/131). 
53.  The representative of Chinese Taipei
 introduced its submission (WT/WGTI/W/126).  He 
noted that one of the purposes of having a multilateral investment agreement was to provide a stable as well as predictable environment for inve stment.  While pursuing this objective, Chinese 
Taipei also supported developing Members' needs to preserve reasonable conditions for the 
advancement of their national object ives within a multilateral framework of investment rules.  His 
delegation believed that multilateral rules should permit longer transition periods and more 
flexibility for developing countri es.  Transitional agreements were  among the most flexible ways 
of dealing with developing countries’ concerns, a nd, moreover, this approach had already been 
successfully used in a number of WTO agreements.  There was no reason why this same approach 
could not be applied to future investment rules.  However, any transitional agreement should 
apply to specific issues only – for example, the establishment of enquiry points.  It may not be 
appropriate to make such arrangements applicable to general matters, such as publication 
requirements.  Neither would it be advisable to apply transitional arrangements to basic issues such as the application of Most-Favoured Nation treatment. 
54. He said that the Doha Ministerial Declaration had already declared that the positive list 
approach of the GATS would be used as a model for the negotiation of investment rules.  Under 
the GATS, developing-country Members enjoyed a substantial degree of flexibility in deciding 
whether to include specific sectors in their schedules of commitments, and they could impose 
specific limitations on the provision of national treatment.  Chinese Taipei saw no reason as to why developing-country Members should not be given the same flexibility in a future multilateral 
framework on investment.  It might also be useful to include provisions that clarified that developing Members were not obliged to undertake the same degree of market liberalization as developed Members under a process of progressive liberalization. 
55. His delegation also believed that it was impo rtant to allow more flexibility in the pre-
establishment phase, than in the post-establishment phase of investment, as the former had 
potentially a greater impact on the development objectives of some Members.  However, there should be less flexibility accorded to MFN treatm ent than to national treatment, as a way of 
preventing discrimination among foreign investors.  Nor did his delegation favour granting 
developing countries the right to impose performance requirements on foreign investors.  If such 
performance requirements were to be allowed, they should not be given permanent coverage 
under future multilateral investment rules.  In any event, it was his delegation’s view that 
requiring foreign investors to transfer technology to domestic firms might not be the most effective way to attract high-quality technology.  In fact, it could be counterproductive for 
developing countries, deterring foreign investors from entering those markets that imposed such WT/WGTI/M/18 
Page 14   requirements.  Performance requirements risked becoming unpredictable and non-transparent both of which were factors that prevented companies from partaking fully in the economic life of developing countries. 
56. The representative of Canada
 introduced its submission (WT/WGTI/W/131).  Canada 
considered that policies conducive to attracting foreign investment, such as transparent and non-
discriminatory administrative norms and legal standards, were essential conditions for economic 
growth.  The potential provisions addressi ng development issues would depend on the 
architecture, scope and disciplines of any multilat eral investment agreement.  Paragraph 113 of 
the minutes of the Working Group's last meeting noted that Canada fully endorsed the notion of 
flexibility in international investment agreemen ts, whether for development or other reasons.  As 
was evident from the Doha Ministerial Decl aration, Members placed great importance on 
ensuring that their ability to govern and regulate in the public interest was preserved and to 
maintain or establish measures in key sectors or policy areas.  In addition, there was recognition 
that the extent and pace of liberalization might differ between Members at different levels of 
development. 
57. Regardless of the architecture, Canada beli eved that the elaboration of development 
provisions should be guided by two fundamen tal principles.  These were flexibility and 
transparency.  This would ensure a closer approximation to the optimal balance between 
countries' need to retain the ability to maintain or apply measures for national policy objectives 
and investors' interest in transparent, stable investment regimes.  An agreement with 
comprehensive obligations, for example, might necessitate greater flexibility and development 
provisions than would an agreement that set out only limited disciplines.  Substantive obligations 
for the liberalization and protection of investments should be balanced with development provisions in such a way as to ensure that flexi bility did not translate into discrimination. 
58. In discussing modalities, Canada believed that the Working Group would have to assess 
how negative and positive list approaches could be used with respect to pre-establishment and 
post-establishment treatment.  Both approaches  provided ample flexibility for development 
purposes, and both enabled a country to maintain non-conforming measures, as well as the 
capacity to adopt discriminatory measures where necessary.  Both approaches could accommodate, in either lists of commitments or  reservations, phase-out periods or transition 
periods.  Consideration could also be given to pr oviding developing and least-developed countries 
with a "grace period" in which they could make adjustments to their lists of schedules. 
59. As Canada had stated in its previous submission on scope and definition 
(WT/WGTI/W/113), any prospective investment agreement in the WTO would co-exist and 
interact with a number of other agreements within the WTO system, including the TRIMs 
Agreement and the GATS, as well as with other international agreements on investment.  The objective should be to ensure that any development provisions elaborated in the context of a 
prospective multilateral framework on in vestment drew on and complemented development 
provisions in these agreements.  For exa mple, the general exceptions listed under GATT 
Article XX and GATS Article XI V, as well as security exceptions under GATT Article XXI and 
GATS Article XIVbis, could be examined for their potential adaptation to an  investment 
agreement.  Moreover, just as GATT Articles XI I and XVIII:B permitted certain restrictions on 
trade in goods, and GATS Article XII permitted cert ain restrictions on trade in services, where a 
country was facing serious balance-of-payments problems, provisions could be built into a 
prospective framework on investment to permit certa in restrictions on investment under particular 
conditions and circumstances.  This sort of flexi bility for developmental purposes would require  WT/WGTI/M/18 
 Page 15 
  the most rigorous transparency disciplines to ensure that it was not being applied in an arbitrary or discriminatory fashion.  Finally, Canada remained committed to participating in technical assistance and capacity-building activities so that developing and least-developed countries could put in place an appropriate policy framework that would be  conducive to attracting foreign direct 
investment to their economies. 
60. The Secretariat
 introduced its background Note on development provisions 
(WT/WGTI/W/119).  Not surprisi ngly, discussions in the Working Group had confirmed that no 
single conception of the development dimension of  international investment existed, and that each 
country's view on this matter depended on its le vel of development, integration in the world 
economy and economic policies.  A key issue in the discussion of future multilateral cooperation 
on investment in the WTO would be to find a workable balance between flexibility for 
development purposes and the promotion of rules ensuring stability and predictability of foreign 
investment. 
61. The representative of UNCTAD  made a presentation on the various ways in which 
development provisions could be treated in  international investment agreements.  
62. The representative of Brazil  said that the Secretariat paper accurately portrayed the 
challenge facing developing countries in ba lancing flexibility and disciplines as they 
contemplated the positive and negative affects of FDI.   It also provided insight into how Members 
might translate that challenge into a legally binding instrument that neither compromised 
development objectives nor sustainable development.  The paper took note of the debate surrounding development provisions in international investment agreements:  one side of the 
debate had asserted that development object ives could not be accommodated in investment 
agreements; the other side of the debate had asserted that they could.  The intensity of this debate 
underlined the need to treat development objectives seriously if WTO Members were to make meaningful progress towards a multilateral framew ork on investment.  This was the spirit in 
which paragraph 22 of the Doha Ministerial Declaration was drafted, when it spoke of the need to 
balance the interests of home and host countrie s, to take due account on the development policies 
and objectives of host governments, and their ri ght to regulate in the public interest, and to 
acknowledge the special development, trade and  financial needs of developing and least-
developed countries. 
63. In trying to address in a constructive wa y the problems that had been raised, it was 
important to look at the concept of flexibility, an d to arrive at a common understanding of what 
that term might mean.  Brazil did not side with  those who believed that flexibility could be 
satisfactorily addressed through preambular language, best endeavours clauses, transition periods, 
or technical assistance provisions, in the abs ence of more substantive commitments.  He was 
pleased to note that this was the viewpoint wh ich UNCTAD adopted as well.  Brazil subscribed to 
the view that was well reflected in paragraphs  15-19 of the Secretariat paper where it had been 
demonstrated that flexibility required that the development dimension be an integral part of the 
design and structure of an investment agreement.  This meant keeping certain elements out of the 
multilateral framework on investment, as well as identifying those elements that would need to be 
brought in.  In due course, Members would need to review issues such as performance requirements, technology transfer requirements, and other incentives.  This could, in turn, raise 
interlinkages with work being carried out in the Committee on Trade and Development or under 
the rubric of implementation.  In this context , he referred to the thought provoking and useful 
study produced by UNCTAD and the WTO on TRIMs and performance requirements which set 
the stage for further discussions.  The study provided evidence against the general assumption WT/WGTI/M/18 
Page 16   that trade would be undistorted – or at least less distorted – in the absence of performance and 
technology requirements and incentives.  Given that many developing countries had been experimenting with liberalization over the past decade, as well as implementing their Uruguay Round commitments, the stage was set for a re -assessment of various economic strategies – a 
reassessment which would compare the recent experiences of developing countries with other successful examples of economies using performance requirements that produced positive results from a development perspective.    In short, Br azil believed that the development dimension 
should be an essential ingredient in any multilateral framework – the understanding of which would assist developing countries in striking an effective balance between attracting FDI and 
preserving policy space. 
64. The representative of the European Communities
 stated that it was widely acknowledged 
that FDI could bring important developmental benefits to recipient countries in the form not only 
of capital but also of technology, knowledge, improv ed access to export markets, and so on.  As a 
consequence, attracting FDI had become a primary objective for many developing countries.  His delegation believed that a multilateral framew ork on investment could - and should - be 
consistent with domestic development policies.  If development provisions were to be effective, 
they would need to be complements to, not substitutes for, an agreement's policy disciplines – 
disciplines that would help to provide for transparent, stable and predictable conditions for FDI.  
Equally, flexibility should not be confused with the right to discriminate.  Nor should it affect the transparency of a potential agreement. 
65. His delegation believed that the right to regulate in the public interest should be 
preserved, as long as it was non- discriminatory.  From this poin t of view, the GATS provided a 
useful model from which to approach flexibility is sues.  A preambular statement could also be an 
integral part of an agreement, helping to interpret its objectives, as well as helping to highlight the 
special needs of developing countries, especially their right to regulate and to maintain national 
development plans.  As regards measures related to home countries and enterprises, reference to 
the OECD Guidelines on Multinational Ente rprises could help to define the boundaries of 
acceptable behaviour by firms.  Compliance with  general principles such as transparency of 
regulations could be linked to technical assistance. 
66. He suggested that flexibility was a broad concept – one which linked a country’s need 
both to maintain an appropriate policy space to pursue national development objectives and to create a stable, predictable and transparent FDI policy framework within which firms could 
advance their corporate objectives.  More generally, the function of flexibility was to adapt liberalization to the particular conditions prevailin g in developing countries, as well as to existing 
economic asymmetries between these countries and developed countries.  Such flexibility could involve inter alia :  lower levels of obligations;  an asymmetrically-phased implementation 
timetable;  best-endeavours commitments;  exc eptions from commitments in certain areas;  
flexibility in the application of – and adherence to – disciplines under prescribed circumstances;  and technical assistance and training.  An inve stment framework could combine each of these 
approaches and instruments. 
67. He drew attention to the way in which the principle of flexibility was embodied in the 
basic structure of the GATS.  First, the GATS  approach was based on the idea of progressive 
liberalization, the starting-point for which was the acceptance of the idea that different Members 
should be allowed to schedule different levels of commitment.  At the same time, GATS 
Members were engaged in a negotiating process l eading towards the further liberalization of 
market access and the expansion of national treatment.  This dynamic approach hinged on the  WT/WGTI/M/18 
 Page 17 
  basic willingness of Members to  deepen liberalization.  Second, the GATS recognized the right of 
Members to regulate "in order to meet national policy objectives", as noted in the Agreement’s 
preamble.  Third, the GATS included a number of general exceptions that had a development dimension – for public morals, public order, consumer safety, and balance-of-payments reasons, 
to name a few.  Fourth, the preamble of Articl e IV emphasized the importance of increasing the 
participation of developing countries in trade in services by strengthening domestic services 
capacity, among other things by improving access to distribution channels and information networks, and by enhanced market access in sectors of specific interest to developing countries.  
Fifth, as regards the admission of foreign investments under GATS mode 3, governments 
provided market access and national treatment on ly in those sectors where they had undertaken 
specific commitments – the so-called “bottom-up” or “positive list” approach.  The positive list 
approach required the removal of entry controls and restrictions only in sectors where countries 
had scheduled commitments.  In other words, it al lowed countries to phase in market access and 
national treatment in a manner consistent with their level of development.  For example, he 
pointed out that developing countries could retain their ability to screen FDI according to 
objective criteria under a positive list approach. 
68. He noted that the EC’s concept paper on mo dalities of pre-establishment commitments 
provided a long list of examples of how GATS provides for developing country flexibility.  The 
paper also made the point that commitments should be commensurate with a given country’s level of development, and that other Members should refrain from exerting undue pressure on developing and least-developed countries to liberalize sectors.  In order to achieve these 
objectives, GATS Article XIX:2 provided for flexib ility in the liberalizat ion process.  Specifically 
it allowed developing countries to open up fe wer industries, to liberalize fewer types of 
transactions, to offer market access commitments only in line with development levels, and to attach conditions to this access (e.g. transfer of t echnology, training, etc.) t hat were in line with 
the objectives referred to in Article IV.  Flexibi lity was also granted in the context of regional 
economic integration.  Acknowledging that regional integration might be important to the 
capacity-building process in developing countries, GATS Article V:3(a) allowed for a flexible 
interpretation of the conditions that needed to be met by developing countries to enter into regional agreements.  Article V:3(b) authoriz ed more favourable treatment to be granted to 
juridical persons owned or cont rolled by natural persons of the parties to such an agreement. 
GATS also recognized that subsidies undertaken in relation to the development strategies of 
developing countries could have positive effects.  The GATS also explicitly addressed the need for developing countries to be provided with adequate technical assistance. 
69. As regards technical assistance more generally, it was crucial to determine what kind of 
assistance was needed to ensure that developing count ries exploited their full potential to attract 
FDI – both by identifying the key requirements for increasing a country’s attractiveness for 
investment, and by identifying the key bottlenecks that  stood in the way of realizing this potential.  
On this basis, assistance could then be directed at  building capacity, first to better regulate the 
domestic markets in a pro-FDI way; and second to identify - and deal with – the obstacles to the 
proper functioning of markets (e .g., competition policy).  With  a view to promoting developing 
countries as investment locations, there was al so scope for initiative on the part of home 
countries.  Developing countries should also re ceive assistance in the effective negotiation of 
international investment rules - and should be assisted when translating the results of these 
negotiations into domestic laws and regulations. 
70. The representative of India
 noted that the Working Group was entering into a very 
important aspect of its study programme on t he relationship between trade and investment, and WT/WGTI/M/18 
Page 18   that his delegation appreciated the contributions t hat had been made, both in writing and from the 
floor.  India also looked forward to other contri butions that would be made during the course of 
the debate, all of which would lead to a great er understanding of the implications and 
ramifications of the issue.  As he had already mentioned, his delegation was still in the process of 
learning, and it might have to return to thes e issues later in the year as his delegation’s 
understanding increased.   
71. Development was a complex process.  There was no single formula that could fit into 
every economic situation in such a manner that it inevitably led to growth.  Developing countries, 
therefore, needed policy space so that they could determine in their own fashion how the process of economic development could be speeded up and how the welfare of their citizens could be 
enhanced.  This also included the policy space to determine the manner in which investment 
should be regulated and channelled.  Any multilateral discipline that sought to limit this policy 
space, by its very definition, would reduce the policy options available to developing countries to 
use foreign investment in such a manner as to promote development.   
72. The basic assumption underlying the proposal for multilateral disciplines in the field of 
investment was that the principle of free trade, which permeated WTO rules in respect of goods 
and services, would apply equally to the movement of capital.  If conditions of perfect market prevailed, then freedom of international capital movement would possibly lead to benefits both 
for home and host countries and to investors.  This was not a realistic assumption.  He quoted, in 
this connection, from a recent paper by Barry Eichengreen of the University of California, 
Berkeley who wrote that the “ef ficient-markets paradigm is fundamentally misleading when 
applied to capital flows.”  While limits on capital movements could be considered to be a 
distortion, removal of this distortion need not be welfare enhancing when other distortions were 
present:  “There are any number of constellati ons of distortions, especially in developing 
countries for which this is plausibly the case.  If the capital account is liberalized while import-
competing industries are still protected, capital ma y flow into sectors in which the country has a 
comparative disadvantage, with immiserizing effe cts.  If a downwardly-inflexible real wage 
causes too many resources to be devoted to capital intensive activities, then a capital inflow may further aggravate this misallocat ion, again reducing the incomes and welfare of domestic 
residents.  If information asymmetries are ende mic to financial markets and transactions, then 
there is no reason to assume that financial libera lization, either domestic or international will be 
welfare improving.  And even if information asymmetries in domestic markets are judged 
insufficiently severe to undermine the case for domestic financial liberalization, the same may not 
be true of international financial liberalizatio n to the extent that international financial 
transactions take place among agents separated by gr eater physical and cultural distance.  Insofar 
as these problems are most severe when the transact ions in question involve developing countries, 
where the capacity to assemble and process information is least advanced, there can be no 
presumption that capital will flow into uses w here its marginal product exceeds its opportunity 
cost.”  Studies by Gordon Hanson, Brian Aitken and Harrison also highlighted cases where 
foreign investment may have lowered host country welfare. 
73. The point was that financial flows in no way resembled the flows of goods and services.  
There was no tangible, direct linkage between buyers and sellers.  Money, by its very nature, was 
more fluid and less transparent in its movement.  It had been the experience of many developing 
countries in recent years that overwhelming emphasis on external capital, be it in the form of 
commercial borrowing or investment resources, carried within itself the seeds of possible 
economic crisis, which, in the case of impover ished developing countries, could assume the form 
of a major human disaster with it s own implications in terms of political and economic stability in  WT/WGTI/M/18 
 Page 19 
  the region and, indeed, in the world as a whol e.  WTO Members must never subscribe to any 
doctrine that would limit policy flexibility in  this important area.  The problem was further 
compounded by the fact that money could assume many different forms from time to time with the result that it was, even now,  difficult to monitor its movement. 
74. Developing countries also needed policy flexi bility to determine the form of investment 
that would lead to the highest growth.  He recall ed that his delegation had already highlighted, at 
the last meeting of the Working Group, the need to  focus on those investments that contributed to 
the expansion of trade, as clearly indicated by Mi nisters at Doha.  The definition of investment 
would have important implications for the develo pment dimension.  Greenfield investments, for 
example, could be of more significance than mergers and acquisitions as they would have more 
beneficial multiplier effects on the economy.  Likewise, developing countries would need to 
guard against the crowding out effect of foreign investment, as clearly pointed out in UNCTAD’s 
World Investment Report of 1999.  Any movement of capital that caused serious damage to 
domestic industry, particularly small and medium enterprises, or that had adverse effects on employment, would need to be carefully regulated.  Developing countries needed to retain the 
ability to screen and channel foreign investment in accordance with their domestic interests and 
priorities.  Bilateral investment treaties had been favoured the world over for precisely the 
flexibility they provided to the host country in this regard. 
75. During the discussion of scope and definiti on at the last meeting of the Working Group, 
the UNCTAD representative had referred to the need to establish home-country and investor 
responsibilities and obligations even as Members talked of host-country obligations.  While 
foreign investment could generate positive changes in the economy through induction of capital, 
technology, managerial and marketing skills, it could  also have various negative effects.  It need 
not necessarily bring in any significant new technology, as empirical evidence presently 
indicated, nor generate much value added for employment, or foster linkages with domestic 
industry in the host country.  The objective of global profit maximization by trans-national 
corporations, rather than by each new subsidiary, could sometimes result in conflicts of interests - 
with the developing host country being the loser in many cases.  It was important, therefore, that 
Members also discuss a binding code of conduct for investors with a further stipulation that such 
a code should be enforced by home countries through a set of precise domestic laws that could be 
activated by any host country.  
76. The Working Group should also take a fresh look at performance requirements.  
Empirical studies had shown that affiliates of cer tain trans-national corporations bought the bulk 
of their inputs from parent companies and ot her affiliated companies leaving only a small 
proportion for unaffiliated suppliers within the host country or in third countries.  UNCTAD’s Trade and Development Report 2002 highlighted the poor record of generating value added and 
linkages by trans-national corporations.  It wa s also an undeniable fact that until recently 
performance requirements were an integral part of the growth strategy of all developed countries.  
It was important therefore that performance requ irements on employment generation, transfer of 
technology, export performance requirements, manuf acturing requirements, training and research 
and development requirements, and so on, remain ed available to developing countries to ensure 
that foreign investment contributed to the achievement of development policy goals. 
77. In this connection, he reminded delegations that the GATS did not impose any 
prohibition on performance requirements.  It furt her envisaged limitations on national treatment 
in respect of sectors covered by commitments.  He mentioned this point particularly because there WT/WGTI/M/18 
Page 20   had been some attempt to draw a parallel between mode 3 of the GATS and investment disciplines.  
78. Another point to which he drew attention was the possible damaging effect of the outflow 
of capital on the balance-of-paym ents.  There was no need to el aborate the many cases of such 
damage to the economies of developing countries in recent years.  While this called for further 
policy flexibility to maintain restrictions on outflows, there was also a strong case for 
performance requirements such as export obligations and foreign exchange balancing to moderate 
the adverse effects of capital outflows. 
79. He also repeated a point that his delegation had often made in the past:  capital was a 
factor of production and, as such, was not more or less significant than  any other factor of 
production.  If Members were considering discip lines aimed at the freer movement of capital, 
those Members must, in the interests of the development needs of developing countries, simultaneously build in disciplines which would fac ilitate the movement of labour, particularly of 
professional and skilled personnel. 
80. He concluded by reiterating the point he had made earlier.  Money fell in the category of 
neither goods nor services.  Delegates to the WTO were trade negotiators.  They were neither 
bankers nor monetary economists.  The less developed countries in the WTO did not have the 
skills and the expertise that the richer countries ha d.  Perhaps the best contribution that could be 
made to the cause of development was to understand the limitations of developing countries and to focus on trade issues within the WTO. 
81. The representative of Hong Kong, China
 recalled that the Doha Ministerial Declaration 
had highlighted the development dimension as an integral part of any prospective multilateral 
framework on investment.  More specifically, paragraph 22 of the Declaration had made it clear that developing and least-developed countri es should only undertake commitments and 
obligations commensurate with their individual  needs and circumstances.  Hong Kong, China saw 
development provisions as an indispensable tool for incorporating policy flexibility into any 
multilateral framework on investment.  In designing any international investment agreement, 
there was inevitably a tension between discipline, on the one hand, and flexibility, on the other.  
Hong Kong, China noted the concern expressed by some Members about the possible misuse of 
flexibility provisions – and the warning that flexib ility provisions should not be so broad in their 
design as to allow unfettered discrimination in t he application of rules by investment authorities. 
82. In Hong Kong, China’s view, the challenge was to balance the need for policy flexibility 
in host countries, with the need for predictable, st able and transparent conditions for international 
investors.  To strike an optimal balance would not be an easy task, and his delegation agreed with Canada, in the concluding part of its paper, that t he elaboration of development provisions should 
be guided by two fundament principles – flexibility and transparency.  His delegation would add predictability to this list.  In concluding, he asked two questions, one of the Secretariat, and one of 
Chinese Taipei:  first, did the Secretariat see a ny scope for the home-country obligations in the 
context of development provisions, and would this be the subject of a future Secretariat 
background Note?  Second, was it accurate, as asserted in paragraph 4 of the paper by the Separate Customs Territory of Taiwan, Penghu, Kinm en and Matsu, that the GATS-type positive 
list approach had already been accepted by Members as the model starting point for negotiations.  
His delegation’s reading of paragraphs 20 and 21  of the Doha Ministerial Declaration suggested 
that the modalities for negotiations had yet to be agreed, at the 5
th Ministerial Conference in 
Mexico.  WT/WGTI/M/18 
 Page 21 
  83. The representative of Japan
 suggested that the central question was how to strike a 
balance between the discipline of international rules and the need to take into account development concerns.  Recent international agreements had tended to follow two distinct 
approaches towards development concerns.  The first was to embody flexibility in the overall structure or architecture of the agreement itself – for example, through limitations on the scope 
investments covered, or limitations on the scheduling of commitments and exemptions.  He noted that much of the debate was on a positive vers us a negative list approach to scheduling 
commitments centred on which over all structure was more inherently development friendly.  The 
second approach was to identify development provisions more narrowly and explicitly in the 
various elements of an investment agreement.  These provisions were discussed in the 
Secretariat’s note.  Regarding these more narrowly focused development provisions, he recalled 
that Japan had already made a written contributio n to the Working Group in June 2001 entitled 
Investment Rules for Development Policies (WT/WGTI/W104), in which various development provisions in existing WTO agreements were examined. 
84. He noted that the paper by the Separate Customs Territory of Taiwan, Penghu, Kinmen 
and Matsu had highlighted how the development dimension could be embodied in the GATS type 
approach to pre-establishment commitments, as well as by making use of transitional 
mechanisms.  Regarding the Canadian paper, his delegation was sympathetic to the idea that 
flexibility and transparency were the two major principles that should inform the Working 
Group’s discussions of de velopment provisions.  His delegatio n also agreed that the process of 
progressive liberalization should take into account the development levels of each country.  
Moreover, phase-in periods, or grace periods for compliance, and phase-out periods for non-
conforming measures were ideas worth considering in more detail.  Matching technical assistance 
to the phase-out periods was also an idea with considerable merit. 
85. His delegation was also concerned about Indi a’s remarks with regard to performance 
requirements.  Japan’s experience had shown that performance requirements could impose 
additional burdens on investors.  The TRIMs Agreement had already disciplined certain 
performance requirements, and it went without saying that this Agreement should be implemented in a focused way.  By the same token, when Members considered a future 
multilateral investment agreement it was important  to strike a balance between the interest among 
developing countries in maintaining such requirem ents and an effective system of investment 
disciplines. 
86. The representative of Hungary
 agreed with the point raised by many other delegations 
that the development dimension was a horizontal issue.  On the basis of Hungary’s positive 
experience in attracting FDI over the past fifteen years – as outlined in an earlier submission to the Working Group (WT/WGTI/W/83) – his deleg ation believed that investment played an 
important and positive role in the development process.  In Hungary’s case, it was an essential pre-condition of economic growth, modernizatio n, and structural adjustment.  His delegation 
subscribed to the view that a multilateral framewor k on investment could only lead to more – and 
more stable – FDI flows, but that growth would be fostered by the more optimal allocation of domestic investment.  Accordingly, Hungary viewed the development dimension in the context of the creation of a multilateral framework for FD I – as an underlying objective and an overriding 
horizontal consideration when design ing the structure, scope and pr ovisions of the framework.  
Members should not try to address it through preambular language, or through one or two stand-
alone special and differential treatment provisio ns, phase-in periods, or technical assistance and 
capacity-building.  At the same time Hungary noted that an important balance needed to be struck 
between the flexibility for developing countries to pursue their development policies and the legal WT/WGTI/M/18 
Page 22   certainty and predictability that binding rules und er the agreement would provide for investors.  
Hungary felt that in many respects the GATS could serve as a useful model or point of reference for the Working Group. 
87. He drew attention to the wording of the Do ha Ministerial Declaratio n which, in addition 
to calling for enhanced technical assistance, made  it clear that Ministers believed that a 
multilateral framework on investment should reflect, in a balanced manner, the interests of home 
and host countries, and should take into account the development policies and objectives of host 
governments and their right to regulate in the pu blic interest.  Furthermore, Ministers explicitly 
recognized that the development, trade and financial  needs of developing and least-developed 
countries should be taken into account as an inte gral part of the framework, enabling Members to 
undertake commitments commensurate with t heir individual needs and circumstances. 
88. His delegation’s approach fitted in with th ese parameters.  Turning to the specific 
elements that Hungary considered to be of key importance, he referred to the Secretariat’s paper listing some of the major areas where developing c ountries might require poli cy flexibility.  First, 
as regards scope, his delegation believed that th e agreement should focus on FDI with a long-term 
focus.  Second, in regard to admission an d establishment, Hungary believed that a GATS 
approach was appropriate, both with regard to mark et access and to national treatment.  Members 
should maintain the freedom to decide what sectors they wished to open up to investors in line with their individual level of development.  This  approach, in addition to providing a necessary 
level of legal certainty and predictability for investors, would provide ample policy space for 
governments to pursue their policy objectives.  Third, on progressive liberalization, Hungary 
believed that a multilateral framework on inve stment, like the GATS, should incorporate the 
principle of progressive liberalization.  The object ive of further liberalization should be pursued 
through successive rounds of negotiations, and these negotiations should pay due respect to 
national policy objectives and individual levels of development, both across countries and sectors.  
Fourth, there should be provisions for taking general exceptions along the lines of the framework 
embodied in the GATT and the GATS.  General security, balance-of-payments, regional 
integration exceptions, and development provisions seemed to be obvious candidates for inclusion. 
89. Finally, his delegation noted that many of the comments and interventions seemed to be 
premised on the assumption that developing countr ies were necessarily recipients of FDI.  In 
Hungary’s view, the reality of  the situation of many develop ing countries might be more 
complex, and the question of development provisions should be seen in a more dynamic context.  Although many developing countries today were clearly not sources of FDI, this situation, at least 
in the case of more advanced developing countries, could change.  Hungary, at an intermediate level of development, was a case in point.  In the process of economic transformation that had begun at the end of the 1980s, Hungary relied heavily on FDI.  However, after a decade Hungary had become the second largest exporter of FDI in Central and Eastern Europe after Russia.  Now FDI outflows amounted to roughly one third of inflows.  He mentioned this only to reinforce the point that positions of countries could change in a short period of time, which could in turn influence the structure and substantive provisions of a potential agreement. 
90. The representative of Korea
 said that his delegation recognized the importance of 
development provisions in the architecture of a mult ilateral investment agreement.  In this sense, 
Korea welcomed the Chair’s decision to give priority to the discussion on development 
provisions.  With reference to the point made by India, he emphasized that  Korea’s experience 
with FDI, particularly after its financial crisis in 1997, strongly suggested that FDI – even when  WT/WGTI/M/18 
 Page 23 
  not necessarily limited to greenfield investment – had demonstrated a positive relationship with 
economic growth and development.  More specifically, Korea believed that more in-depth discussion and elaboration would be needed to prop erly integrate development provisions into a 
multilateral framework on investment. 
91. As a first step towards such elaboration, Korea highlighted two aspects for the 
consideration of the Working Group.  First, in adopting substantive obligations for the 
liberalization and protection of investment, devel oping countries should be given the opportunity 
to formulate policies to further their development objectives.  These two objectives, the 
liberalization and protection of investment, on the one hand, and the flexibility to apply 
development policies, on the other, could be compatible and complementary when development 
provisions provided transparent procedures and clea r-cut limitations.  In this vein, his delegation 
echoed Canada’s remarks to the effect that flexibility should not translate into discrimination.  
Second, any development provisions elaborated in the Working Group and eventually 
incorporated into the multilateral framework on investment should not be in conflict with other 
agreements under the WTO umbrella.  Therefor e, the Working Group needed to look into 
relevant provisions of other agreements, such as Su bsidies, TRIPS, and TRIMs to ensure that the 
various development provisions were compatible and coherent. 
92. The representative of Zambia
 introduced a note of caution to the Working Group’s 
deliberations, and warned against an over-ambitious agenda.  He recalled that the mandate of the 
Working Group, as set out in the Doha Ministerial Declaration, was to undertake a more detailed 
course of study so that the issues might be better understood.  Despite the fact that the Working Group had been discussing this issue since 1996 , developing countries like Zambia had scanty 
information, especially in relation to the implications of a multilateral agreement on investment.  
The Doha Declaration identified issues for further  clarification, two important aspects of which 
needed to be underlined.  The first was that the items mentioned in paragraph 22 were for 
clarification.  This did not mean that they had al ready been accepted as an appropriate subject in a 
multilateral framework on investment .  It remained possible that after this clarification exercise 
Members might decide that the items should be treate d in a certain way – or indeed that an item 
should not be included at all. 
93. The second point was that the items listed in paragraph 22 were not the only subjects for 
clarification.  If developing and least-devel oped countries identified other elements for 
consideration or clarification, this paragraph did not prevent them from doing so.  The 
Declaration went on to identify possible guidelines for shaping a multilateral framework from a 
development perspective, including that it should reflect a balance of interests for host and home 
countries, and take account of development policies and development objectives of the host governments, and take into account the special development, trade and financial needs of 
developing countries, including the least-devel oped countries.  However, as mentioned in 
paragraph 20 of the Doha Ministerial Declaration – and also in the Chairman’s statement - the 
modalities for negotiation of such a framework would have to be worked out.  In this respect, the 
Working Group still had a long way to go.  
94. He reiterated the point made by other delegations that developing and least-developed 
Members might wish to apply conditions on the entry and operation of FDI in accordance with their own development priorities and strategies.  In this respect, Zambia believed that Members 
should retain their autonomy.  As with trade liberalization, it was also important for developing 
and least-developed countries to have flexibility as regards the phasing in of FDI disciplines, their 
quality, and their appropriateness to a country’s needs and level of development.  It was also WT/WGTI/M/18 
Page 24   important for beneficial synergies to develop between FDI and domestic investment.  It was instructive that recent studies had indicated that FDI could have possible adverse effects on 
domestic investment. Host countries might wish  to protect domestic small- and medium-sized 
enterprises from adverse foreign competition, either through channelling FDI, or through measures directed towards favouring domestic enterprises.  This was not a new idea; indeed it appeared to be a mechanism used in developed countries.  The point was that developing 
countries needed to retain the ability to scre en and channel FDI in tune with their domestic 
interests and priorities.  There appeared to be no consensus yet on the types of policies that would ensure that FDI had positive effects – perhaps be cause different factors applied in different 
economies.  In Zambia’s view, other study of this issue would be of immense help to developing 
and least-developed countries. 
95. He noted that the issue of non-discrimination was a hugely complex one, and Zambia did 
not want to make hasty decisions on this subject .  Zambia viewed FDI as an important component 
of its development strategy and policy.  However,  his delegation was worried about subscribing 
to an overly idealised view of FDI, as a kind of panacea for development.  FDI could bring with it 
a number of valuable resources for development  when new productive capacity was created.  It 
was also recognized that FDI could bring with it employment and technology, which could in turn 
give rise to other industries and contribute to fu rther employment.  Zambia understood that the 
positive effects of FDI might not come about auto matically.  National policies and strategies 
could play an important role, and Zambia recognized its responsibilities in this context, ensuring that it did in fact generate such benefits.  While macroeconomic stability and other policies to 
attract FDI were important, hi s delegation also believed that there was a need for regulation and 
for channelling FDI into sectors of interest.  Ther efore Zambia was of the view that there must be 
flexibility for Members to give preference to certain types of FDI, as well as to certain types of 
investors.  For example, it was Zambia’s view that domestic investment should be encouraged, as domestic investors might be more likely to have domestic linkages with their investments, thus 
generating further domestic economic activity.  His delegation therefore proposed very careful 
examination of these issues, and in this regard suggested that a useful approach might be to 
consider them in the context of the development dimension. 
96. With regard to modalities for pre-establishment commitments based on a GATS-type 
positive list approach, Zambia understood this to mean that countries were free to determine the 
admission and establishment commitments they were prepared to make, and that conditions could 
be attached to these undertakings.  The exper ience of the GATS negotiations on specific 
commitments suggested that this  process would depend to a great extent on a series of bilateral 
and plurilateral negotiations with other countries , and in particular with the major developed 
countries.  His delegation believed that Zambia had neither sufficient experience nor time to 
clearly assess the potential flexibility of this app roach, and would require further consideration of 
the matter. 
97. The representative of Chile
 noted that a number of interventions – as well as most of the 
written submissions – had made th e point that a multilateral framework on investment would 
need to give greater freedom and flexibility to developing countries.  This balance should be reflected in the basic structure of the agreement, as well as in specific provisions.  She also noted 
that these horizontal aspects of development provisions had already been touched upon – or 
would be touched upon - in the Working Group’s discussions of scope and definition, 
transparency, non-discrimination, and modalities for pre-establishment treatment.  Her delegation 
believed that the GATS embodied most of these concepts in its present structure, and that a 
multilateral framework on investment should take GATS as its reference point.  As an example of  WT/WGTI/M/18 
 Page 25 
  how development provisions could be embodied in in vestment agreements, she cited the case of 
Chile where rules regarding transfe r limitations – in order to mitigate the destabilizing effects of 
short-term capital flows – were incorporated in a ll of its bilateral, regional and multilateral 
investment-related agreements,  including the GATS.   
98. The representative of Cuba
 said that the Doha Ministerial Declaration had been clear on 
the point that developing and least-developed countries should only be asked to undertake 
commitments and disciplines proportional to their development needs and individual 
circumstances.  It could not be assumed that a multilateral framework on investment would 
necessarily provide developing countries with the fl exibility they needed to apply their policies 
and strategies in this sphere.  For this reason, developing countries needed to maintain the 
capacity to screen foreign investment in ways which would foster economic development.  Given 
the direct relationship between investment and development policies and programmes, the 
principle of special and differential treatment must be appropriately applied.  Likewise, the 
coverage of a potential agreement should not exten d beyond post-establishment treatment in order 
to preserve the decision-making capacity of nati onal governments, and to avoid offering legal 
protection to short-term capital flows that mi ght be detrimental to development.  Cuba believed 
that the various modalities of a possible investment agreement needed to be analysed with a view 
to ensuring effective special and differential treatme nt.  Special and differential treatment must go 
beyond transition periods, and include lower levels  of obligations, provisions on technology 
transfers, and flexible commitments for developing countries.   
99. The representative of Mexico  noted that FDI had played an important role in Mexico’s 
development, not only as catalyst for employment , but also as a vehicle for the transfer of 
technology.  FDI had clearly contributed to Mexico’s economic growth, fostering capital 
formation, the expansion of exports, increased competition, and technological advancement.  The 
potential benefits of foreign investment were well documented.  As regards theoretical work, he 
drew attention to studies conducted by the OECD  that showed empirically that FDI could have a 
positive impact on technological development, m anpower training, and overall integration into 
the international economy.  These changes contributed directly to economic growth which, in turn, was fundamental to alleviating poverty in developing countries.  Beyond strictly economic 
benefits, Mexico’s experience had demonstrated that FDI helped to improve social and 
environmental conditions. 
100. Despite all these benefits, Mexico understood – and shared – the concerns expressed by 
many Members regarding the need to ensure that any agreement struck a proper balance between transparent and clear rules on the one hand, and flexi bility for developing countries, on the other.  
Mexico, like others, was convinced that the GATS mi ght be an inspiration in the formulation of a 
multilateral framework on investment that embodied flexibility as one of its central goals.  Mexico also noted with some surprise that when the Working Group discussed development provisions, a number of delegations raised the issue of investment incentives and performance requirements.  Mexico felt that performance requirements were not a subject for analysis in this Working Group for two reasons.  First, the TR IMs Agreement was itself already the subject of 
review in another context.  Second, paragraph 22 of the Doha Ministerial Declaration did not list 
performance requirements as a matter for further clarification by the Working Group.  The 
inclusion of themes outside those set out in the Doha mandate might distort the structure and 
spirit of the Declaration, as well as overburden the agenda of the Working Group. 
101. As regards investment incentives, Mexico’s position was that such incentives did not 
constitute an optimal policy instrument, but rath er were a second best solution.  A series of WT/WGTI/M/18 
Page 26   studies carried out by the OECD demonstrated that  even when there was a theoretical justification 
for incentives it was not recommended strategy because it encouraged rent seeking and corruption.  The studies concluded that the most  appropriate policy response was to create a more 
favourable investment environment overall, th rough the creation of a modern infrastructure, an 
effective system of social security and workforce training.  This not only transformed countries 
into a more favourable location for investment, bu t also allowed the domestic economy to benefit 
from foreign participation.  Finally, Mexico considered that the Working Group should be careful regarding the question of regulating corporate li ability.  This question was also noted included in 
paragraph 22 of the Doha Ministerial Declaration.   Again delegations must be conscious of the 
need to avoid overburdening the agenda of the Working Group.   
102. The representative of Colombia
 said that her country was well aware of the advantages of 
attracting FDI.  At the same time, Colombia wa s interested in reducing any negative effects of 
FDI, and felt it was relevant to recognize the vu lnerability of developing countries in the face of 
certain phenomenon, especially financial volatility .  Her delegation suggested that an issue of the 
first order of importance for development was provisions designed to minimize possible negative 
effects of financial turbulence.  More generally, Colombia noted the absence of more 
unambiguous references to the gains which international investment agreements could offer 
developing countries.  Foreign investment was now intimately linked with trade growth, and it 
was important to view investment policy as par t of a broader positioning strategy in a given 
market.  For this reason, Colombia believed that  one important element of a development-friendly 
investment regime would be initiatives aimed at open ing up sectors that were of particular export 
interest to developing countries.  Her delegatio n also believed that flexibility was an essential 
element to consider within the development dimension, not only as regards the coverage of an 
agreement, but also in terms of specific policies. 
103. In this context, she emphasized the importan ce her delegation attached to the issue of 
investment incentives and performance requirements.  It was Colombia’s view that any 
investment negotiation would lead to far-reaching reflection on all measures related to 
investment, including investment incentives, regional  agreements, and so forth.  It was necessary 
to evaluate the impact of these issues in the conte xt of the overall purpose of an international 
investment agreement.  Finally, she pointed out t hat her delegation did not share the view that a 
post-establishment model would be preferable to a pre-establishment one.  On this issue, her 
delegation felt that a mixed model, where a country could undertake pre-establishment 
commitments in sectors of direct interest to it, would be more advantageous.  This mixed or joint 
model would also enable Members to guarantee a stable and predictable framework for 
investment while simultaneously preserving impo rtant flexibility for industrial policy.   
104. The representative of Sri Lanka  noted that, as a trade dependent economy - with external 
trade contributing to seventy per cent of GDP – Sri Lanka considered FDI to be a major vehicle for economic development.  It helped to bridge the shortfall in domestic savings and to achieve a high level of sustainable economic growth thro ugh the development of infrastructure, the transfer 
of technology, the upgrading of skills, access to ma rkets, the fostering of domestic competition, 
and employment generation.  Sri Lanka had recently liberalized investment policy in a number of 
services sectors, allowing up to 100 per cent foreign ownership.  In this context, development 
provisions in a future possible multilateral frame work on investment had to focus on the needs of 
developing countries, particularly small economies.  Host countries should be allowed to balance 
their commitments to liberalize their investment re gimes and to protect foreign investment, on the 
one hand, and, on the other hand, should be allowed to maintain sufficient flexibility to apply 
appropriate policies to support both foreign invest ors and local investors and service providers.  WT/WGTI/M/18 
 Page 27 
  105. His delegation believed that the need to screen investment - and to channel investment 
into certain sectors - may vary from country to country, depending on various factors such as resource endowments, the size of domestic mark ets, and varying development priorities.   
Investment incentives also played an important ro le – a fact which should be recognized in 
formulating development provisions in any possibl e future multilateral framework on investment.  
Sri Lanka shared the view expressed by some dele gations that host countries had a key role to 
play in establishing a favourable, transparen t, stable and predictable investment climate.  
Similarly, home countries had an equally important role to play in providing information and technical assistance, and in encouraging linkages between host and home countries. 
106. One of the important considerations in addressing development provisions was the 
different levels of economic development of Me mber countries, and the need to reflect these 
differences in the application of special and diffe rential treatment, which could include flexibility 
in the timing of implementation and limitations on specific commitments.  In this context, his 
delegation believed that the GATS approach had merit, as it would provide Members with flexibility to undertake commitments only in selected  sectors, with limitations on market access 
and national treatment, to take MFN exemptions, an d to preserve the right to regulate.  Listing 
horizontal measures applying across all sectors of in terest to a particular country would also be an 
important element of flexibility that woul d be available under such a GATS approach. 
107. While many developing countries, including Sri Lanka, had experience in providing 
protection to investors, particularly in the post -establishment phase, through bilateral investment 
agreements, experience in the pre-establishment phase was more limited.  A developing country 
such as Sri Lanka needed to understand fully the complex implications of any possible future 
multilateral framework on investment that addressed both pre- and post-establishment phases.  Technical assistance was needed to improve the ca pacity of Members to understand the issues 
and their implications, especially with regard to pre-establishment commitments. 
108. His delegation also wanted to highlight  the issue of corporate responsibility vis-à-vis  host 
countries.  While Sri Lanka recognized that a long-term relationship between corporations and 
host countries was extremely important to t he achievement of development objectives, the 
question of corporate responsibilities in t he context of development should be taken into 
consideration in the Working Group’s deliberations under development provisions. 
109. The representative of Indonesia
 considered the development dimension to be an essential 
element for discussion in the Working Group – one that should be taken into account in 
discussions of all other elements specified in pa ragraph 22 of the Doha Ministerial Declaration.  
His delegation believed that the current discussion should be followed up by a more systematic 
discussion of the issue, not only as a specific agenda item, but as part of each and every element 
addressed under paragraph 22.  Indonesia was of the view that development provisions were essential to ensure a level playing field betwee n all countries, particular ly in a sensitive and 
complex area such as investment.  These provisions were intended to accord flexibility to 
developing countries so as to enable them to pursue their strategic development objectives.  The 
development dimension should also be reflect ed in the level of obligations and commitments 
undertaken by developing countries, which should be commensurate with their developmental levels. 
110. Indonesia took the position that the development dimension could not be adequately 
addressed through preambular statements or best-endeavour clauses, but needed to be 
incorporated in the basic structure and provisions of  the agreement.  It was equally important that WT/WGTI/M/18 
Page 28   development provisions be made operational,  with assurances that commitments would be 
effectively implemented.  His delegation also un derlined the need to include the conduct of home 
countries and restrictive business practices in the discussion of the development dimension.  With 
regard to investment incentives, Indonesia wished to secure their retention within the scope of 
development provisions.  However, Indonesia believed that such incentives should be formulated with great care, and applied in a transparent and predictable manner.  While Indonesia supported the various provisions outlined in the Secretaria t Note, his delegation also wanted to see the 
inclusion of safeguard measures under development provisions - assuring developing countries of the right to take safeguard actions to address any unforeseen negative effects of FDI. 
111. As regards pre-establishment treatment, Indonesia was of the view that the right to 
regulate the entry of foreign investment - and to conduct screening - should be retained in any 
potential multilateral framework on investment, as a means of ensuring that FDI supported a 
country’s development objectives.  Such screening should be based on clear criteria and 
conditions - incorporated in the laws of host countries – to be met by foreign investors in the pre-
establishment phase.  With regard to non-disc rimination, the issue of national treatment was 
critical to finding an appropriate balance between the need to attract foreign investment on the 
one hand, and the need to maintain policy space to develop domestic industries (especially small-
and medium-sized industries) on the other.  The sensitivity of this issue for host countries was 
underscored by the fact that in most bilateral and regional arrangements, national treatment applied only in the post-establishment phase.  With regard to the development aspects of 
transparency, his delegation emphasized that although Indonesia acknowledged the importance of 
transparency in creating a predictable business environment, the question was whether overly-
ambitious transparency obligations could actual ly be implemented by developing countries given 
their lack of human and institutional capacity. 
112. The representative of New Zealand
 observed that if Members chose to move forward 
with a multilateral negotiation on investment, there would be a range of national objectives – not 
just development objectives – which all governments would need to factor into their approach.  
He noted that the Secretariat’s paper, particularly after page 15, provided in some ways a template for the approach that many Members might wish to pursue.  In response to India, he was struck 
by the fact that it seemed premised on the understanding that the Doha mandate was aimed at 
investment liberalization.  This was not New Zealand’s assumption, and he cited paragraph 20 of the Doha Ministerial Declaration which recognized the case for a multilateral framework on 
investment to secure “transparent, stable, and predictable conditions for long-term cross border 
investment, and particularly foreign direct investment ”.  While it was quite true that liberalization 
was part of the agenda of many delegations, he was not sure it was wise to burden the Working 
Group with the assumption that this was the prim ary objective of negotiating.  It seemed to his 
delegation that the emphasis of the mandate was more on the governance aspect of investment 
rules, and that in the interest of achieving a good result in a complex area in a limited time, it 
might be profitable to keep discussions focused on the more narrow aspect of the mandate and to 
treat liberalization as a debate t hat had yet to take place.    
113. The representative Switzerland
 felt that the current horizo ntal – or “across-the-board” - 
discussion of the development issue was useful.  There were two sides to the debate.  The first 
was the current policy dimension of FDI, mainly expressed through the applied regimes of host 
countries on entry, establishment, ownership, cont rol, operational restrictions, authorizations, and 
reporting.  What was encouraging at present was the trend towards the liberalization of these 
regimes in recent years.  UNCTAD had registered mo re that 60 countries a year introducing more 
than one hundred regulatory changes more favourable to FDI, while changes less favourable had  WT/WGTI/M/18 
 Page 29 
  averaged less than ten per year.  This overall trend  towards investment liberalization explained, in 
part, why Members were now discussing the issue of investment in the WTO.  Moreover, FDI policies were themselves at the crossroads of numerous domestic policies and legislation, which 
addressed among other things industrialization, job creation, technical training, economic 
diversification, backward and forward linkage s, research and development, technological 
capacity, rationalization, competition, total factor  productivity, fiscal revenues, trade regimes, and 
balance-of-payments.  These complex interconnections among policies, and the need to look carefully at the issue of development from a multitude of perspectives, was the second dimension of the current debate.  Switzerland agreed that  flexibility needed to be an integral part of an 
investment agreement.  However, the details of this “flexibility” would depend on a thorough 
analysis of each core element of the agreement.   Existing WTO agreements provided a good 
starting point for the Working Group’s discussion s, not least because they showed the willingness 
of Members to take development needs fully into account. 
114. He then responded to six points that had been raised in the present discussion.  First, 
regarding the point that the WTO should remain  focussed on trade, his delegation noted that 
investment had grown five times faster than trade in the last decade.  Moreover, one-third of 
world trade now took place within multinationals enterprises, and another one third among 
multinational and their suppliers.  This demo nstrated inescapably that investment was now 
driving trade.  Including investment rules in the WTO was a logical next step that would only further advance the WTO’s core objective which was the promotion of world trade.  Second, responding to the point raised by India regarding the legitimate role for investment restrictions in 
promoting development objectives, he noted th at his delegation recognized that there was 
sometimes a legitimate role for infant industry policies.  However, the longer such market 
distortions remained in place, the less useful purpose they generally served, becoming instead 
vehicles for protectionism and rent-seeking and benefiting a relatively small number of economic agents.  Moreover, the smaller the economy, the more  detrimental the effects of these policies on 
the prospects for long-term growth, because small economies soon reached the limits of their 
domestic markets.  Third, regarding concerns about volatile capital flows, his delegation noted 
that the majority of Members agreed that a multila teral framework on investment should focus on 
long-term, not short-term, investment.  Fourth, regarding the need to address the mobility of all factors of production, not just investment, Swit zerland also saw a linkage between the issues of 
capital and labour mobility, and indeed this linkage had already been implicitly recognized in mode 3 and mode 4 of the GATS.  Nevertheless,  his delegation felt that the linkage between 
labour mobility and investment was not of the same magnitude as the linkage between trade and 
investment.  Fifth, regarding performance requ irements, Switzerland supported the views 
expressed by Mexico and Chile to the effect that, for the time being at least, the issue was already 
being adequately addressed in the TRIMs Commit tee, as well as in the Council for Trade in 
Goods, in the context of the TRIMs Article 9 review.  Sixth, regarding the need to match flexibility in an eventual agreemen t to different development levels,  Switzerland felt that it was 
important for developing countries to set out their flexibility needs, and to explain why they were necessary.  Only then could Members begin to examine the ways in which flexibility could be integrated into an eventual agreement.   
115. The representative of the United States
 noted her delegation’s view that the work done in 
the Working Group should neither prejudge nor exclude various development approaches that 
could eventually be included in a multilateral framework on investment.  The United States 
appreciated the Secretariat's point in its Note that  if development provisions were to be effective, 
they needed to be complements to, not substitutes for an agreement's policy disciplines that provided transparent, stable and predictable condi tions for foreign investment.  Furthermore, the WT/WGTI/M/18 
Page 30   United States agreed with the st atement that flexibility needed to be defined carefully and applied 
through clear and precise provisions, so as not to undermine the value of an agreement's binding obligation in guaranteeing predictability and stab ility for foreign investment.  Her delegation 
believed these were important principles to ke ep in mind as the Working Group considered where 
a balance might be achieved between the interests of investors, host and home governments. 
116. In particular, while many investment agreements provided development flexibility 
through the regulation of investment entering the country, the United States preferred to include 
general rules on pre-establishment, but to allow countries to take individual exceptions to those 
rules to customise their obligations in a way to further their development agendas in targeted areas.  Similarly, the United States believed t hat a broad, asset-based definition of investment 
would be a preferable starting-point for a multilater al agreement, as strong investment protections 
encouraged the investment that facilitated develop ment.  In this respect, the United States 
appreciated the Secretariat's recognition of t he importance of portfolio capital inflows in 
supplementing FDI and foreign exchange resources of developing countries. 
117. One of the ways in which the United St ates’ investment agreements incorporated 
regulatory flexibility was in the area of inte llectual property.  US investment agreements had 
traditionally provided that, to the extent that a host government recognized intellectual property 
rights, they were deemed to be covered assets.  However, the agreement itself did not mandate protection of any particular type of intellectual property or require a minimum protection term, 
relying instead on national laws and standards to make that determination. 
118. Another area frequently cited as an example of  where developing countries felt the need 
to have regulatory flexibility was in the area of re strictive business practices.  She expressed the 
view that the United States had one of the wo rld's most comprehensive and actively enforced 
competition laws, while simultaneously taking no reservations for its use in international investment agreements.  This balancing occurred  because the United States' competition policy, 
which included review and approval of many mergers and acquisitions, based its decisions on 
economic principles and objective characteristics, such as size, rather than on the foreign or 
domestic ownership of the companies.  The only instance where the US considered foreign 
ownership in evaluating a merger or acquisition  was when there might be national security 
implications.  Under the United States’ Exon-Flori o legislation, which had been in effect for 
fourteen years, the US Government had examined over 1400 such transactions, only one of which was actually blocked by the President on national security grounds. 
119. The United States also shared the concern of many WTO Members on the potential 
implications for bilateral MFN obligations being i ncorporated into a multilateral context, and her 
delegation looked forward to finding creative ways to address this issue. 
120. The United States disagreed with UNCTAD's op inion that a negative list approach might 
prove too complex for developing countries to negotiate as compared to a positive list.  As there were currently nearly 2,100 international investment agreements, nearly all of which relied on a negative list approach, there was the institutional capacity and experience among developing countries’ investment negotiators in dealing with  a negative list approach that did not exist for a 
positive list.  Furthermore, a positive list may have been desirable in the GATS context, as it 
incorporated a relatively new topic and four different modes of services.  In contrast, investment 
agreements were neither new, having been around for nearly 50 years, nor were they complicated 
by various modes of delivery.  Finally, regarding the suggestion that the Working Group should 
examine the issue of performance requirements, her delegation agreed with Switzerland, Mexico  WT/WGTI/M/18 
 Page 31 
  and Chile that this subject was already being ad equately addressed in other contexts within the 
WTO. 
121. The representative of Norway
 fully supported the view that a multilateral framework on 
investment should reflect the needs of home and host countries in a balanced manner, take due 
account of the development policies and objectives  of host countries, recognize their right to 
regulate, and should reflect the special development, trade and financial needs of developing and 
least-developed countries.  Norway also recognized  developing countries’ needs for flexibility in 
a multilateral framework on investment.  His deleg ation considered that an investment framework 
agreement modelled on a GATS approach - where deve lopment provisions were built in - could 
meet the needs of developing and least-developed countries.  Development provisions should be 
regarded as a horizontal issue, and his delegatio n referred to paragraph 15 in the Secretariat’s 
Note to the effect that the development dimensio n should be an integrated part of the design and 
structure of any investment agreem ent.  Norway also agreed with New Zealand that the primary 
goal of this exercise was not liberalization.  For example a schedule of commitments in the pre-
establishment phase did not necessarily have to be negotiated, as each country could decide what 
they wish to put on such a list.  Finally, Norw ay thanked those developing countries that had 
identified the type of provisions they thought were necessary to enable them to subscribe to a 
multilateral investment agreement.  
122. The representative of Honduras  suggested that paragraph 22 of the Doha Ministerial 
Declaration did not necessarily provide clear gu idance as to how the Working Group was meant 
to address the issue of development provisions .  One aspect of the mandate was to clarify 
development provisions; but at the same time, the mandate was to ensure that the special needs of 
developing countries were taken into account in  the multilateral framework.  His delegation 
believed that this implied differentiated results.   First, that development provisions should be 
included that were distinct from flexibility and special considerations for developing countries.  
Second, that obligations and commitments in a future agreement must taken into account 
development needs, allowing developing countries to  adopt disciplines that were proportional to 
needs and individual circumstances.  Beginning with  this second conclusion, Honduras felt that 
this referred specifically to flexi bility, so that developing countries should be allowed to adopt 
commitments gradually and to deviate from discip lines, in a transparent manner, when pursuing 
justified national development obj ectives.  A multilateral framew ork should al so recognize 
developing countries’ right to regulate, and enjoy a transition period for the adoption of 
commitments and obligations.  Regarding the first aspect of Honduras’ analysis of paragraph 22, 
flexibility should not be viewed as a substi tute for development provisions.  An eventual 
agreement must become a new and effective inst rument of development with well defined 
commitments on the part of developed countries.   These commitments should be oriented to, 
among other things, the transfer of technology, facilitating the attraction of FDI, and to 
encouraging synergies between foreign investors an d local enterprises.  To this end, Honduras 
invited delegations to engage in a positive and constructive discussion of these issues.  It was 
clear that any effective and operative provis ions for development would constitute a great 
attraction for developing countries in future investment negotiations.   
123. The representative of Malaysia  observed that, while paragraph 22 of the Doha Ministerial 
Declaration instructed the Working Group to clarify a series of elements of a possible multilateral 
framework on investment, so far delegations had limited themselves to setting out national 
positions.  This compelled Malaysia to state its own position on these issues, while also seeking 
their clarification.  On development provisions, his delegation noted that while having preambular 
language might superficially appear to advance development objectives, thus far no legal WT/WGTI/M/18 
Page 32   authority had determined that such language was sufficient to enable development provisions to be evoked by signatories to an agreement.  Similarly, as regards best-endeavour language and notions of transitional periods, the experience of many developing-country Members had shown that such provisions had not proven to be in their in terests.  Implicit in the idea of transition 
period was the reality that even if developing-country Members were unprepared to assume certain disciplines or obligations, they would nevertheless be forced to do so at the end of the transitional period.  At best, they would have to seek a further time-limited extension to the 
transition period when they were still unready to accept the disciplines.  Thus Malaysia had difficulties in accepting such concepts in the con text of a possible mult ilateral framework on 
investment. 
124. As regards the concept of progressive liberalizat ion, Malaysia was sceptical of the idea of 
prescribed timelines for the negotiations.  His delegation felt it should be left to developing 
countries themselves to determine when they would be in a position to further liberalize and to 
accept additional obligations.  Malaysia had reiter ated in all meetings of the Working Group – as 
well as in the run up to the Doha Ministerial Conference – that if there was to be a multilateral 
framework on investment, developing countries should have the ability to take permanent carve-
outs from disciplines.  Malaysia stood by this position.  Such development-related carve outs 
should be built into the structure of a potentia l agreement, not merely offered as transitional 
mechanisms.  Without any time-bound limitations, developing countries should be free to continue policies, such as, screening, the use of investment incentives and other performance requirements (not under the ambit of the TRIMs Agreement or any other WTO rules), 
employment policies (that could change from time to time), land and property ownership, and the 
ability to determine the form of FDI (e.g., join t ventures).  If proponents of a multilateral 
framework on investment were generally concerned with the need for development provisions – and with the interests of developing countries more generally – this idea of permanent carve outs should be an acceptable one to them. 
125. Regarding national treatment and MFN tr eatment, Malaysia asked whether developing 
countries should not be given the flexibility to  discriminate between their nationals and foreign 
investors if individual circumstances required?  His delegation believed that ensuring MFN 
treatment was more pertinent to the objectives of a possible multilateral framework on investment 
than attempting to achieve legally binding national treatment.  Malaysia believed that market access could be provided without necessarily guarantee ing national treatment.  On the subject of 
safeguard provisions, Malaysia agreed such provision needed to be considered by the Working 
Group, especially in the context of emergency si tuations, such as the sudden crowding out of 
domestic investors.  Regarding pre-establishment  treatment, his delegation supported a positive 
list approach – without prejudice to its position on the question of whether the GATS offered a 
useful model of this approach – because it was more favourable to developing countries.  
However, the Working Group would need to determine at a later stage whether a positive list 
should be based on a sectoral approach, or tariff- like line-by-line approach.  Malaysia also agreed 
with New Zealand and Norway that the primary ai m of this exercise was not liberalization.  
Indeed, Malaysia was inclined to believe that de veloping countries should be exempted from 
making any commitments at all regarding pre-est ablishment treatment.  Finally, Malaysia agreed 
with Norway and other delegations that home count ry obligations should also be included in any 
multilateral framework on investment. It was Malaysia’s view that embodying development 
provisions in a possible multilateral framework  was about recognizing an essential right to 
development.     WT/WGTI/M/18 
 Page 33 
  126. The representative of the Czech Republic
 pointed out that before reviewing the numerous 
potential benefits and costs of FDI in the development context, the extreme complexity of FDI itself was worth remembering.  The assessment of the costs and benefits of investment projects 
differed according to economic sectors.  Furt hermore, differences resulted from the corporate 
strategies of investors, the mode of entry of FDI, the cyclical positions of home and host 
economies, and the level of economic development  of the host country.  There were different 
factors inherent in developing country economies that, along with the characteristics of FDI flows, had a major influence on the benefits and costs of FDI.  One such factor was market size 
and growth prospects:  developing countries with  larger markets, faster economic growth, and a 
higher degree of economic development provided better opportunities for enterprises to exploit 
their ownership advantages.  Another factor was openness to international trade and access to 
international markets:  economic reforms and open door policies and other efforts to promote trade by conducting bilateral trade agreements and ad opting unilateral actions  could help to attract 
export-oriented FDI.  Another important factor was resource and human endowments:  the 
"classic" motivation for investment in a developin g country was the availability of abundant or 
low-priced production factors.  The availabil ity of skilled inexpensive labour was becoming 
increasingly important as a motivation for FDI into developing economies.  A fourth important factor was market access:  access to host country markets for processed goods were an important motive for investing in the manufacturing sector s of developing countries, particularly where 
import-substitution and related policies impeded di rect export from the home countries.  Finally 
the impact of FDI - and the benefits that a country may derive - depended particularly on 
macroeconomic factors such as the rate of s aving in the host country, and on its degree of 
integration into the international financial syst em.  Regarding the former point, a crucial 
separation needed to be drawn between developing countries that had sufficient domestic savings 
to finance a rate of capital accumulation that was deemed economically or socially optimal, and 
those which fell short of this objective. 
127. She then addressed the linkage between the FDI and economic growth.  The potential 
channels through which inward FDI could influence macroeconomic performance could be 
divided into three categories.  FDI could boost the total funds available for investment in the host 
economy, provide a less volatile source of funds than loans and portfolio investment, and contribute to international integration.  Many developing countries considered foreign investors as a potential source of economic growth.  Attitu des differed, however, towards the various forms 
that FDI could take – i.e., FDI that produced an immediate and visible impact on domestic value 
added, versus FDI that at first took the form of a transfer of the ownersh ip of well-run existing 
enterprises.  The first category was the most impo rtant from her delegation’s point of view, and 
included greenfield investment and mergers and acquisitions where the domestic enterprise sector had limited access to international financial markets. 
128. Some Members had stressed the potential negative effects of FDI on a developing 
country's economy as a result of the "crowding out" of domestic investment and the suppression 
of local entrepreneurship.  A second concern was the risk that developing countries might 
experience a deterioration in their balance-of-payme nts due to increased imports.  Furthermore, 
an adverse impact on a developing countries' balance-of-payments position could result from profit repatriation and from reduced tax revenues as  a result of transfer-pricing practises, tax 
allowances and other financial incentives gran ted to foreign firms.  However these negative 
impacts of FDI were not prevalent - and in any event experience differed from case to case, 
making generalisations risky.  As regards FDI and foreign trade linkages, she noted that policy makers in developing countries had traditionally looked upon FDI as a potential tool for boosting export performance and encouraging import-competing production in the host economy.  Here WT/WGTI/M/18 
Page 34   again, the degree to which FDI and inward and outward foreign trade wa s inter-linked in a 
network of international labour sharing, depended on the motivation for FDI, as well as on the sectoral specifics and macroeconomic characteris tics of the home and host economies.  Another 
frequently noted concern of developing-country au thorities regarding the activities of investors 
involved the possibility of transfer pricing in con nection with intra-enterprise foreign trade.  A 
related issue was that a profitable investment ev entually gave rise to a degree of repatriation of 
profits and dividends, and in some cases to the pa yment of royalties.  Empirical evidence of the 
financial flows associated with FDI was notori ously hard to find.  Developing countries with 
weak legal structures or a low degree of compliance might well encounter problems, especially if 
their national investment climate was perceived as lacklustre.  It needed to be stressed, therefore, 
that to reap the benefits of FDI a developing country must, at a minimum, put in place an 
appropriate legal and regulatory framework and assure a reasonable degree of compliance.  The main potential benefit of FDI for developing countries lay in its long-term contribution to 
integrating the host economy more closely into the world economy.  However, developing-
country authorities needed also to consider the sh ort- and medium-term impacts of FDI as well, 
particularly when faced with currents account pressures. 
129. The representative of Venezuela
 observed that this agenda item was central for her 
delegation, and noted some elements that were of  particular importance.  She noted that many of 
the existing special and differential treatment pr ovisions in WTO agreements were being viewed 
or revised in the Committee on Trade and Develop ment with the view to making these provisions 
legally binding and operative.  In a possible multilateral framework on investment Members 
would have to include provisions which were truly substantive, effective and operational, which 
meant that they would need to be rooted in language that went beyond best-endeavours.  In terms 
of the policy space that developing countries needed within a framework of multilateral disciplines, her delegation focussed on three main concerns.  The first involved the right to regulate - and to undertake regulatory reform - in line with national development policy objective.  
Her delegation considered it extremely important  to note the need for a proper sequencing of 
policy reforms – i.e., to ensure that the domestic regulatory capacity increased in line with the 
liberalization of international investment policy.  While this process was already occurring in her country, it was important to keep the proper sequencing of the two processes firmly in mind.  Her second point was the importance of recognizing, in the context of development provisions, the legitimate aspiration of developing countries to develop all of their economic sectors.  Governments needed to ensure that foreign investment flowed in ways that were conducive to economic growth and their national objectives.  He r third point was related to capacity-building – 
the capacity of developing countries to design and es tablish investment priorities, the capacity to 
negotiate effectively, and the capacity to implem ent the agreements reached.  It was not just a 
question of having seminars and proper documentation, but rather developing a long-term investment strategy among all key stake-holders in developing countries.  These needs must not 
be ignored in the Working Group’s.   
130. The representative of Turkey
 observed that, given that the majority of WTO Members 
were developing countries, a potential multilateral framework on investment should clearly contribute to their special development needs and pr iorities.  Moreover, taking into consideration 
the different levels of development among Members, and the variety of interests of home and host 
countries, flexibility had to be the main approach adopted by the Working Group in order to 
provide sufficient space for developing countries to set up their national development policies in 
accordance with their specific needs and limits.  In order to achieve an overall balance between 
rights and obligations among the parties, a potential investment agreement had to include the  WT/WGTI/M/18 
 Page 35 
  development dimension in all its provisions – this  should include general obligations, as well as 
its specific exemptions for developing countries so  as to implement their development policies. 
131. Her delegation believed that a new multilateral  architecture based on a GATS approach 
would provide enough flexibility for all Members to undertake selective and progressive liberalization.  In this respect, Turkey’s main concern was that a multilateral framework on 
investment would not limit a party's ability to regul ate or restrict the entry of foreign investment 
at the pre-establishment stage.  In light of the various interventions on the subject of development 
provisions, her delegation believed that the ap plication of national treatment for the pre-
establishment phase of an investment was a critical issue from the point of developing countries.  Her delegation also broadly supported Sri Lanka’s point about the critical need to provide 
technical assistance regarding the pre-establishm ent phase.  Besides technical assistance, there 
was also a need for more analytical work on th e pre-establishment stage of FDI, not only to 
examine its potential negative impact, especially regarding the crowding-out of local investments 
and small- and medium-sized enterprises, but also to examine its positive impact on the 
comparative advantages of local enterprises, and the overall competitiveness of developing 
countries. 
132. Her delegation wished to underline a final point.   If a multilateral investment agreement 
came into being, all WTO Members should be party to the agreement.  But in the eventuality that accession to the agreement was made optional, the commitments flowing from it should apply 
only among the parties to the agreement.  In other words, Turkey was in favour of a strict balance 
between rights and obligations.  There should be no assumption that obligations would extend 
towards non-parties. 
133. The representative of Morocco
 noted that the development dimension, which was placed 
at the heart of the Doha Ministerial Declaratio n, had a very important place in the context of 
investment.  Placing development issues at th e centre of the Working Group’s discussion was 
particularly innovative and important especially in li ght of the failure of the OECD’s Multilateral 
Agreement on Investment, which offered very little room for the development dimension.  
Morocco believed that the key elements of the development dimension needed to be built into the 
structure of the agreement, as a di stinct form of special and differential treatment.  His delegation 
believed that the central objective was to find a proper balance between obligations and disciplines, on the one hand, and developing country flexibility and manoeuvrability on the other hand. 
134. The representative of the Philippines
 commented that the usual rhetorical tributes to 
development concerns – including the need for flexi bility and transition periods, the need for 
balance, the need to preserve the right to regulate, an d so forth - rang alarm bells in the ears of 
harassed negotiators now ensnared in lengthy debates on implementation issues and special and differential treatment, with the minimalist objective of making them mandatory and 
operationable.  What was significant to the Wo rking Group’s discussion was not rhetoric, but 
substantive proposals on the scope and modalities of a possible agreement.  Regarding its scope, 
he noted that in the Working Group’s discussions since 1996, and in the lead up to the reluctant 
acceptance of a reformulated mandate in the Doha Ministerial Declaration, little reference had 
been made to pre-establishment issues – in fact, one major demandeur assured Members that their proposal did not envisage negotiations on pre-est ablishment issues.  Now all the submissions by 
Members emphasized this subject.  His delegation believed that, while it was useful to exchange 
insights on the issue and to study its implications, it was, at this point, difficult to accept its 
inclusion in any possible international investm ent agreement.  The treatment of investments WT/WGTI/M/18 
Page 36   before they had even crossed a border could not be given MFN treatment or national treatment 
because it would commit host governments to offer equal treatment to all types and sources of investment, regardless of areas and phases of dome stic operation – and, at the least, would put 
tremendous pressures on host governments in the context of negotiations with potentially all foreign investors to accord similar or equal treatmen t as they accorded to their own nationals.  
This paralleled the principle of full "contestability of markets" in the competition policy arena.  
He did not think that any developing country was wi lling to go that far.  The problem with the 
idea of general or universal commitments in both the pre-establishment and post-establishment phase (as suggested in Korea's paper), was that  it would create little incentive for investors to 
commit large sums or assets, to transfer technology, provide research and development and 
human resource development facilities, or to invest for the longer term, since such commitments 
would make it easier for investors to come and go. 
135. The GATS had been seen by some delegations as a useful model for an approach that was 
both development oriented and flexible, that was progressive, and that allowed a careful 
balancing of the need for rules and the sovereign right to regulate.  While conceding that there 
were more development-friendly provisions in the GATS than in any other covered agreement in 
the WTO, the Philippines could not say, at this  point, whether in fact the careful balancing 
worked or whether developing countries had benefited from it in absolute or relative terms.  The 
GATS had definitely benefited multinational corp orations from developed countries in various 
sectors such as telecommunications, banking and finance, and utilities.  While there were also instances of small- and medium-sized companies benefiting from the GATS, it was not the 
quantum leap forward described by think tanks in  developed countries.  On the other hand, the 
GATS still presented developing country negotiator s a number of problems in areas such as 
classification, the complexity of inscribing  and enforcing commitments, treatment of MFN 
exemptions, and dealing with a myriad of regulatory issues.  He referred delegations to the recent report of the UNCTAD seminar on investment held in Singapore which reached a divided 
conclusion on the matter of the effectiveness, coverage and relevance of the GATS. 
136. As regards the TRIMs Agreement, its impact  on industrialization was still being 
evaluated in the Philippines.  The Agreement spanned a number of industrial sectors, and his 
country had experienced negative effects from it:  migration, unemployment and export 
diminution.  He supported India's proposal to discuss this in the Working Group. 
137. The representative of India
 responded to observations made by delegations on a number 
of issues raised by his delegation in its earlier in tervention.  Regarding the positive impact of FDI 
on a host country, there was no doubt that FDI could bring into the host country a number of valuable resources for development such as capita l, technology, managerial and marketing skills 
and sometime market access in the case of ex port-oriented FDI.  Export-oriented FDI had 
evidently helped a number of countries to build rapidly their manufacturing and export capabilities.  It would be important to exami ne the conditions and factors that promoted the 
export platform or export-oriented FDI.  In comparing greenfield investment with mergers and 
acquisitions, it was the former, as UNCTAD studies had pointed out, that had the more beneficial effects on host economies.  India had been liber alizing its foreign investment policies for more 
than a decade, and had one of the most liberal foreign investment regimes.  However, as the 
UNCTAD presentation had brought out, there could be certain negative effects as well.  The point 
that his delegation wanted to stress was that the positive effects of FDI might not always come 
about automatically, and that developing countries needed to retain the ability to screen and channel FDI in accordance with their domestic interests and priorities in order to maximize the 
positive effect and to minimize the negative effect s of FDI.  His delegation emphasized that, at  WT/WGTI/M/18 
 Page 37 
  this point, it had heard no convincing argument that a multilateral framework on investment 
would achieve this objective.    
138. Secondly, as regards the correlation between mobility of capital and labour, his 
delegation pointed out that FDI was an issue of wi der economic concern than just trade.  Capital 
and labour were complementary factors of production and needed to be studied together.  Capital 
required labour as an integral part of the production process.  An integrated approach was 
necessary – one which regarded the mobility of labour  as part and parcel of the free global flows 
of capital, goods and services.  There was a tw o-way relationship between capital and labour, and 
any discussion of the mobility of capital remained incomplete without appropriate investigation into the scope for the mobility of labour.  In the interest of the development needs of developing 
countries, it was important that the Working Grou p looked at ways of facilitating the movement 
of other factors of production.   
139. Some delegations had referred to the issue of performance requirements, and suggested 
that there was no need to discuss that issue in the Working Group as it was already being 
considered in another WTO body.  It should be noted that the TRIMs Committee dealt with trade 
distortions arising out of investm ent.  In this Working Group, Members were taking a larger 
perspective, particularly as it related to the ov erall development dimension.  Hence delegations 
needed to re-examine performance requirements and their historical role in promoting 
development.  Regarding foreign investors’ obligations, it was noted that this issue was not listed 
in paragraph 22 of the Doha Ministerial Declar ation and therefore need not be discussed in the 
Working Group.  These issues, while they may not be identified as separate items in paragraph 22 
of the Declaration, they were extremely im portant from the development perspective for 
developing countries and they needed to be considered thoroughly.  Until recently, performance requirements were an integral part of the growth  strategy of many developed countries.  It was 
important that performance requirements on employment generation, transfer of technology, 
export performance requirements, training and research and development requirements remained 
available to developing countries to ensure that foreign investment contributed to the achievement 
of developmental policy goals. 
140. In the discussion so far, the proponents of investment rules had focussed only on the 
obligations of host countries while the obligati ons of investors were overlooked.  There were 
serious concerns in developing countries relating to the obligations of investors, especially as 
regards transferring technology, promoting exports , creating linkages with domestic enterprises, 
and so forth.  There were concerns also related to  restrictive business practices.  Discussions on 
binding codes of conduct for investors was, therefore, extremely relevant. 
141. Comments had been made regarding the relationship between trade and investment.  It 
had been noted that nearly one third of world trade was now intra-firm trade between affiliates of transnational corporations – main investors - wh ile another one third was between TNCs and non-
affiliated enterprises.  Investment therefore pulled trade - hence the need to discuss investment in 
the WTO.  His delegation’s response was that in  a broad sense, apart from investment, there were 
a host of other macro-economic variables that had a bearing on trade.  However, it had to be 
emphasized that trade and investment were two distinct variables.  There might be a relationship between the two sometimes, but the extent of that relationship, or the degree of correlation, was a matter that was still being examined in the Working Group.  
142. Though the focus of discussion was on long-term cross border investment, particularly 
FDI, the fact remained that capital tended to move in various ways.  There was no certainty WT/WGTI/M/18 
Page 38   regarding the source of funds.  There was also no certainty regarding the manner in which funds could be retained in the host country, and at what point in time and in what manner and to what extent funds would flow out.  Even after an investment was made, money could be drawn out through derivatives and other financial instrument s.  The issue of capital flows was a complex 
one for trade negotiators to com prehend and considerable emphas is would need to be placed on 
understanding the concept of investment and capital flows.  
143. The representative of Chinese Taipei
 responded to some of the questions and comments 
made on its paper.  He was grateful for the comments made by Hong Kong, China on his 
delegation’s statement that “the commitment model under the GATS would be used as basis for future model on the negotiation of investment rules”.  He took note of the views expressed by 
Zambia as regards the limited scope of the Doha mandate in the area of investment, and the need 
to remain within the parameters of this mandate in the Working Group’s discussions .  He 
suggested that if delegates examined paragrap h 4 of the submission by the Separate Customs 
Territory of Taiwan, Penghu, Kinmen and Mats u, they would find that the focus was not on 
having a definite negotiation of an investment agreement, but on the GATS model, which was 
explicitly identified as needing further clarifi cation in paragraph 22 of Doha Ministerial 
Declaration.  His delegat ion noted that in paragraph 20 of the Declaration, Ministers had agreed 
that negotiations would take place after the Fifth Session of the Ministerial Conference, with the 
qualification that they should be based on a decision to be taken, by explicit consensus, at that Session on modalities of negotiations.  Chinese Taipei had no intention of increasing or decreasing what had already been agreed by Ministers in Doha, and what had subsequently been 
expressed in the Declaration.  Having said that, Ch inese Taipei still favoured the negotiation of an 
investment agreement in the future. 
144. With respect to a binding code of conduct, his delegation felt that the Working Group 
should also consider some of the practical diffic ulties of establishing such a “code”.  As a general 
rule, international agreements did not directly bind enterprises.  Requiring enterprises to do – or  
to refrain from doing – certain things, could on ly be undertaken as a commitment by signatories 
to the agreement, and could only be enforced by those signatories.  Although technically an international agreement could require home countrie s to regulate the business practices of their 
enterprises operating abroad, it might not prove a very effective rule, as home countries were not 
in a good position to collect information on such practices in other countri es as a basis of their 
enforcement.  More to the point, it always remained within the power of host countries to require 
investors to respect and observe local laws and regulations, as long as these requirements were 
not in violation of commitments made in international investment agreements. 
145. With respect to performance requirements, Chinese Taipei understood the needs of 
developing Members in this respect.  His delegation supported re-examining this issue in a more in-depth manner in the future, as already sugg ested by India.  However, in practice performance 
requirements were perhaps not the most effective way of attracting foreign investors – especially 
with a view to attracting capital and high technol ogies.  The purpose of having such performance 
requirements could be effectively achieved by othe r means.  For instance, compulsory licensing 
under the TRIPS Agreement might be useful to obtain necessary technologies needed by the host countries, and competition law might be useful to deal with some undesirable business practices. 
146. His delegation found Malaysia’s statement practic al, especially with regard to the need to 
make permanent some of the schemes for develop ing countries.  Chinese Taipei thought that 
permanent schemes could be applied in many fields, such as a lower threshold on the application 
of safeguard measures (if there were to be saf eguard measures), lower expectations on developing  WT/WGTI/M/18 
 Page 39 
  countries in making specific commitments for the positive list, and so forth.  Delegates should 
consider further what kind of measures could be made permanent for developing members. 
147. The representative of Canada
 reiterated his delegation’s support for the notion of 
flexibility for development and other purposes, and  believed that this flexibility should be 
reflected in the architecture and scope of any agreement.  As Chinese Taipei had mentioned, there 
was scope for reservations and exceptions that were  not time-limited.  To reassure Malaysia, from 
Canada’s point of view there could be certain s pecific and clearly articulated areas where such 
reservations and exceptions could be included in any framework agreement on investment.  In its 
submission, Canada had underlined that policies cond ucive to attracting foreign investment were 
key to sustained economic growth.  His delegation drew attention to Mexico’s intervention 
because it was Canada's view that Mexico’s experience in this area was particularly instructive.  It 
was precisely the type of policies that Mexico had adopted that had helped it to attract investment, 
not only from its North American partners but also from many other parts of the world.  Canada 
suggested that it was inappropriate to assume  that avoiding the disciplines of an investment 
agreement was somehow good for developmen t.  His delegation believed that adopting 
investment commitments and disciplines, while ensu ring that there was sufficient flexibility and 
scope for development and other policy needs, was the correct route towards attracting FDI.  His 
delegation also underlined a point made by Hungary that capital importing countries could also 
become capital exporting countries in a relatively short space of time, so Canada encouraged Members to look at any prospective multilateral framework on investment within this dynamic context.  As regards India’s concerns about including unfettered, short-term capital flows in the 
scope of an eventual agreement, his delegatio n’s recollection from the last meeting of the 
Working Group was that no-one was advocating t hat approach.  Indeed, the first meeting of the 
Working Group had demonstrated a clear consensus on this point; Members were talking only about long-term transboundary investment, particularly  FDI.  Finally, his delegation reiterated a 
point made by Hong Kong, China that the principl e of predictability – as well as flexibility – 
should be fundamental to any agreement.  
148. The representative of the United States,
 in response to concerns that the Working Group 
risked exceeding its mandate, recalled that para graph 22 of the Doha Ministerial Declaration 
instructed the Working Group to clarify a nu mber of issues, including modalities for pre-
establishment treatment based on a GATS-type positive list approach.   
149. The representative of the European Communities  noted that his delegation did not 
question a country’s right to regulate – or to maintain “policy space” – within the context of a multilateral investment agreement.  Moreover, his delegation saw no contradiction between international rules and disciplines, on the one ha nd, and countries maintain ing legitimate “policy 
space”, on the other.   
150. The Secretariat
, in responding to a question raised by Hong Kong, China as to whether 
there was scope for home-country measures in international investment agreements, explained 
that its paper examined provisions that actually existed in international agreements; it did not 
speculate on the possible formulation of new provisi ons.  The Secretariat said that the majority of 
existing agreements did not contain provisions re lating to so-called home-country measures.  
Several regional integration agreements contained provisions encouraging parties to stimulate 
outward investment to other countries, but these seemed to be framed in non-binding declaratory 
language, often in the preamble that set out an agreement’s objectives.  Other international 
treaties, such as the Cotonou Agreement, contained provisions to encourage, facilitate, and 
promote investment and technology transfers from the EU to the ACP countries, but it was not WT/WGTI/M/18 
Page 40   clear to the Secretariat that this was the same meaning that some Members were attaching to the 
notion of home country measures.  What did exist in most developed countries were national agencies whose functions included investment promotion in developing countries, examples of which were the Swiss Organiza tion for Facilitating Investments, the United Kingdom’s 
Commonwealth Development Corporation, the Un ited States’ Overseas Promotion of Investment 
Corporation, and so on.  At the multilateral level, one of  the World Bank affiliates, the 
Multilateral Investment Guarantee Agency offered insurance against non-commercial risk in developing countries.  He concluded by noting that the issue of whether there was any scope for home-country provisions that went beyond thes e existing instruments was obviously something 
for Members to decide. 
(ii) Non-discrimination 
151. The Chairman
 drew attention to a Note by the Secretariat on "non-discrimination" 
(WT/WGTI/W/118), as well as to written contri butions on the same subject that had been 
received from the European Communities  (WT/WGTI/W/122) and from Japan 
(WT/WGTI/W/124).  Since Korea, the Separate Customs Territory of Taiwan, Penghu, Kinmen 
and Matsu, and Canada had provided written contributions that combined both "non-
discrimination" and "modalities for pre-establishment commitments based on a GATS-type positive list approach", he invited them to present all or part of their submissions at this point, or 
to wait until the Working Group would take up the issue of "pre-establishment commitments". 
152. The representative of the European Communities
 introduced its submission 
(WT/WGTI7W/122).  His delegation agreed with the point made by several Members to the 
effect that the primary purpose of a multilatera l investment framework would not be investment 
liberalization.  The main purpose of a multilateral framework was to foster international 
investment regimes that were transparent and non-discriminatory.  The focus of the EC’s paper was on the two basic WTO principles of no n-discrimination, MFN treatment and national 
treatment.  Practically all countries maintained some  restrictions on national treatment of foreign 
investors, for a variety of reasons.  However , he noted that, as successive UNCTAD World 
Investment Reports had indicated, the current tren d was towards less discriminatory treatment and 
the removal of discriminatory measures.  Regarding discrimination on the basis of nationality, there were even greater signs that restrictions were being lifted and investment regimes were embracing MFN treatment, in part because of the increasing complexity of business relationships and the blurring of corporate nationalities.  It  was less and less meaningful to draw distinctions 
based on the origin or property of companies.  These trends were reflected in the enormous growth in bilateral investment agreements, all of which included provisions on non-discrimination.  In this area in particular, the Working Group was not starting from a blank sheet of paper. 
153. As regards non-discriminatory treatment, ther e was a distinction to be drawn between its 
application at the entry stage of investment and its application at the stage where investments had 
already been admitted.  There was also a clear distinction in most international investment 
agreements between the application of MFN and national treatment.  In the GATS Agreement, for 
example, MFN treatment applied at all stages of the investment process, and indeed across all 
sectors, reflecting the importance Members attached to avoiding discrimination among foreign service suppliers.  Most BITs also included national treatment provisions, but these usually 
applied to the post-establishment phase.  WT/WGTI/M/18 
 Page 41 
  154. There were various ways to take exceptions to MFN and national treatment.  There were 
general exceptions, that applied to the whole agr eement (e.g., national security, public health, 
protection of the environment, balance of payments),  as well as subject specific exceptions (e.g., 
taxation, intellectual property, regional integration) .  There were also country or sector specific 
exceptions to non-discrimination.  The latter oft en took the form either of a “positive list” 
approach (as in the GATS) – where countries scheduled the sectors to which they would apply national treatment – or the “negative list” approac h – where countries listed the sectors that would 
not qualify for national treatment.  All of thes e methods provided ample room for flexibility.  
Nevertheless, his delegation believed that a positi ve list approach to national treatment would be 
appropriate for the pre-establishment phase of in vestment (as was the case in the GATS), general 
national treatment would be appropriate for the post-establishment phase (as was the case in most 
BITs), and finally general – or “across the board” - MFN treatment should apply to all stages of 
investment (an approach which would again be con sistent with existing WTO rules).  Since 
similar commitments had already been undertaken by m any countries bilaterally or multilaterally, 
in the GATS, they could be incorporated in a mu ltilateral framework on investment without too 
much difficulty.  This approach would essentially be a consolidation of the existing, complex 
international regime.    
155. The representative of Japan
 introduced its submission (WT/WG TI/W/124).  He asserted 
that the non-discrimination principle essentially contributed to the better allocation of resources 
globally, and was as appropriate in the invest ment sphere, as it was in the trade sphere.  
Non-discrimination touched on two basic and rela ted issues – disciplines and exceptions.  The 
level of exceptions to non-discrimination in an ag reement affected its overall level of disciplines. 
156. As regards MFN treatment, he noted that this  principle ensured that all foreign investors 
were treated equally – or no less favourably.  From the point of view of the private sector, this 
was an extremely important concept as it ensured the predictability of the overall investment 
environment.  He noted that the Japan Business Federation had conducted a survey of its 
members that showed that MFN treatment was considered among the most important elements in 
securing a level playing field for business.  Whil e in principle, MFN treatment should be granted 
in a non-discriminatory manner, Members also needed to address the question of exceptions.  
Countries might have justifiable reasons for disc riminating among different types of investment 
or among investments from different locations.  He recalled that various WTO agreements 
included provisions for MFN exceptions.  The Working Group needed to make proper reference 
to these provisions, and needed to examine their possible applicability to an investment 
framework.  Japan had identified three examples of such exemptions in its paper that warranted 
further examination:  first exemptions granted fo r regional integration arrangements that met 
specific tests (e.g., GATT Article XXIV and GATS  Article V);  second, exemptions granted for 
bilateral investment treaties (it was important to examine the extent to which treatment afforded 
to partners under such BITs might be effected by an MFN requirement in a multilateral 
framework);  third, exceptions granted for listed sectors or measures (e.g., GATS MFN 
exemption lists).  The existence of prior benefits  accorded to investors was also an issue that 
needed to be taken into account when examining the issues of MFN treatment in a multilateral framework on investment. 
157. As regards national treatment, he noted that this concept, like MFN treatment, was 
already well entrenched in the WTO agreements, both for trade in services as well as trade in 
goods.  National treatment in international invest ment agreements required host countries to treat 
foreign investors and their investments no less favourably than domestic investors.  National 
treatment would establish a truly level playing field for foreign investors, ensure the more WT/WGTI/M/18 
Page 42   efficient allocation of resources, and would help  to create a more favourable climate in host 
countries for the attraction of FD I.  In other words, national treat ment was a win-win situation for 
host countries and business alike.  However, here too it was important to discuss the legitimate grounds for exemptions to national treatment, of which there were several.  In the context of a 
possible investment agreement, it was important to study domestic industrial and financial policies that might not be consistent with national treatment. 
158. It was also important to examine the ways in which exceptions to national treatment 
should be reflected in the rules of a multilatera l investment agreement.  For example, at what 
stage of investment should national treatment be applied?  It was his delegation’s view that 
national treatment should apply to the pre-establ ishment phase, as well as the post-establishment 
phase, as such rules would contribute to creating a better business environment for both investors 
and host countries.  Another question was whether commitments and exemptions should be 
scheduled as a positive list – like GATS – or a ne gative list?  While Japan discussed this issue in 
more depth in another submission, he noted that Ja panese industry felt that national treatment was 
essential to creating a favourable business environment and encouraging FDI flows.  In 
conclusion, both MFN and national treatment were not only central to WTO agreements, but were 
core provisions in a number of international inve stment agreements.  Japan believed that this 
principle would be an essential feature of any fu ture multilateral investment agreement.    
159. The representative of Korea
 introduced its submission (WT/WGTI/W/123).  He noted 
that the issues of non-discrimination and the GATS-type positive list approach to pre-
establishment treatment were inherently linked, and that it was difficult to address one without 
referring to the other.  Hence his delegation had a ddressed both subjects in a single paper.  On the 
subject of non-discrimination, Korea suggested th at the GATS-type positive list approach offered 
a good starting point for a possible multilater al framework on investment.  During previous 
discussions of the Working Group, his del egation had presented its views on how the non-
discrimination principle could be applied to such an agreement (WT/WGTI/W/96 and 
WT/WGTI/W/79).  The essence of the non- discrimination principle in GATS could be 
summarized as “unconditional” MFN and “conditional” national treatment.  “Conditional” national treatment meant that national treatment was extended only to those sectors where 
Members had made specific commitments.  MFN treatment, on the other hand, was an 
“unconditional” obligation in the GATS.  How ever, certain exemptions to the MFN treatment 
were permitted for a limited duration and on an except ional basis.  He pointed out that while the 
GATS had many aspects of an investment agreement, some disciplines of a multilateral 
framework on investment might need to go beyond the GATS approach, for the reason that 
investment disciplines had certain characteristics not  reflected in the GATS.  A basic question for 
the Working Group to consider was:  How could the principle of non-discrimination in the GATS 
be extended to the multilateral investment rules?  And what would be the differences and the 
commonalties? 
160. He then read excerpts from his delegation’s paper (WT/WGTI/W/123).  
161. The representative of Chinese Taipei
 introduced its submission (WT/WGTI/W/127).  He 
then read excerpts from the paper. 
162. The representative of Canada  introduced its submission (W T/WGTI/W/130).  He thanked 
the Secretariat for their papers on these two subjects.   These were important subjects that lay at 
the heart of their work.  He said that t he Secretariat paper on non-discrimination  WT/WGTI/M/18 
 Page 43 
  (WT/WGTI/W/118) was a helpful account of how provisions related to non-discrimination were dealt with in a number of internatio nal investment agreements (IIAs).   
163. Importantly, the Secretariat paper also dealt with a number of related issues, such as “the 
better of” national treatment and MFN provisions with respect to non-discrimination, and “in like circumstances”.  Although a discussion of these sorts of issues would be necessary as the work of 
the Working Group work progressed, it might be premature to address these issues before the 
Working Group agreed to a general approach on non-discrimination, and on how commitments 
were to be made.   
164. Canada believed that the Secretariat paper on modalities for pre-establishment 
commitments (WT/WGTI/W/120) provided a particularly helpful taxonomy of investment 
agreements based on how commitments were made in each one.  In turn, examining the 
“investment control”, “selective liberalization” (o r positive list), and “MFN/national treatment” 
(or negative list) models were a hel pful means of differentiating among IIAs in this regard. 
165. As noted, investment control agreements tended to accord non-discriminatory treatment 
to foreign investments only after they were established in the host country.  In the contemporary 
world economy, investors would expect little less – with or without an investment agreement.   
166. With respect to investment in services industries, he said that the GATS represented a 
hybrid approach:  while the right of establishment was implicitly accorded to foreign investors, MFN exemptions were taken on a negative list basis, and national treatment commitments could 
also be circumscribed through limits as outlined in  what essentially amounted to a negative list as 
defined in each Party’s schedule of commitments .  Most reservations to MFN/national treatment-
type agreements were described in annexes on a horizontal, broad, or narrow basis in “negative 
lists” where non-discrimination provisions did no t apply.  This feature was sometimes overlooked 
in the depiction of negative list agreements.   
167. This feature could also apply when dealing with “pre”- versus “post”-establishment 
discrimination.  Canada believed that to draw an a priori  distinction between pre- and post-
establishment in this regard could be seen to undermine the contemporary meaning of non-
discrimination.  To foreign investors, the right of establishment (or pre-establishment market 
access) effectively determined whether in fact no n-discriminatory market access existed.  In an 
era of declining tariffs, this was an increasi ngly important consideration for international 
investors.  In increasingly competitive markets, investors were less inclined to make investments 
for reasons attached to import substitution only (with the possible exception of a few very large country markets), but rather were more inclined to respond to market conditions extending beyond the host (or home) market.  Thus there was an increasing dynamic established between investment conditions in the host market and trade possibilities, which militated against pre-establishment discrimination against foreign investment in the same way that such discrimination was addressed in the trading system.   
168. Canada therefore believed that it would be a missed opportunity to consider designing an 
IIA in the WTO agreement whereby MFN and natio nal treatment would be  treated differently, 
and pre- and post-establishment al so differentiated in this regard, ab initio .     
169. This, of course, was the ideal.  It also had to be acknowledged that pre-establishment 
market access would not be permitted by the host country in all cases and in all sectors.  For 
political or other reasons it would not always be possible, or even desirable, to do so.  Even where WT/WGTI/M/18 
Page 44   it might make economic sense to expose domestic investors to competition from more efficient foreign investors, vested interests might also ma ke it difficult to do so.  This realization was 
implicitly embodied in MFN/national treatment (o r negative list-type) agreements, and was an 
important illustration of “flexibility” that was of ten overlooked in these types of agreements.   
170. Many of the attributes ascribed in the Working Group's discussion on development 
provisions with respect to a positive list, or  GATS-type approach, were also features of a 
negative-list approach.  This was borne out by Canada's own experience.  Canada would therefore 
not adhere to any investment agreement without a BOPs clause, for example, and it applied 
discriminatory measures in other circumstances too.   It found it could do this without difficulty in 
IIAs using a negative list approach.   
171. Canada believed that developing countries and LDCs should receive technical assistance 
and capacity-building assistance from developed countries in order to compile their list of exceptions.  This focus had been recommended by China in its intervention with respect to helping developing countries to participate in any negotiations.  Such an exercise would be a 
highly productive means of assisting developing countries in becoming more integrated 
participants in the world economy, as envisaged at Doha. 
172. Architectural considerations were paramount in  the consideration of a prospective IIA in 
the WTO, as had been pointed out in Canada's previous submission on scope and definition.  The 
structure of negative list-type agreements inherent ly favoured transparency, which together with 
non-discrimination was the key pr inciple underlying most trade and investment agreements.  The 
agreements had been predicated on general applicability, with defined exceptions and 
reservations, rather than on applicability only with respect to selected obligations as would be the 
case in positive list agreements. 
173. The way in which any prospective IIA in the WTO would interact with other agreements 
in the WTO system, particularly with the GATS , but also with the Agreement on TRIMs, the 
ASCM, and the TRIPS Agreement was a fundamenta lly important issue that warranted careful 
consideration not only in this Working Group but also in other bodies.  Canada looked forward to 
working on this issue in future meetings.  At this stage, the point that Canada would like to make was that recalling the network of BITs and regional agreements, and the increasing importance of 
FDI to economic growth and export competitiveness, the Working Group's challenge was to 
produce recommendations concerning an IIA in the WTO with real “value-added” for both Parties and investors.  Canada was convinced th at this was a challenge worth meeting. 
174. The representative of Mexico
 introduced its submission (WT/WGTI/W/132).  The 
principle of non-discrimination was one of the fundamental pillars of the multilateral trading system, and therefore central to any effort to bu ild a multilateral framework with the goal of 
creating transparent, stable and predictable conditions for transboundary investments.  Mexico 
felt that the Working Group should focus its effo rts on clarifying the two main provisions in 
which the principle of non-discrimination was ex pressed – MFN and national treatment.  Rather 
than outlining his delegation’s specific position on these issues – which could be found in 
Mexico’s written submission – he instead addressed what Mexico considered to be the most appropriate formula for achieving non-discrimination in investment rules, in particular for balancing the interests of host and home co untries.  This was the GATS approach.  Mexico’s 
proposal was that MFN treatment should be a gener al rule of application in a possible agreement, 
as was the case in the GATS.  With respect to  national treatment, the GATS-type positive list 
approach would allow countries to identify sect ors in which they were prepared to make  WT/WGTI/M/18 
 Page 45 
  commitments, as well as providing the means by which countries could specify conditions or 
limitations on national treatment.  The GATS approach would allow countries to maintain the flexibility they needed without discriminating am ong investors for reasons of nationality. 
175. If the Working Group adopted the GATS-type positive list approach, special attention 
would need to be paid to certain specific issues re lated to the scheduling of commitments – issues 
that, in Mexico’s view, might introduce future conf usion or ambiguity.  One such issue was the 
application of the principles of national treatment  and market access that had the potential to raise 
questions about whether measures identified in the schedules were – or were not – discriminatory.  
Another issue was the inclusion of the term “in similar circumstances” in any agreement, which was particularly important in the context of di scussions about non-discrimination since MFN and 
national treatment were relative, not absolute , standards.  As Mexico had noted on other 
occasions, the objective of this term was to enable consideration of all relevant circumstances, 
and to exclude characteristics that were not relevant.  This related to a third question which was 
whether other standards with applicability to the non-discrimination principle – such as fair and 
equitable treatment or full security and protect ion – should be included in a multilateral 
framework on investment.  Mexico considered these concepts to be a simple reference to 
minimum standards of treatment for foreigners according to international customary law and it 
did not believe that they conferr ed any additional standards of treatment beyond what already 
existed in customary law.  At this stage in th e discussion, Mexico believed that the Working 
Group should focus only on the principles of MFN and national treatment.   
176. The Secretariat
 introduced its background Note on non-discrimination 
(WT/WGTI/W/118).  It noted t hat this subject had been more extensively discussed than any 
other item listed in paragraph 22 of the Doha Mini sterial Declaration, and he drew delegations' 
attention to the summary of these discussions in the Secretariat’s Note. 
177. The representative of UNCTAD  highlighted certain key concerns from a development 
perspective that might arise with the use of t he non-discrimination standard in international 
investment agreements, be it at the bilateral, regi onal or multilateral levels.  Non-discrimination 
in international investment agreements had th ree main components:  the national treatment 
standard, the MFN standard, and the fair and equit able treatment principle.  In discussing non-
discrimination, and in particular national treatment, a key issue was the need to draw a distinction 
between its application at the pre- and/or the post-entry phases.  Tradi tional treaty practice 
overwhelmingly did not provide for pre -establishment national treatment.  Rather, it reflected the 
sovereign right of States to control, screen and channel foreign investment in line with their national policy objectives.  Furthermore, in the few international investment agreements that 
contained pre-establishment provisions, States had placed strong limitations upon the right of establishment.  It was noteworthy that among OECD countries the right of establishment took 
more than 20 years to be accepted, and that even today it was applied with numerous exceptions and restrictions.  This issue, he understood, was also one of the stumbling blocks in the 
discussions related to the OECD’s Multilateral Investment Agreement.   
178. In its post-establishment application, the national treatment standard was of key 
importance to foreign investors.  At the same time, it raised very important development concerns.  This was because of the economic asymmetries between developed countries and their 
firms on the one hand, and developing countrie s and their firms on the other.  The question 
therefore arose to what extent such asymmetries could be taken into account in treaty provisions 
on national treatment.  One way to deal with this was through the formulation of exceptions to the 
standard.  These could be both structural (i.e.,  general and country-specific) and substantive (i.e., WT/WGTI/M/18 
Page 46   company and/or sector and/or industry-specific) in nature.  Exceptions – e.g. in the form of a "development clause" – could provide a degree of  flexibility commensurate with the development 
priorities of host countri es in that they offered a wide choice of policy options.  The need for 
exceptions might however be mitigated by the use of a positive list approach, in which countries decided about their own pace, choice of sequencing and sectors to be covered by national treatment. 
179. A point that should not be forgotten in this context was that, however exceptions were 
formulated, their identification and administration in treaty practice was problematic, particularly 
for less developed economies.  Also relevant were the precise formulations of a treaty provision – namely distinguishing between "similar" and "sam e" treatment, or "similar" and/or "like" 
circumstances, where references to "similar" implied a more flexible approach. 
180. The MFN standard was a core element of international investment agreements.  
Accordingly, the MFN-standard in  general attracted few exceptions.  However, certain economic 
policy questions had given rise, in treaty practice, to exceptions.  From a development 
perspective, the most important of these exceptions concerned:  (1) Members of a regional 
economic integration scheme or partners in a preferential association agreement might grant 
themselves preferences that they did not extend to third parties through an MFN provision.  While such a limitation had advantages for insiders, for outsiders this might cause difficulties, because it could be seen as preventing them from reaping th e benefits associated with MFN.  (2) Countries 
might also seek to limit the scope of an MFN prov ision to the specific subject-matter covered by 
an agreement so as to avoid situations where issu es and measures that were not included in the 
agreement in question (but might be covered in ot her international investment agreements, e.g. in 
BITs) could be indirectly introduced by way of an MFN clause.  In addition, such an approach could take care of so-called "free rider" problems, whereby preferential treatment granted under 
another IIA, whether bilateral, regional or multilateral in nature, could be extended to third 
parties. 
181. Finally, an issue to be considered under non-discrimination related to the principle of fair 
and equitable treatment.  He realized that this was a standard that trade negotiators might not be 
familiar with, but it was of some importance in international investment agreements.  It was an absolute standard that aimed to ensure that the relationship between investors and the host country was based on general principles of fairne ss, proportionality and non-discrimination.  It 
allowed therefore for less flexibility in policy development, in that a country needed to ensure that its actions in this field did not infringe on the notions of fairness and equity introduced by 
this standard. 
182. The representative of Brazil
 agreed that, as noted in the EC paper, non-discrimination 
played a key role in helping to attract FDI to t he extent that it ensured a level of predictability and 
certainty for foreign investors and investments.  Nevertheless, the existen ce of a stable domestic 
legal and institutional framework of non-discrimi nation, as well as the soundness of a country’s 
macroeconomic fundamentals, were just as important, if not more so, for attracting FDI than 
international investment instruments.  For example , Brazil had attracted considerable amounts of 
FDI despite the fact that it had no international  investment agreements in force.  Moreover, the 
vast majority of international investment agreements were between developed and developing countries, and not among developed countries themselv es – this despite the fact that the largest 
flows of transborder investment took place among developed economies.  The only real attempt 
to build a framework on investment among developed countries – the Multilateral Agreement on 
Investment – did not have a successful outcome.  At the same time, the EC paper seemed to  WT/WGTI/M/18 
 Page 47 
  consider exceptions to national treatment as only  hypothetical propositions, and not as a 
necessary ingredient in a possible multilateral framework on investment.  As demonstrated in the Secretariat paper, national treatment for investment was fundamentally distinct from the national 
treatment rule for trade in goods in the GATT.  Any possible multilateral framework on investment should allow for exceptions to be workable, which also seemed to be the opinion of delegations that had presented written submissions. 
183. As regards the Secretariat paper, he pointed out that paragraph 63 raised the fundamental 
issue of the definition of investors and inve stments, and asked whether the definition would 
include potential investors.  The same concept had also been raised in paragraph 14 of the Secretariat paper on Modalities for Pre-establis hment Treatment Based on a GATS-type Positive 
List Approach, where the reference was to investors seeking entry into a host country.  His 
delegation made the point that pre-establishment  rules in any possible framework on investment 
must be limited to regulating the actual entry of  FDI, without conferring any rights to either 
potential investors or investors seeking entry.  Th is was a view that had also been expressed by 
the EC, Japan, and Korea in their respective submissions.  Finally, he referred to the point raised 
in the Secretariat paper regarding the concept of “like circumstances” in connection with the 
national treatment rule.  In his delegation’s view , this was a concept that, due to its inherent 
ambiguities, allowed ample flexibility for regulators to accord discriminatory treatment to foreign 
investment, and in that regard it might merit further analysis by the Working Group.   
184. The representative of Hungary
 commented that non-discrimination was one of the 
fundamental principles of the multilateral trading system – encompassing MFN treatment and 
national treatment.  Needless to say, the incorporation  of these principles in a possible multilateral 
framework for FDI was indispensable.  By listing non-discrimination among the elements 
requiring further clarification by the Working Gr oup, Ministers had clearly conveyed this view.  
Hungary shared the view that multilateral rules for FDI in the primary and secondary sectors – 
i.e., in agriculture, fisheries, mining and manu facturing – should not fall short of the treatment 
accorded to investments in the services sector under the GATS, particularly with regard to the key 
principle of non-discrimination.  A multilateral framework on investment should also include a general obligation to provide unconditional MFN treatment for FDI across the board – i.e., in all 
sectors, regardless of whether the sectors were scheduled or not.  In addition, horizontal 
exemptions – i.e., general security and subject-specific exceptions – could apply to this general obligation, as well as to national treatment.  In  the post-establishment phase, a multilateral 
framework, like most bilateral agreements, shoul d contain a general obligation to provide national 
treatment.  Here Hungary could support the inclusio n of country-specific exemptions.  In the pre-
establishment phase, a multilateral framework could follow the GATS model by providing for the 
conditional application of national treatment through specific schedules of commitments. 
185. In paragraph 5 and 14 of its paper, Canada had argued that drawing a distinction between 
the pre-establishment and post-establishment phases of investment might undermine the concepts of non-discrimination and market access.  Hungary di sagreed.  In his delegation’s view, a realistic 
approach to a multilateral framework for FDI wo uld make this distinction.  In the pre-
establishment phase it would seem to be overly ambitious if the Working Group attempted to start from the proposition that national treatment should be a general or unconditional obligation, with 
a negative list of exception.  The negotiations would be made even more complicated and 
difficult if this approach were combined with a broad, asset-based definition of investment.  His 
delegation also pointed out that this distinction between pre- and pos-establishment treatment, as 
related to national treatment was employed in the majority of BITs. WT/WGTI/M/18 
Page 48   186. He drew attention to paragraph 3 of Korea’s paper which usefully stated that the GATS 
provided for unconditional MFN treatment an d conditional national treatment.  However, he 
questioned its assertion that the latter meant t hat national treatment was to be provided in only 
those sectors where specific commitments we re made.  He noted that Article XVII bis1 of the 
GATS not only provided for national treatment only in scheduled sectors, but also allowed 
Members to inscribe conditions and qualifications to such treatment.  This was the approach towards national treatment that Hungary favoured in the pre-establishment phase.   
187. The representative of the United States
 noted that the principle of non-discrimination was 
at the core of every international investment treaty – as well as WTO rules – and was set out most clearly in the MFN and national treatment commitments.  However, while MFN and national 
treatment provisions committed treaty partners to  accord each other non-discriminatory treatment, 
other parts of the agreement might dilute that commitment.  For example, if the term 
“investment” was narrowly defined in an agreement to include only direct investment, host 
countries would be able to discriminate agains t foreign portfolio investors, significantly 
weakening the overall commitment to non-discrimi nation.  Other provisions could weaken or 
reinforce the non-discrimination principle.  Fo r example, it mattered significantly whether non-
discrimination applied at all phases of the inve stment process, or only the post-establishment 
phase.  It also mattered whether the parties tabl ed reservations according to a positive or negative 
list.  
188. Investment agreements should confer the highest standards of protection to foreign 
investors.  This could not be accomplished by allowing significant opportunities for host 
countries to discriminate on the basis of natio nality.  The benefits of investment liberalization 
were maximized to the extent that countries made the broadest non-discrimination commitments 
possible, and that other treaty provisions reinforced these commitments.  For example, US BITs 
used an asset-based, open-ended definition of investment that was designed to cover all forms of 
investment that foreign investors might wish to undertake.  These BITs provided pre-
establishment coverage for investment, and the United States and its BIT partners (the vast 
majority of whom were developing and transition economies) took exceptions and reservations on a negative-list basis.  The United States recogni zed the concerns of developing countries that 
extending non-discriminatory treatment to foreign investors in the pre-establishment phase would 
take away some flexibility to reject or modify prospective investments on nationality grounds.  It was correct that pre-establishment coverage limited a host government’s ability to reserve certain 
sectors for its nationals, or to attach special conditions to foreign investment.  But this was what 
an international investment agreement was all about - ending discriminatory, and often 
distortionary and protectionist, policies towards fo reign investment, and facilitating increased 
foreign investment, with its attendant benefits.  Indeed, the Secretariat in paragraph 51 of its 
paper had noted UNCTAD’s finding that MFN comm itments in the pre-establishment phase were 
increasingly used in IIAs, and had concluded that “non-discrimination at this market access stage 
[was] becoming an increasingly important issue fo r host countries that want [ed] to attract more 
foreign direct investment.” 
189. She commented that the “development dimension” was rightfully a major theme of the 
Working Group’s discussions.  Part of this work  was to consider how policies towards foreign 
investment could promote economic development .  The United States disagreed with the 
suggestion, as noted in paragraph 75 of the Secretariat paper, that economic development could 
be promoted by allowing developing countries to “screen foreign investments and allow in only those that would best suit their industrial polici es and development needs and not stifle domestic 
investment and development”.  The United States to ok issue with the implication that foreign  WT/WGTI/M/18 
 Page 49 
  investment relied on the inhibition of domestic inve stment, as if it were a zero-sum equation.  On 
the contrary, her delegation believed that FDI complemented domestic economic activity.  
Foreign investments, particularly in manufacturi ng, needed locally supplied goods and services.  
FDI often had the effect of setting standards for local suppliers that had helped to make those suppliers more competitive at home and abroad.  Rather than overwhelm local firms in a small developing country, foreign investors built expo rt-oriented industries that enriched the local 
economy. 
190. A policy of restricting FDI to selected sectors where it did not compete with domestic 
firms inhibited development.  The United States believed that welcoming and protecting foreign 
investment was part of a comprehensive development strategy.  The US currently had over forty 
BITs, mostly with developing and emerging market countries.  In addition to a broad definition of 
investment, these agreements featured MFN and national treatment coverage in the pre-
establishment phase of investment; a negative list fo r the taking of reservations; an absolute right 
of free transfers for capital related to an investme nt; and restrictions on performance requirements 
that went beyond TRIM.  The many developing countries that had signed the US BITs 
demonstrated that strong non-discrimination provisions were not only compatible with a 
development strategy, but essential for its success.  In that light, her delegation also shared some 
of the views expressed by Canada concerning elements of pre-establishment treatment. 
191. The representative of Japan
 noted that the Secretariat paper outlined four categories of 
exceptions to non-discrimination – namely systemic, general, country specific, and ad hoc.   This 
was useful in order to scrutinize unnecessary exemptions, given that too many exceptions would 
nullify the principle of non-discrimination.  He also responded to three general questions raised in 
the Secretariat paper.  First, Japan felt that too many exceptions to the non-discrimination 
principle would deter potential investors. Second, the GATS-type positive list approach provided 
a useful model for building a flexible architecture of disciplines.  Third, exceptions to the 
principle of non-discrimination should be provi sional, not permanent.  Any exceptions should 
undergo periodic review and be decreased gradually. 
192. As regards the EC paper, Japan shared many of the points raised therein, especially the 
argument that the time was ripe to consolidate existing non-discriminatory investment instruments in a truly multilateral framework.  The EC’s paper noted that MFN treatment had been accepted in most existing bilateral and region al investment agreements.  It also noted that 
that MFN treatment had been accepted as applyi ng both to the pre- and post-establishment phase 
of investment under mode 3 of the GATS.  It wa s Japan’s view that these precedents provided 
useful guidance to the Working Group in its delib erations on the issue of MFN treatment.  As 
regards national treatment, the EC paper had not ed that many bilateral and regional agreements 
extended national treatment to the post-establishment phase of investment, which Japan felt was 
also instructive in the Working Group’s discu ssion.  On the subject of exemptions to these 
principles, Japan agreed with the three broad categ ories set out in the EC’s paper, i.e. general 
exemptions, subject specific exemptions, and country and sector specific exemptions.  In terms of the conclusions drawn by the EC, his delegation agreed that new investment rules should cover primary and secondary sectors, although Japan belie ved that any services sectors left out of the 
GATS should also be covered.  Moreover the rules covering these sectors should be comparable, 
in terms of disciplines and obligations, to the GATS.  Japan also agreed with the EC that MFN 
should be a general – across-the-board - obligatio n across all sectors.  His delegation also 
supported the concept that general obligations as well as specific obligations should be incorporated.  Finally, Japan fully supported the EC ’s observation that new international rules in WT/WGTI/M/18 
Page 50   the investment area should in no way prevent host countries from pursuing their domestic policies.  This was an important concept that dese rved further elaboration in the Working Group. 
193.  Turning to Korea’s paper, Japan had three comments.  First, Japan agreed with Korea in 
accepting the GATS-type positive list approach as an initial model for discussions of a possible 
multilateral framework on investment.  Second, his delegation supported Korea’s proposal that 
MFN treatment should be extended to the pre- and  the post-establishment phase of investment.  
Third, Japan shared Korea’s view that in the pre-establishment phase national treatment should be 
applied along the lines of the GATS-type posit ive list approach, whereas in the post-
establishment phase it should have a more general application. 
194. Regarding the paper by the Separate Customs Territory of Taiwan, Penghu, Kinmen and 
Matsu, his delegation made three points.  First, th at it might be premature to draw the conclusion 
that national treatment should be applied to the post-establishment phase of investment only.  This should be an issue of further discussion in the Working Group.  Second, Japan supported Chinese Taipei’s assertion that any multilateral framework on investment should be consistent 
with the GATS.  Third, Japan agreed with Chinese Taipei that MFN exemptions should be limited 
to minimum levels. 
195. On Canada’s paper, Japan shared its fundamental approach of allowing exemptions to the 
principle of non-discrimination in order to accomm odate the pursuit of domestic objectives by 
developing countries.  Canada’s paper also emphasized the need for such exemptions to be transparent, an extremely important point that Japan shared.  Transparency of all rules, including 
exemptions, was crucial in order to create a stable  and predictable investment environment.  As 
regards Mexico’s paper, Japan took note of its em phasis on the need to strike the right balance 
between regulation and flexibility in applying the pr inciple of non-discrimination.  In conclusion, 
Japan felt it noteworthy that many of the contributions to the Working Group on the subject of non-discrimination had indicated that the GATS approach might allow the compatibility of the 
twin goals of investment promotion and development flexibility.  This provided a valuable 
reference point for the Working Group’s future discussions.   
196. The representative of Indonesia
 underscored the importance his delegation attached to 
creating a friendly international investment climat e, dedicated to maintaining and developing 
long-term and sustainable investment flows, and  to eliminating any obstacle to the achievement 
of this objective.  However, exceptions to the pr inciple of non-discrimination were sometimes 
needed in order to secure certain national and public interests, as well as economic development 
objectives.  With regard to paragraphs 5-9 of the Secretariat paper, it was Indonesia’s 
understanding that its categorization and classifica tion of various exceptions were intended to 
provide delegations with information concerning the various ways and means that had been 
adopted by countries to apply differentiated treatment to investment or investors.  The paper pointed out that the typical exceptions to non-discrimination could be classified as systemic 
exceptions, general exceptions and country-specific exceptions, and ad hoc exceptions.  The question 
before the Working Group was to determine whether these approaches were sufficient to meet the 
individual needs of each country.  His delegation stressed that such classification exercises should 
serve only as explanatory models, and should in no way limit the freedom of countries to adopt various other exceptions. 
197. Regarding the application of the non-discrimination principle to the pre- and post- 
establishment phases of investment, Indonesia understood pre-establishment to refer to the admission 
of investments - including any screening provisions t hat might affect the entry to such investment -  WT/WGTI/M/18 
 Page 51 
  while post-establishment referred to the operation, management, expansion, sale or disposition of the 
covered investments.  Accordingly, Indonesia consi dered the application of non-discrimination in the 
pre-establishment phase to be a more sensitive issu e than the application of non-discrimination to the 
post-establishment phase.  Although Indonesia fully subscribed to the principle of non-discrimination as the basis of multilateral relations in the WT O, in the area of investment the principle of non-
discrimination  - especially in the pre-establ ishment stage - might undermine a host country’s 
flexibility to direct investment towards supporting its economic and development needs.  Accordingly, it was necessary to explore the appropriate application of non-discrimination in the investment area aimed at providing Members with options to adopt suitable policy in pursuing their national
, interests 
both at the pre-establishment as well as the post-establishment phase. 
198. The representative of Thailand  recognized the potential benefit s of the non-discrimination 
principle in terms of providing a more attractive investment climate.  However, like many others, 
Thailand was also aware of the potential costs in  terms of diminished policy space and flexibility 
to pursue socio-economic development objectives.  Many of the proposals offered at the present 
meeting for introducing flexibility into a possibl e multilateral framework on investment were of a 
short-term nature, and were perhaps inadequate in addressing the problems or concerns of 
developing countries.  Therefore, exemptions of a more long-term nature were more desirable.  
As regards the application of the non-discrimination  principle, Thailand felt that an approach that 
simply borrowed concepts and practices used in the trade field, and that then applied them to the 
investment field could lead to various practical pr oblems.  The notion of “like circumstances” was 
one example.  Regarding MFN treatment, Thaila nd believed that this principle might not 
prejudice existing BITs given the complexity of t he existing network of treaties.  In conclusion, 
Thailand thought that the Working Group should be ar in mind the point raised by a number of 
delegations that the primary purpose of the curr ent exercise was not investment liberalization.  
199. The representative of Cuba  believed that the principle of non-discrimination should be 
viewed within the context of the development obje ctives of host countries.  When applying their 
development policies, governments had to maintain their capacity to regulate or limit foreign 
investment for the successfull achievement of their objectives.  Cuba considered that the application of the principle of non-discrimination should be evaluated only after an investment 
had been approved by a country, in conformity with it s national legislation.  It was necessary to 
establish a balance between the benefits of non-discrimination and the application of certain restrictive measures that furthered development objectives.  Among the issues that needed to be 
considered were the differing levels of developm ent among countries and their various strategic 
objectives.  Likewise, many developing countri es encountered difficulties in promoting the 
development of their national companies which were often more vulnerable than transnational 
companies, particularly those from developed coun tries.  Therefore, in order to stimulate their 
growth and competitiveness, developing countries sometimes needed to devise policies and 
programmes that conferred an advantage on nationa l companies.  In these instances, it was 
necessary to limit the principle of non-discrimination.    
200. The representative of Chile
 considered the principles  of non-discrimination and 
transparency to be the fundamental pillars of the multilateral trading system, and that they should remain so if WTO rules extended  into the investment field.  These two principles were closely 
related, as had been noted in Canada’s paper, and needed to be consistent within a system of 
rules.  Chile did not believe that non-discrimi nation was incompatible with the freedom to 
regulate – or to restrict certain kinds of investments - on the part of developing countries.  Regarding the substance of non-discrimination, Chile believed that the two principle concepts 
were MFN and national treatment, without prejudice to other standards of treatment, such as “fair WT/WGTI/M/18 
Page 52   and equitable treatment” which existed in most BITs and which needed to be examined in the future.  The Working Group had been informed by UNCTAD that there were now over 2000 BITs in existence.  A central question for the Working Group was how this spider’s web of 
agreements could be made compatible with the MF N treatment required by the many existing 
investment-related WTO agreements?  Chile believed that MFN treatment should be a general rule of application in any future multilateral framework on investment.  As regards national treatment, the Working Group needed to discuss further the level of ambition that it sought in future negotiations – both with regard to the phas e of investment – i.e.,  pre- or post-establishment 
- as well as to the coverage - i.e., a negative or a positive list - which Chile would address in 
greater depth under the discussion of modalities for pre-establishment treatment.  This debate 
would also have a direct impact on the type of exemptions that might be included in a future 
investment agreement. 
201. Finally, Chile highlighted an important point, raised in both the Canadian and Japanese 
papers, regarding the need to minimize the differences in treatment which the same economic operator might face across different sectors.  Thus an investor making an investment in the 
telecommunications sector should be treated in the same way and under the same standards as if 
that investor were investing in the manufacture of telephones.   
202. The representative of Hong Kong, China
 already discerned several common themes 
arising out of the various submissions that  his delegation believed could be of particular 
significance in future discussions.  First, th at MFN and national treatment were the two most 
widely used standards of non-discrimination in in ternational investment agreements.  Compared 
to MFN treatment, the granting of national treatment was typically hedged with more conditions 
in these agreements.  Second, it was common for international investment agreements to apply 
the principle of non-discrimination to the pre- establishment and post-establishment phase of 
investment differently.  Third, few international investment agreements, if any, provided for full 
and unconditional non-discriminatory treatment.  Fourth, international investment agreements 
usually contained a mix of general and county specific exemptions to provide flexibility for 
signatories to use certain discriminatory measures  at certain times or in certain circumstances. 
203. Hong Kong, China regarded non-discriminatory  treatment as an essential condition for 
creating a level playing field for FDI world- wide.  Incorporating the principles of non-
discrimination in an international investment agreement could bring important legal, commercial and administrative benefits to the governments and market players concerned.  Hong Kong, China’s liberal investment regi me, together with its bilateral investment agreements, were a 
testament to the importance which it attached to  the non-discriminatory treatment of investment 
and investors.  While non-discrimination was one of the cornerstones of the multilateral trading 
system, his delegation was mindful of the fact th at its application in a possible multilateral 
framework on investment had caused some unease to developing Members.  For example, some had expressed concern over the application of full national treatment, and sought the carve-outs of selected sectors for development  purposes.  These concerns shoul d be carefully considered and 
addressed.  The challenge was to find an optimum mix of exemptions that could address the needs 
of developing countries for flexibility to purs ue vital socio-economic, developmental and public 
interest objectives while maintaining some optimal  form of discipline to promote a level playing 
field for foreign investment.   
204. The representative of India
 said that it was perhaps too early in the process to arrive at 
any a priori  conclusions on the application of the no n-discrimination princi ple with respect to 
investment.  His delegation’s comments were theref ore preliminary in nature and India reserved  WT/WGTI/M/18 
 Page 53 
  the right to revert to the subject at a later stage.   Non-discrimination in the context of trade rules 
included national treatment and MFN treatment.  The question of whether to include the MFN 
and national treatment standard in any international investment agreement tended to raise more complex issues than the question of whether to include them in trade agreements.  This fact was 
underlined in the Secretariat Note.   
205. Investment essentially involved the movement of capital.  Capital tended to move in 
various ways from home country to third countr ies and then to host countries.  There might be 
many channels of such movements and the ultimate investor might not be the original lender or 
investor.  Hence the question of non-discrimination in capital flows became more complex.  There was no clear buyer-seller linkage as in t he case of goods and services.  There was no 
certainty regarding the source of funds.  There was also no certainty regarding the manner in 
which funds might be retained in the host country, and at what point in time, in what manner, and 
to what extent funds would flow out.  Unlike domestic investment, where funds remained within 
the country, foreign investment could flow in and out, depending on speculative factors and short-term changes in the assessment of different in vestment destinations.  Many developing countries 
had, in the recent past, faced economic crises on account of a heavy outflow of funds occurring 
within a short period.  A certain degree of disc rimination between different kinds of investment 
was unavoidable.  The effect of different kinds of foreign capital on the economies of developing 
countries would obviously vary.  The source of funds was also of significance from the economic as well as political point of view.  There were, th erefore, severe limitations to the extension of the 
concept of non-discrimination to capital flows.  
206. The important issue to be clarified was whether non-discrimination was an absolute 
principle.  While it was universally accepted and endorsed that the principle of non-discrimination underpinned the multilateral trading system, develop ment economists had 
questioned whether such non-discrimination provisions should be treated in an absolute sense.  
Given the various channels by which capital flowed, the characteristics of capital, and their 
different socio-economic impact on the host country, was it not essential that developing 
countries preserved fully their discretionary authority with regard to investment inflows?   
207. Another issue was the relevance of the WT O principles of non-discrimination to 
international investment agreements.  In a paper previously submitted to the Working Group in 2001 (WT/WGTI/W/96), Korea had enumerated five  fundamental principles of the WTO:  non-
discrimination;  freer trade;  predictability;  pr omotion of freer competition;  and encouraging 
development and economic reform.  Korea had then argued that any rule in the WTO context should conform to these principles.  When it came to “investment” per se  - as distinct from 
“trade” per se  - the relevance of these principles was ne ither direct nor evident.  As India had 
argued in its intervention on development provisions, money flows were essentially different in character from the flows of services and good s.  The money market was considerably more 
opaque, less predicable, and far more subject to pu rely speculative movements.  The principles of 
free trade in goods and services could not be applied to the movement of capital. 
208. It was not appropriate to compare “investment”, as defined and dealt with under GATS, 
with “investment” as proposed for negotiation by some Members under the aegis of the WTO.  The GATS followed an enterprise-based definiti on of investment and the definition was closely 
linked to mode 3 of service delivery, "commercial presence".  "Commercial presence", in the 
context of GATS, had no other purpose than to facilitate service supply.  One of the basic 
characteristics of service delivery in respect of cer tain categories of services was the need for the 
supplier and the receiver of the service to be in contact.  ‘Commercial presence’, therefore, was WT/WGTI/M/18 
Page 54   the only mode of service delivery in the case of certain types of services - e.g., banking and insurance.  Korea's submission (WT/WGTI/W/123) in paragraph 18 had also noted that “the 
GATS [dealt] with trade in services by its nature, not investment per se.  Therefore, the 
‘commercial presence’ in a host country, even thou gh it include[ed] direct investment, or the 
establishment of a foreign company, mainly focus[ed] on the supply of services”.   
209. Commercial presence was covered under the GAT S only to the extent that it facilitated 
delivery of services - and even that too subject to various conditions and exemptions.  What was 
of importance was the commitment to market acce ss for specific service sectors undertaken by a 
Member.  Mistaking it as a commitment for "commercial presence" was mistaking the "medium" for the "message".  Therefore, inclusion of comme rcial presence under GATS in WTO did not, in 
any way, justify inclusion of 'investment' under 'goods' in the WTO.  Not surprisingly Korea's 
submission (WT/WGTI/W/96), on this issue, po sed a question:  “How should we bridge the 
differences in the definition of investment bet ween any multilateral framework on investment 
(MFI) and the GATS in which investment is defined as a "commercial presence"?  While looking at the contrast between the GATS  and the GATT, it might be noted that specific sectors and 
modes of supply to be covered under the GATS contrasted with the traditional GATT approach 
based on general principles.  
210. When it concerned trade – in goods and in services – national treatment had a special 
relevance and the multilateral trading system had been established on the basis of the non-
discrimination principle.  On the other hand, trad itionally in international law, control of entry 
and establishment had been the prerogative of national governments.  Conventionally countries 
had treated, as a sovereign right, the control of entry and establishment.  There were only two 
countries (the United States and Canada) that were known to insist on ‘pre-establishment national 
treatment’ provisions in their BITs. International investment agreements also in general did not 
envisage national treatment at the pre-establishment phase.  When certain international 
instruments envisaged national treatment at the entry phase it should be noted that such 
instruments were non-binding.  A case in poin t was the OECD Code for the Liberalization of 
Capital Movements in which the right of establis hment was introduced in 1984.  Another instance 
was that of APEC’s non-binding investment pri nciples.  A multilateral agreement on investment 
under the auspices of the economically well off countries of the OECD, which envisaged in the 
draft agreement binding national treatment obliga tions, did not find favour with many Members 
and had to be abandoned.  How then could an agreement of this nature - envisaging national 
treatment and MFN provisions of a binding nature - be considered in a much more heterogeneous 
group like WTO? 
211. In conclusion, he recalled that it was in order to bring services under the umbrella of the 
WTO that Members found it necessary to devise a specific architecture involving, inter alia , 
mode based definitions.  The GATS was a complex agreement.  Safeguard measures in respect of 
services had so far proved elusive. Protection, in  respect of goods, was possible through tariff and 
other border measures, but certain modes of serv ices were not amenable to such measures.  In 
India’s view, given the complex nature of capita l flows and investments, the application of the 
non-discrimination principle to investment, as it ex isted in goods and services rules, could not be 
automatic.  Developing countries needed to retain the ability to screen and channel FDI in tune 
with their domestic interests and priorities.  Th is was the reason why BITs pre-dominated the 
world over. 
212. The representative of Switzerland
 suggested that it might be worthwhile to place all of 
the Secretariat background notes, once completed, on the WTO website as a way of helping  WT/WGTI/M/18 
 Page 55 
  people to know more about the issues before th e Working Group.  His delegation agreed with 
Brazil and Indonesia that macroeconomic frameworks were critical to the attraction of FDI.  
Indeed, foreign investment sought out countries  which fulfilled certain basic “framework” 
conditions – i.e., price and exchange rate stability, di stortion free labour and product markets, as 
well as a certain level of human and capital infrastructure.  But there was another set of 
conditions, or flanking policies, t hat centred on governance issues – i.e., national treatment, a fair 
and efficient judicial system, pr operty rights, competition policy,  anti-corruption policies, and 
environmental standards.  In these areas, devel oping countries might take measures to maximize 
the development effects of FDI, but the basic co ntext for attracting FDI was the most important 
single driver of development and economic grow th.  He quoted an Indian economist who had 
argued that the more closed an economy was to foreign investment, the more government 
intervention in – and screening of – investment was needed, which in turn limited the prospects for economic growth. 
213. Regarding non-discrimination, he agreed with Japan that MFN treatment promoted an 
environment for fair competition.  His delegation also agreed with the need to look more closely 
at the relationship between regional agreements and BITs and a possible multilateral framework 
in order to identify the scope for potential overlaps and conflicts.  Referring to the question of 
vested benefits, also noted in the Japanese paper, his delegation felt that the Working Group 
would need to look closely at how an eventual "grandfather clause" might be applied.  In this respect, the MFN clause should be applied without exemption to the pre-establishment phase.  Switzerland also thought that national treatment  was an essential discipline, although differing 
development levels, industrial structures and so cial policies could indeed justify exceptions.  
Nevertheless these exemptions would ne ed to be well articulated and justified.  In this respect, 
Switzerland supported the EC’s proposal to h ave, first, general MFN and national treatment 
obligations, including possible exemptions, at the post-establishment state and, second, specific or 
conditional national treatment obligations for the establishment of sectors set out in each 
Member’s schedule of commitments.  This wo uld not prevent host countries from pursuing 
development and related policies, as long as the conditions for pursuing those policies were 
specific, clearly identified, and well documented .  Regarding Indonesia’s question about whether 
exemptions would adequately address differing de velopment levels, and Thailand’s question 
about whether time-limited exemptions would be su fficient, Switzerland felt that it would be 
important to go into these issues in greater detai l in the future.  His delegation also supported the 
point made by Chile about the need to make the rules and standards governing different sectors comparable, so that an investor in the telecommunications services as well as the manufacture of telephones was not confronted with different sets of rules. 
214. Finally, addressing India’s point about the risk s of volatile capital flows, it was important 
to distinguish among different types of capital – as had been done in the Doha Ministerial 
Declaration – and their differing impact on developm ent.  He recalled that in the past few years 
FDI inflows had averaged US$170 to 200 billion a year for developing countries, while long-term 
borrowing had become negative over the same period, suggesting that the Working Group should 
be very careful in interpreting the role that long-term investment played for developing countries.   
215. The representative of Norway
 believed that in order to create a level playing field, and to 
ensure that investors had a transparent and pred ictable framework in which to operate, non-
discrimination was an essential element and should be a core principle in a future multilateral 
investment agreement.  MFN and national treatment  standards in an investment agreement could 
be modified by lodging exceptions to the non-disc rimination principle, for example as was done 
in the GATS Agreement.  Norway saw MFN as t he key element both in the WTO system and in WT/WGTI/M/18 
Page 56   international investment agreements.  He noted that MFN was an unconditional obligation in the GATS.  Norway believed that, as a matter of consistency in the WTO system, MFN should also be incorporated in a multilateral investment framework agreement as a general obligation across- the-board subject to any exceptions that a party might lodge.  Norway was also of the opinion that national treatment obligations could be applied acr oss-the-board in the post-establishment phase, 
again allowing for possible exceptions. 
216. His delegation recognized that the case for commitments in the pre-establishment phase 
was sensitive.  Norway fully appreciated that many countries had concerns when it came to the 
question of liberalizing admission of foreign inve stment.  If a country had liberalized a sector or 
sectors for establishment of FDI, Norway believed th at national treatment should apply to these 
sectors that could be listed in a party’s schedule of pre-establishment commitments based on a 
GATS-type positive list approach.  
217. The representative of Malaysia
 observed that the majority of delegations that had taken 
part in the discussion on this subject apparently felt that it was more important to incorporate the 
principle of MFN treatment in a possible multil ateral framework on investment than national 
treatment.  Malaysia would go further, arguing t hat developing countries should be able to seek a 
permanent carve out from national treatment in any multilateral framework.  Malaysia also disagreed with the EC’s claims that all intern ational investment agreements contained some form 
of national treatment provisions.  As regards J apan’s point that regional integration agreements 
involving preferential investment provisions sh ould be exempt from MFN requirements only if 
they met existing WTO criteria (i.e., they cover  substantially all investments and did not raise 
barriers to outsiders), Malaysia pointed out that these were extremely stringent tests which in 
practice very few Members had actually met.  Japan’s position raised questions as to whether any regional agreements could meet the test, and as to who would decide whether the appropriate 
conditions had been met?  Malaysia also wanted to reflect further on Japan’s proposals regarding 
the exemption of BITs.  On the subject of “v ested benefits” raised in Japan’s paper, Malaysia 
requested Japan to provide the Working Group with more precise examples.  As far as the United 
States' intervention was concerned, Malaysia found it difficult to reconcile US arguments that screening should be disallowed but that developm ent concerns should be treated sympathetically.  
The Working Group should recall that many Members – developed as well as developing – 
actively screened FDI, in order to attract and channel  the right kind of investment. Finally, his 
delegation noted that if the Working Group was going to address the question of general 
exemptions – such as security exemptions – Malaysia would propose that all development 
provisions be included under the umbrella of general exemptions.  
218. The representative of the Philippines
 subscribed to the view that non-discrimination was 
the bedrock of trade relations in the WTO system.  However, his delegation would not go so far as to apply this principle to investment, especial ly to investments at the pre-establishment phase, 
because what was at issue was not merely access for goods and services, but the most significant aspects of commercial and physical presence in an economy.  His delegation would not subscribe to sweeping statements that less screening of inves tment somehow led to higher growth potential.  
The issue was more complicated than that.  Ef fective policy space for development transcended 
specific circumstances and justifications. His delegation suggested that effective development 
flexibility at the pre- and post-establishment p hase of investment would even mitigate the need 
for emergency safeguard measures, and the long drawn out negotiations that would accompany 
them.  On the subject of the GATS, while his del egation was clearly aware of the Doha mandate, 
the Philippines was also tempted to suggest that the replication of the GATS in trade and 
investment was by no means a forgone conclusion.  In particular, his delegation did not think that  WT/WGTI/M/18 
 Page 57 
  the permissible exceptions in the GATS in respect to MFN and national treatment were to be treated as benchmarks in the Working Group.  For  the Philippines, the GATS exceptions were a 
minimum, not a maximum. 
219.  The representative of the European Communities
 observed that there seemed to be a 
broad consensus that non-discrimination was im portant to creating an investment-friendly 
environment, whether through domestic measures alone or whether backed by binding 
international agreements.  International rules promoting non-discrimination were not a panacea 
for development, nor could they be considered as  the engine of new FDI flows by themselves.  
Non-discriminatory treatment, while it would certain ly help to attract FDI, would have to be 
supported by favourable domestic considerations.  It was also broadly true that the usefulness of 
any framework of international rules on investment would depend on the level of commitments 
and exemptions undertaken by individual countries.  In response to questions regarding the EC’s 
paper, he doubted – as one delegation had asserted – that only two types of bilateral agreements 
in the world included commitments on pre-establishment treatment.  Nor did he accept the suggestion by one delegation that the EC paper ha d been factually wrong in asserting that all 
international investment agreements contai ned provisions on national treatment. 
220. The representative of Mexico
 noted that the term “like circumstances”, far from 
introducing ambiguity into an agreement, as one delegation had suggested, in fact clarified its 
scope.  The term was particularly useful given t he inherently relative nature of concepts like MFN 
and national treatment.  It ensured that a compar ison was made, not on the basis of nationality, 
but in light of the relevant circumstances surrou nding the investor and the investment.  Moreover, 
the term “like circumstances” was certainly not new to multilateral agreements; a version of the 
term was used in both the GATT and the GATS – i.e., “like goods” and “like services”. 
221. The representative of Chile  underscored one point, regarding India’s concerns about 
volatile capital flows, which was that when a country needed to impose measures to address exchange difficulties these measure had to be applied in a non-discriminatory way or their basic 
purpose was undermined.   He pointed out that on e of the clauses that Ch ile had always included 
in its bilateral investment agreements was designed to prevent such short-term financial 
instability, and this provision was applied to all capital movements in a non-discriminatory manner.  
222. The representative of Chinese Taipei
 said the real merit of applying national treatment at 
the pre-establishment phase related to the admission of foreign investment in general.  The 
suggestion in the EC paper, shared by Japan and Korea, that national treatment at the pre-
establishment phase did not affect the right of a host country to exclude foreign investment in 
certain sectors of its economy seemed to require furt her elaboration.   In addition, current GATS 
practice might also need to be taken into account.  As was well known, under mode 3 of the GATS investment in services was subject to nat ional treatment only at  the post-establishment 
phase.  A consistency issue could arise if general national treatment were applied at the pre-
establishment phase in a future multilateral framework on investment. 
223. The representative of Korea
 responded to delegations' questions and comments on the 
subject of non-discrimination.  In response to Hungary’s comment that national treatment should apply generally to the post-establishment phase, he noted that Korea shared this view in principle, 
with some qualifications.  If a legal entity was established in accordance with a host country’s 
domestic laws, this entity should be considered as  a national legal entity – regardless of the 
national origin of the company or  its owners.  In this respect, he noted that many international WT/WGTI/M/18 
Page 58   investment agreements – regional or bilateral – pr ovided national treatment as a general rule of 
application in the post-establishment phase.  Th e most important issue was how to protect the 
interests of investors at the post-establishment  phase to create a friendly environment for 
investment.  In addition, Korea felt that the key element to be addressed by the Working Group was whether exceptions under existing WTO agreements, especially the GATS, were sufficient to meet the needs of developing countries. 
224. The representative of Japan
 reiterated his delegation’s views about the importance of the 
principle of non-discrimination in a multilateral investment agreement.  He agreed with the EC 
that non-discrimination was not a panacea, but a major pillar of a more investment-friendly climate. Japan noted the many concerns raised by developing countries regarding national 
treatment for the pre-establishment phase.  To respond to these concerns, the Working Group 
needed to continue its in depth discussions on the definition and the practicality of the flexibility 
that could be envisaged in a multilateral framewo rk.  Japan’s feeling was that the most important 
thing was to come up with flexible set of rules beneficial to both investors and host countries. 
225. Referring to Malaysia's question regarding exceptions for regional integration, his 
delegation wanted to make clear that it was not proposing to copy GATT Article XXIV or GATS 
Article V for a prospective mult ilateral framework.  Japan was merely introducing these 
provisions as a reference for further consideration.  What the Working Group needed to bear in mind was that the exemptions needed to be carefully screened – they could not be unconditional.  
More thought and attention needed to be given to t he issue of exemptions for regional integration 
or BITs.  Regarding Malaysia’s question ab out vested benefits, hi s delegation was looking 
forward to hearing from developing countries about their needs. Japan was not, however, 
proposing such provisions.    
226. The representative of Australia
 suggested a way of moving discussions on this subject 
forward – by taking the fair amount of common gr ound that existed at the conceptual level and by 
translating it into practical work for a later date.  It would seem that after years of discussion on 
these issues the Working Group had reached one of its goals which was to find some level of 
common understanding – if not a common position – on the pros and cons of limited MFN and 
national treatment in investment regimes.  Australia was not aware of any international 
investment regime that offered MFN or national treatment without any conditions or exemptions.  
Therefore, in order to move forward, it might be  useful to examine some of the areas listed for 
further analysis in WT/WGTI/W118 – particularly the reference to sub-federal levels of government, investment laws and regulations, the possible need for competition policy, the 
compatibility of the MFN principle with screening procedures, and the handling of investment incentives.  These were issues that Members had raised in recent years and it seemed to her delegation that the Working Group had not discussed them to the extent needed to reach a common understanding on how they might apply to a multilateral investment agreement.    
227. The representative of the OECD
 pointed out that the principle of non-discrimination in 
international investment agreements had first been tested in the OECD, starting in 1976 with the 
National Treatment Instrument, and since 1984 under the Code for the Liberalization of Capital 
Movements.  The principle of no n-discrimination had helped to underpin post-war reconstruction, 
and had facilitated the global wave of liberaliz ation since the 1980s.  Perhaps one reason for this 
success was the concept of progressivity that underpinned the application of the non-
discrimination principle.  She also wanted to correct an omission in the Secretariat paper on 
development provisions (WT/WGTI/W118) wher e reference was made to the OECD National  WT/WGTI/M/18 
 Page 59 
  Treatment Instrument but not to the right of the establishment obligation incorporated in the 
Capital Movements Code.       
(iii) Modalities for pre-establishment treatment based on a GATS-type positive list approach 
228. The Chairman
 drew attention to a Note by the Secretariat on "modalities for pre-
establishment treatment based on a GATS-type positive list approach (WT/WGTI/W/120), as well as to written contributions on the same subject that had been received from the European 
Communities (WT/WGTI/W/121), Korea (WT/WG TI/W/123), Japan (W T/WGTI/W/125), the 
Separate Customs Territory of Taiwan, Penghu,  Kinmen and Matsu (WT/WGTI/W/127), and 
Canada (WT/WGTI/W/130). 
229. The representative of the European Communities
 introduced its submission 
(WT/WGTI/W/121).  The EC had long favoured the GATS-type positive list approach to pre-
establishment commitments because, in his delegat ion’s view, this approach provided sufficient 
flexibility for all Members – which was particular ly important in a broad and diverse body such 
as the WTO.   Not only did the GATS approach al low each country to pursue liberalization of its 
investment regimes at its own pace, it also provid ed a degree of legal certainty and transparency 
for other Members and investors.  The EC was also  aware - from the various surveys of European 
business that it had conducted - that the entry conditions that each country provided were very 
important to investors.  Investors were looking for the added security and credibility that came 
with having a domestic policy regime anchored in  a framework of international rules.  Although 
all countries maintained certain controls or restrictions on the admission of foreign investment, it was important that these policies were predictab le and transparent.  Here, too, a multilateral 
investment framework could help.   
230. The representative of Japan
 introduced its submission (WT/WGTI/W/125).  Regarding 
the distinction between pre- and post-establishment treatment, he pointed out that most 
international investment agreements provided for non-discrimination in the post-establishment 
phase if only because it became difficult in practice to treat economic factors differently once 
they were established in a market.  Although,  as had been noted by other delegations, pre-
establishment commitments were more complex and sensitive, these too were important to foreign investors as a means of assessing the predi ctability and security of an investment regime.  
As regards the advisability of a positive or  negative list approach to pre-establishment 
commitments, he noted that Japan used the negativ e list approach in its partnership agreements 
with Korea and Singapore.  While it was obviously up to Members to determine which approach 
was appropriate for them, it seemed to Japan that  the GATS-type positive list approach could be 
more acceptable, particularly for developing economies.    On the subject of the methodology for 
arriving at a positive list of  commitments, Japan favoured the request and offer format, whereby 
Members received requests from investment partners regarding sectors they wished to see liberalized.  After reviewing these requests, each Member tabled its offers.  This was the 
methodology Members already employed in the GATS, so it seemed to Japan that the additional 
administrative burden would not be too excessive.   As a last point, he noted that should the 
multilateral investment agreement adopt a positi ve list approach, the Working Group might want 
to study the appropriate industrial classifications  that would need to be used in such an approach.  
Here, too, the experience in the GATS could provide a point of reference.  The GATS divided the services sector into 150 sub-sectors using the UN ’s Central Product Classification system.  This 
system established the template for scheduling  each country’s sectoral commitments on national 
treatment and market access.    Perhaps this same system could be used to classify the non-service 
sectors under a possible multilateral framework on investment.  He then summarized the third WT/WGTI/M/18 
Page 60   section of Japan’s paper which looked at the way pre- and post-establishment treatment was addressed in existing bilateral, regional and multilateral agreements on investment including the ASEAN Investment Agreement.      
231. The Secretariat
 introduced its background Note on modalities for pre-establishment 
commitments based on a GATS-type positive list approach (WT/WGTI/W/120). 
232. The representative of Chinese Taipei  supported Japan in urging the Working Group to 
look more closely at the format for industrial  classification, based either on the UN’s Central 
Product Classification or on the Harmonized Comm odities Description and Coding System.  His 
delegation also shared Japan’s view that sectoral definitions should be neither too wide nor too 
narrow.  Two additional elements for future  consideration were the need to made the 
classification system flexible enough to cope with  new sectors that post-dated commitments, and 
the need to ensure that the classification issue was decided in conjunction with the final decision 
on the scope and definition of investment.  The issue of industrial classification was not just a 
technical one.  It could have substantive implications for the quality and nature of future 
commitments.  Perhaps delegations, or the Secretaria t, would wish to contribute further to this 
particular discussion, both regarding the options before the Working Group and the pros and cons 
of the various alternatives. 
233. A second issue that deserved more discussion was the relationship between the GATS-
type positive list approach and the use of scr eening mechanisms by host countries.  Chinese 
Taipei’s preliminary view was that the GATS approach and screening mechanisms were 
compatible on the condition that the screening cr iteria and procedures were transparent, and that 
these criteria had to do with substantive requirem ents, these requirements had to be put forward in 
the respective positive lists of commitments as a condition or qualification of entry (unless they 
fell under the category of general exemptions for s ecurity, public morals, etc.).  In any event, his 
delegation was of the view that a fuller discussion of this issue would be of great help to the Working Group.   
234. The representative of Mexico
 suggested that pros and cons of the positive and negative 
list approach to pre-establishment treatment had already been amply analysed by the Working Group.  The central point was the need to find an appropriate balance - both between disciplines 
and flexibility, and between home and host countries.  It had also been noted that this balance 
would have to take into account the national objectiv e and policies of WTO Members, as well as 
their different levels of development.  Mexico felt  there was a broad sense in the Working Group 
that a GATS-type positive list approach would help Members to strike this balance, since this 
approach allowed countries to liberalize in a selective manner and in accordance with their needs 
and economic advantage.  The Working Group could certainly not assume, at this point, that all 
Members were prepared to liberalize their inves tment regimes in all sectors.   Hence it was 
essential to guarantee – above all for developing count ries – a margin of action in direct relation 
to their national policies and goals.  Finally the Working Group needed to analyse carefully the 
implications of the relationship between exist ing WTO agreements (especially the GATS) and a 
possible multilateral framework, and the need to avoid inconsistency or incompatibility of 
investment-related rules.   
235. The representative of Hungary
 subscribed to the view, as outlined in the EC paper, that 
the GATS-type positive list approach for pre- establishment obligations provided a workable 
model for Members to proceed towards a possible multilateral framework for investment.  This 
approach would address the concerns of developing countries, anxious to retain enough flexibility  WT/WGTI/M/18 
 Page 61 
  in defining entry conditions for FDI.  But at the same time, this approach would also guarantee enough legal certainty, transparency and predictability for foreign investors entering a market.  A gradual and selective approach would also provi de enough time for developing countries to fully 
comprehend and observe, through the experience of  other countries, the kind of approach that 
should be applied to the treatment of foreign inves tors in the pre-establishment phase.  Hungary 
also subscribed to the view that a multilater al framework for investment, providing selective 
national treatment and market access in the pr e-establishment phase, and unconditional MFN 
treatment across the board, would offer value ad ded in as much as engagements undertaken by 
countries in the multilateral context would enhance the credibility of their policies in the eyes of 
potential investors.  Given the fierce competition for investment in global markets, this would be 
of distinct benefit to countries.  
236. The representative of Malaysia
 reiterated that developing countries should be exempt 
from making any pre-establishment commitments under a possible multilateral framework – if 
indeed development concerns were to remain at the core of such a framework.  He also reiterated that Malaysia could not accept the notion of progressive liberalization if Members chose a GATS 
approach.  It should be up to developing countries, not developed countries, to choose if and 
when to embark on further liberalization.  His del egation also repeated its request for clarification 
of the meaning of the term progressive liberali zation (i.e., what would be the end date of the 
process), and he hoped a response would be forthco ming before the next Ministerial Conference. 
237. Regarding the Secretariat paper, his delegation associated itself with the option identified 
in the paper as the “investment control” model.  This remained Malaysia’s preferred option.  
However, assuming that Members opted for the GATS-type positive list approach, he sought 
clarification as to what would happen if a Member wished to modify its commitments.  Finally, Malaysia wanted to clarify that Japan was mistaken  in asserting in paragraph 30 of its paper that 
the ASEAN Investment Agreement contained provisions requiring the review and progressive 
liberalization of commitments.  In fact, it stated that “the sensitive list shall be reviewed by 1 
January 2003 and at such subsequent periodic intervals as may be decided by the AIG council”.  
There was no commitment on the part of Members to the notion of progressive liberalization. 
238. The representative of the United States
 felt that the Secretariat paper could have included 
more on modalities for pre-establishment treatm ent, rather than concentrating on a comparison of 
positive and negative list approaches.  Nevertheless the United States believed that this, too, was 
a valuable point for discussion, and she therefore add ressed her comments to that issue.  First, her 
delegation disagreed with the imp licit distinction made in the paper - that a negative list was 
associated with pre-establishment coverage, while a positive list was for only post-establishment.  Rather, both approaches could work for either type of commitment, as was evidenced by the hybrid nature of the GATS schedules, and by th e existing international investment agreements.  
One of the real differences between the appr oaches related to the initial treatment for new 
investments.  In a positive list, the new sector was entitled to no protection and no guarantees of access, thereby reducing incentives for foreign in vestors to invest abroad.  On the other hand, a 
negative list provided them a minimu m level of protection, as well as access, from the first day.  
As had often been seen with the GATT, until a new product had been identified by a specific tariff number, generally following a long an d complicated process of reclassifying the 
harmonized tariff system, there was confusion an d disagreement on the appropriate tariff 
classification.  A negative list approach in in vestment would avoid that conundrum.   
239. Her delegation agreed with the Secretariat's recognition that an MFN/national treatment 
approach could provide significant policy flexibility in setting the de facto conditions of pre-WT/WGTI/M/18 
Page 62   establishment treatment through country-specific "negative" exemptions in respect to particular measures, as well as sectors or activities in  which foreign investment was not admitted.  
Suggesting that only a positive list approach provided the necessary regulatory flexibility was inaccurate, as could be demonstrated by the United States' regulatory climate, which was one of 
the most active in the world;  in many instances there might be 50 different regulatory paradigms.  However, the United States was still able to rely  confidently on a negative list approach in all of 
its investment agreements.   
240. While the GATS negotiators felt more comfortable with a positive list approach because 
services liberalization was completely new for many negotiators, the same could not be said with respect to investment.  There were nearly 2,100 investment agreements currently in effect nearly 
all of which were based on a negative list approach.  At least 87 per cent of current WTO 
Members had experience with this type of agreemen t.  Furthermore, a significant portion of WTO 
Members were already bound by negative list pr e-establishment commitments in their existing 
international investment agreements.  So, as ment ioned earlier, it appeared that for most WTO 
Members, additional capacity would be required to  negotiate a positive list approach, whereas a 
negative list approach could be done relying on the abilities of existing negotiators. 
241. Pre-establishment coverage did not mean a country might never restrict entry of a foreign 
investment based on nationality.  What it meant was that any exceptions to MFN or national treatment must be negotiated with the treaty partners so that they were iden tified at the outset of 
the agreement, and they should be as limited as possible.  Similarly, sectoral limitations, 
restrictions on inflows, limitations on ownersh ip and control and most investment incentives 
could be accommodated through either a negative or positive list approach.  A host country could 
place further conditions on new investments subjec t to the requirement to treat foreign investors 
and domestic investors comparably.  However, it was important to understand the negative 
competitive effect that conditions could have generally on investment. 
242. Finally, it was important to remember that the GATS was actually a hybrid approach - 
incorporating a positive list for pre-establishment  national treatment of bound sectors, and a 
negative list component for MFN treatment.  United States investment agreements had 
successfully relied for many years on a negative list approach for both pre- and post-establishment obligations, and her delegation believed that such an approach was a vital component of a high standards agreement. 
243. The representative of Indonesia
 observed that pre-establishment treatment was one of the 
most sensitive and contentious issues in the inve stment area.  The key issue was whether or not 
foreign investment should be allowed to enter a host country under conditions set up by that 
country.  Drawing on the Secretariat paper, his delegation noted that there were several ways to 
regulate pre-establishment of investment through, among other things:  investment control, MFN/national treatment (negative list), and select ive liberalization (positive list). Given the 
sensitivity of the issue, the majority of existing international investment arrangements, 
particularly BITs, contained binding policy rules only regarding the post-establishment treatment, 
and left it to the discretion of host countries to determine pre-establishment treatment.  It was 
obvious that regulation of the post-establishment  phase was easier and less sensitive than the pre-
establishment phase.  The Working Group should therefore be cautious in addressing regulation of the pre-establishment phase of foreign investment.   
244. Regarding the investment control model, Indonesia saw the merit in this approach for 
developing countries as it allowed them to retain a degree of policy space.  Host countries could  WT/WGTI/M/18 
 Page 63 
  provide non-discriminatory treatment in the post- establishment phase, but preserve extensive 
discretion over investment in the pre-establishm ent phase.  As regards the negative list approach, 
this merited further consideration as it still al lowed host countries to list the economic sectors 
they wished to regulate.  Host countries had the option of excluding or maintaining control in certain sectors, depending on whic h sectors they felt to be important to economic development.  
Regarding the selective liberalization model (posit ive list approach), Indonesia felt that while the 
GATS approach provided a certain degree of flexibility, the GATS also required Members to undertake progressive liberalization with a view to reducing and eliminating barriers and to providing effective market access.  Under this process, Members would face heavy pressure to 
gradually open up their markets through rounds  of progressive liberalization.  Liberalization 
would also be carried out through bilateral negoti ations among Members, further increasing the 
pressures – and conditions - imposed by larger Members on the smaller ones. 
245. Indonesia felt that pre-establishment treatme nt should be left to the discretion of 
Members to arrive at policy decisions in accorda nce with their individual needs.  If some 
Members felt comfortable with undertaking furthe r bound liberalization, while retaining a certain 
degree of flexibility, they could adopt the se lective liberalization approach.  However, while 
taking this position, his delegation was ready to  discuss in greater detail the GATS-type positive 
list approach to pre-establishment treatment with a view to better understanding this issue.  
Likewise, Indonesia wanted to better understand  how the development dimension might fit into 
the GATS-type positive list approach, noting that one aspect of the development dimension was to provide developing countries with full discreti on over the pre-establishment phase.  His 
delegation wanted to make clear that it did not favour automatic admission.  Screening of 
investment was also an important measure that needed to be fully retained by developing 
countries.  Therefore, Indonesia did not share the vi ew that screening was a barrier to the entry of 
foreign investment.  Finally, in his delegation’s view, although the Doha Declaration had already 
identified modalities for pre-es tablishment based on the GATS-t ype positive list approach as 
being one element to be further clarified by the Working Group, this did not mean that 
commitments on pre-establishment treatment sh ould be automatically considered an element in 
any prospective arrangement. 
246. The representative of Chile
 observed that it was difficult to analyse paragraph 22 of the 
Doha Ministerial Declaration in an isolated fashion because the issues were so inter-related.  This was particularly true with regard to the modalities for pre-establishment commitments.  Any 
decision on modalities and pre-establishment comm itments was part and parcel of decisions on 
non-discrimination, scope and definition, home an d host countries' obligations, and so forth.  She 
noted that Japan’s paper set out four elements that needed to be addressed in relation to 
modalities:  pre- and post-establishment, pos itive and negative lists, requests and offers, and 
industrial classification.  Chil e agreed with Japan’s categorizati on of the four elements, and her 
delegation felt that the Working Group should f ocus its discussion on clarifying the first two 
elements. 
247. Regarding positive and negative lists, she note d that most delegations had expressed their 
preference for a positive list approach.  Chile wa s flexible in this regard, although given the 
diversity of WTO Members, it was probably more realistic to imagine a GATS-type positive list 
approach.  Nevertheless depending on the objective that the Working Group sought in future 
negotiations the distinction between a positive or  negative list approach in the long-term might 
prove illusory.  If one objective of a multilater al framework was investment liberalization, and 
Members progressively deepened commitments through a positive list approach, the long-term 
substantive result would be a convergence of the two approaches.  Chile hoped that a WTO WT/WGTI/M/18 
Page 64   agreement on investment would not only seek to protect investment – which was already covered in the existing network of BITs – but would also seek to promote and liberalize investment, especially given the need to find balance in the tr eatment of the manufacturing and services 
sectors. 
248. The representative of Hong Kong, China
 recalled that there was no rule of customary 
international law requiring a territory to allow entr y to foreign investment, and that the concept of 
unconditional right of entry did not exist in practi ce.  The history of negot iations of international 
investment agreements also illustrated that governm ents generally wished to retain certain rights 
to regulate the entry and establishment of forei gn investments.  Most existing international 
investment agreements, in particular BITs, left a considerable degree of discretion over pre-
establishment treatment of investments.  Hong Kong, China had no pre-conceived view on how to 
address pre-establishment treatment in the context of a possible multilateral framework on 
investment.  His delegation observed that the GA TS-type positive list approach was supported by 
a considerable number of Members as being a r ealistic platform for m aking pre-establishment 
commitments in a multilateral setting.  This ap proach allowed for the progressive relaxation of 
restrictions on entry of FDI commensurate with the individual needs and circumstances of 
Members.  Hong Kong, China agreed that the GA TS-type positive list approach could be a useful 
starting point for any future multilateral ru le-making on pre-establishment treatment of 
investment. 
249. Looking ahead, his delegation believed there were a few issues that merited further 
examination in the Working Group.  First, the concerns raised by some developing Members 
must be dealt with.  For example, comments had been made that the GATS approach by itself 
could not adequately address developing countries' development needs and concerns.  Some developing Members believed that they should be allowed to carve-out selected sectors 
permanently and did not want to be pressurized in to progressively relinquishing their right to 
regulate admission of investments in those sectors.  Hong Kong, China had an open mind on this 
idea and would welcome additional justifications for such permanent carve-outs. 
250. Second, his delegation understood that apar t from the GATS-type positive list approach, 
the investment control and MFN/national treatment  approaches were also common ways to deal 
with pre-establishment treatment of investment in  international investment agreements.  Each of 
these three approaches had its merits and demerits.  It might be worth exploring whether a compromise formula from these approaches was possible to address the wide-ranging needs of the Members. 
251. Finally, his delegation concurred with the EC  and others that the relationships between 
pre-establishment rules in a possible multilate ral investment framework, the GATS mode 3 
provisions and those in other international investment agreements should be carefully assessed.  Only with such an assessment could Members ensure that the new multilateral investment rules 
were complementary to the existing web of investment-related international agreements.  
Otherwise, complications might arise during implement ation and interpretation of the multilateral 
rules, defeating their very purpose of securin g transparent and predictable conditions for 
investment. 
252. The representative of India
 noted that his delegation had already expressed its views on 
the basic difference between the concept of commercial presence under GATS and the concept of 
investment.  India had also noted that given the complex nature of capital flows and investments, 
the application of the non-discrimination principle, as it pertained to goods and services, was  WT/WGTI/M/18 
 Page 65 
  neither feasible nor desirable with respect to in vestment as it would substantially limit the 
flexibility available to  developing countries. 
253. It was often argued that the GATS architec ture envisaged substantial flexibility for 
developing countries by enabling them to liberali ze progressively.  However , the issue was not as 
direct as it was often made out to be.  While developing countries were allowed to open up 
progressively, developed countries through MFN exemptions limited market access to developing 
countries.   
254. The concept of pre-establishment national treatment as such did not exist under the 
GATS.  National treatment was available only to the extent that commitments had been taken by 
Members.  As a Secretariat paper had indicated (WT/WGTCP/W/114, para. 2)  "....it has, of 
course, to be recalled and emphasized that national  treatment is not a rule of general application 
in the GATS but is dependent on a specific sectoral commitment having been made and on any conditions and qualifications set out therein". 
255. He noted that national treatment was generally  applicable only at the post-establishment 
phase in almost all international investment agr eements.  India had earlier noted that there were 
only two countries (the US and Canada) that were  known to insist on pre-establishment national 
treatment provisions in their BITS.  The EC had observed that pre-establishment national 
treatment provisions were also available in certain  other BITs.  However, his delegation wished to 
underscore its understanding that except for the recently negotiated BIT between Japan and Korea, all other agreements involving pre-establis hment national treatment provisions were in the 
context of regional trading agreements or involving the US and Canada.  The UNCTAD paper on 
national treatment quoted Patrick Juillard as saying that, in the context of investment, the 
extension of national treatment from post to pre-establishment stage had been considered to be a 
“revolution” for many countries. 
256. He then responded to the observation made by the EC regarding non-discrimination 
principles in existing BITs.  In this context, it wa s important to note that the national treatment 
principle available in BITs (which numbered over 2,000) were subject to the domestic rules and 
regulations of host countries and, except in the cases already mentioned, were at the post-
establishment phase.  In short, the host countries preserved their right to make or modify their 
rules and regulations on foreign investment.  Av ailability of this policy space was the most 
important development dimension – a point to which many delegations had alluded in their interventions. 
257. He also noted that substantial investment had flowed to certain countries with no 
provisions for national treatment of investments or investors.  These investment flows had taken 
place based on other considerations such as the si ze of the host country market, macro-economic 
conditions in the host country, the availability of  skilled personnel and inputs, and so on.  That 
being the case, India was not convinced of the arguments for rules for pre-establishment national treatment. 
258. In most BITS, investors is allowed national  treatment and investors receive only MFN 
treatment.  Nationals of other contracting parties  were sometimes accorded national treatment "as 
regards their activity in connection with investments in its territory".  Was it not true that national 
treatment in such cases was not extended to invest ors as such but only to the extent they were 
involved in specific investment in the host country? WT/WGTI/M/18 
Page 66   259. As his delegation had explained earlier, when ce rtain international instruments envisaged 
national treatment at the entry - i. e. the pre-establishment - phase, it might be noted that such 
instruments were non-binding and covered only investment and not investors.  Binding national treatment and MFN provisions were available in some of the regional trading arrangements in advanced stages of integration.  NAFTA, for exa mple, envisaged national treatment to investors 
and investments of another contracting party wi th respect to "the establishment, acquisition, 
expansion, management, conduct, operation and sale or  other disposition of investments".  Could 
these few cases – all in the context of t he advanced regional integration efforts - be the 
benchmarks for emulation in the WTO where the membership was predominantly comprised of 
low income countries and LDCs, with diverse ec onomic and other backgrounds, and in different 
stages of development? 
260. What about the issue of national treatment  at the sub-central level?  The UNCTAD 
document on national treatment posed the question  as to "whether a sub-national authority [had] 
to extend such preferential treatment to foreign investors on the basis of the national treatment 
standard, regardless of how it treat[ed] invest ors from outside the subdivision". The UNCTAD 
document observed that "In US BITs foreign inves tment and investors are granted treatment no 
less favorable than that accorded to investors from other states of the US.  A foreign investor is to 
be treated by a United States sub-nat ional authority as if it were an investor from another US sub-
national authority for the purpose of compliance wi th national treatment provisions”.  Therefore, 
if the host sub-national state offered preferentia l treatment to local investors and did not extend 
such treatment to out-of-state investors, the foreign investor could not invoke national treatment 
to obtain similar preferences.  The obvious question  that arose was what should be the modalities 
for treatment of sub-national authorities with constitutional powers to make rules and regulations 
related to foreign investment?   
261. Unlike goods and services, investment essentially involved movement of capital, which 
tended to move in various ways from home count ry to third countries and then to host countries.  
In India’s view, given the complex nature of  capital flows/investments, binding rules on pre-
establishment commitments were neither feasible nor necessary.  Developing countries needed to retain the ability to screen and channel FDI in tu ne with their domestic interests and priorities.  
BITs had been favoured the world over for precise ly the flexibility they provided to the host 
country while at the same time extending the necessary protection to foreign investors. 
262. The representative of Cuba
 recalled that from its inception, the GATS had offered 
technical assistance to Members in the process of  scheduling their commitments.  More generally, 
her delegation remained concerned with both the positive and negative list approach to pre-establishment commitments, as neither coincided with the rights of developing countries in 
particular to decide how the entry of foreign investment should be regulated without pressure from their trade partners.  In this respect, Cuba agreed with Malaysia that the GATS idea of progressive liberalization was problematic.  Cuba  was also concerned, as Zambia had noted, that 
the liberalization process under a GATS-type posi tive list approach would effectively take the 
form of bilateral negotiations, accentuating existing imbalances between small and larger economies.      
263. The representative of the Czech Republic
 said that the issue of the application of broadly 
the same investment principles to  the pre-establishment phase – as  well as the post-establishment 
phase - was closely related to the discussion on the scope of a multilateral framework on 
investment.  From her delegation’s perspective, both host and home countries would benefit from 
the global application of multilateral admission and establishment rules.  Indeed, the Czech  WT/WGTI/M/18 
 Page 67 
  Republic had gained some important experience with the negotiation and implementation of pre-
establishment commitments under the GATS.  However, the GATS approach applied "only" to services-related FDI. Moreover, it was well know n that the majority of BITs applied MFN and 
national treatment to investment only after it had been admitted, and that only some regional investment agreements applied non-discriminatory treatment at the pre-establishment phase.  
There was therefore considerable room for a more horizontal and coherent approach on a multilateral basis to arrive at a more transpar ent, secure and predictable investment environment 
in the primary and secondary sectors.  No doub t Ministers in Doha had this in mind when they 
recognized, for the first time, the case fo r a multilateral framework on investment. 
264. The question was how to register or schedule new obligations under the future agreement.  
The Czech Republic had been arguing for some time that the best way to accommodate a wide 
range of interests and concerns would be an appr oach that converged with that of the GATS.  The 
GATS-type positive list approach would perfectly f it the objective of striking a functional balance 
between encouraging and safeguarding foreign inves tment, on the one hand, and preserving the 
ability of the host countries to regulate activities of investors on their terri tories, on the other.  
Moreover, a GATS bottom-up model was in full compliance with the genuine intention of the 
Doha Ministerial Declaration to place the developme nt dimension at the center of a multilateral 
framework.  It would allow national governments to pursue national policies, negotiate their own 
pace of liberalization and open sectors of their economy in a staged and considered manner, while taking full account of their level of  development and economic capacities. 
265. The representative of Korea
 observed that, while there was typically a clear distinction 
between pre-establishment and post-establishment in the context of investment policy, no such 
distinction existed in the GATS.  Regarding t he pre-establishment phase, the GATS bottom-up 
approach seemed to offer the best way to balance the need to facilitate investment liberalization and attract more foreign investment, with the need to retain national sovereignty for domestic policy objectives, and to support domestic in vestors and producers.  The GATS was seen as 
providing the necessary flexibility for developing countries at different development stages - 
especially as regards new investments in emerging  sectors.  In this respect, Korea welcomed 
Japan’s proposal that the Working Group should give consideration to the issue of industrial 
classification. 
266. As regards the post-establishment stage of investment, the difference between the 
positive and negative list approach was not a major concern at this stage.  Many international 
investment agreements provided unconditional nati onal treatment, with only limited exceptions, 
to all established corporations - regardless of thei r origins. Paragraph 18 of the Secretariat paper 
underscored this point, as did the papers by Japan, the EC, Canada, and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu.  Korea was of the view that when a legal entity 
was established in accordance with the host country’s domestic laws and regulations, it should 
enjoy the same treatment as a national legal en tity, regardless of the nationality of its parent 
company or staff.  In conclusion, there were few grounds for discriminating between foreign and domestic companies at the post-establishment phase. 
267. The representative of Switzerland
 pointed out that in most countries primary and 
manufacturing sectors were generally less regula ted than the services sector, which would make 
the scheduling of commitments in a multilateral agreement easier for all Members, especially 
developing countries, than had been the case under the GATS.  He also noted that the share of 
FDI that had been directed towards capital formation in the manufacturing sector in developing 
countries had risen from 11 per cent in 1980 to 37 per cent in 2000.  This led to the conclusion WT/WGTI/M/18 
Page 68   that pre-establishment commitments were of growing interest to developing countries.  Switzerland believed that pre-establishment wa s an important – and manageable – issue.  His 
delegation also believed that the value of a pot ential investment agreement would become clear 
once discussions moved from broad statements to more specific analysis and proposals.  Finally, 
Switzerland agreed with Japan that it was important  to look at the issue of industrial structures 
and classification, but it was equally important to recognize that this issue could only be 
effectively addressed a late r stage in the process.  
268. The representative of Brazil
 observed that paragraph 22 of the Doha Ministerial 
Declaration had established the parameters for the debate on investment in the WTO.  Within 
these parameters was the issue of modalities for pre-establishment treatment based on a GATS 
type positive list approach.  He noted that th e concept of pre-establishment commitments was 
relatively new to international investment agreements, found mainly in US BITs and the NAFTA.  
In these agreements, MFN and national treatment were formulated as rules of general application 
on the basis of a negative list approach.  However,  in Brazil’s view, the best approach for framing 
pre-establishment commitments in any investment agreement was one based on a GATS-type 
positive list approach, and this was for a number of reasons.  First, this approach was the best way 
to ensure, in the very structure of any framework, an adequate balance between disciplines, on the 
one hand, and the necessary flexibility for developing countries, on the other.  Second, it was the 
most transparent method of assuming legal commitments for market access and national treatment.  In a negative list approach, there was ver y little legal certainty regarding the scope of 
economic activities that a host country had effec tively committed to open up to foreign investors.  
Third, in a negative list approach Members were no t really certain whether they were committed 
to liberalizing economic activities that migh t come into existence in the future because of 
technological or other developments. Since these fu ture activities could not have been included in 
the exception list, neither could they have been proper ly regulated.  In that regard, Brazil took 
issue with the assertion in paragraph 31 of the Sec retariat paper that the positive and negative list 
approaches could converge, particular ly where provision was made in an international investment 
agreement for progressive liberalization.  In t hat connection, the positive list approach ensured 
legal certainty, not only for host countries, but also for foreign investors and their investments.   Also in a positive list approach, there was room for countries to regulate, not only the entry of 
FDI, but also its operation in the post-establis hment phase by imposing requirements aimed at 
fulfilling the host country’s social, economic, and technological policy objectives.  The Doha 
Ministerial Declaration, in referring to a positive list approach for pre-establishment 
commitments, reflected the understanding that th is was the best approach for all Members, 
particularly developing country ones.  Brazil believed that this same perception was emphasized at a recent UNCTAD Experts Meeting on Experien ces with Bilateral and Regional Approaches to 
Multilateral Cooperation in the Area of Investment. 
269. Regarding Japan’s paper, his delegation was concerned that paragraphs 19 and 21 seemed 
to imply that the modalities for pre-establishm ent could be based on some other model that the 
positive list approach.  Brazil cautioned against any relativization of the positive list approach for 
purposes of considering a possible framework fo r investment.  Turning to Canada’s paper, Brazil 
was not certain it agreed with Canada’s assert ion that no a priori distinction could be made 
between a positive and negative list approach, nor wi th the arguments presented to sustain it.  The 
fact that FDI tended to have an export enhancing effect did not in any way mean that limitations 
or conditions imposed on the entry of FDI would n ecessarily prejudice their export capacities at 
the post entry phase.  Brazil also took issue with paragraph 14 of the Canadian paper that seemed to argue in favour of conferring rights on pote ntial investors and investments, or investors seeking 
entry.  In his delegation’s view, the only realistic way to treat pre-establishment in any  WT/WGTI/M/18 
 Page 69 
  multilateral framework was to limit it to rules for entry of FDI, as Brazil thought could be 
inferred from the documents by the EC, Japan, and Korea, whose general gist Brazil could 
broadly support. 
270. The representative of Egypt
 stressed that development provisions should be effective and 
operational in any future multilateral framework.  They should be well articulated in order to 
avoid having to resolve any future implementation issues.  Egypt felt that the positive list 
approach could provide a useful tool in furtherin g development objectives, as it would help to 
accommodate host-county concerns by enabling them to choose and schedule their own specific 
market access commitments in line with its developmental objectives.  Many of the examples cited in the Secretariat paper might reflect devel oping country requirements.  However, it was not 
practical to follow the guidelines on treatment  of FDI which called for an open regime of 
admission, describing performance requirements as  counter productive.  Nor was it true, as 
suggested in some interventions, that the TRIMs Agreement imposed disciplines on performance 
requirements broadly defined.  Egypt believed that this assertion held true for only three performance requirements out of some 41 possible  policies.  In this regard, Egypt underscored 
that developing countries should be afforded ef fective special and differential provisions with 
respect to the conditions and requirements which they might attach to the admission of FDI – 
including through investment incentives, ownership limitations, performance requirements, etc.  
His delegation also stressed that  the development dimension should be integral to any approach.  
Although a number of subjects had been raised under this umbrella, nothing had been said regarding disputes, which Egypt felt was somethin g that might require further discussion as part 
of the broader focus on development provisions. 
271. Another subject of concern to developing countries was non-discrimination.  Initially, 
like Canada, Egypt was of the view that MFN sh ould be considered a rule of general application 
in a possible multilateral framework.  General exemptions should be provided in areas such as 
security.  Egypt would address this issue in mo re detail at the next meeting of the Working 
Group.  As regards a GATS-type positive list approach, his delegation agreed with others that any 
framework should enable Members to undertake obligations and commitments commensurate with their individual needs and circumstances.  A negative list approach offe red less flexibility to 
host countries in regulating the entry of future  investment in sectors and industries whose nature 
might not be anticipated at the time the commitment s were made.  In this respect, a positive list 
approach might be preferable, as it would provide de veloping countries with flexibility to pursue 
domestic development policies.  Since most coun tries built their FDI promotion strategies on 
concrete data and statistics on industries in which they had comparative advantages – available 
resources, trained manpower, past investments, and so forth – developing countries should not be 
expected to update their positive lists unless they were certain that previous liberalization had contributed positively to their development needs and economic growth.  In this regard, Egypt 
was of the view that an assessment mechanism should be established to evaluate, among other 
things, transfers of technology, macroeconomic per formance of host countries, implications for 
domestic industry, including spill-overs and linkages, and incentives to encourage developing 
countries over time to expand their commitments.   This exercise should be viewed in the context of the overall development priorities of developing countries. 
272. One of the deficiencies in the GATS stemmed from a failure to negotiate areas of special 
interest to developing countries, leading to inequal ities in rights and obligations, as developing 
countries had given concessions without getting any concessions in return.  This imbalance had to 
be taken into account in the discussion in the Wo rking Group.  One of the beneficial aspects of 
the positive list approach – as noted in paragraph 31 of the Secretariat paper – was that it could WT/WGTI/M/18 
Page 70   lead to “a party making no commitments, and therefore ending up with no binding pre-
establishment obligations".  While this might not be a likely outcome of negotiations, this flexibility might be a means of securing the intere st of host countries provided it was based on 
structured criteria.  It also underlined the elasticity of the posi tive list approach in striking a 
balance between liberalization on the one hand, and host countries’ development concerns on the other.     
273. The representative of Malaysia
 asked the United States to clarify whether it would accept 
a positive list approach, given that this approach seemed to be supported by the majority of 
Members. 
274. The representative of the European Communities  asserted that it was not only the United 
States and Canada that negotiated agreements covering the admission of investment.  As Japan 
had noted, other countries also negotiated such agr eements.  He also agreed with the point that 
had been made that “pre-establishment” as such was not a legal concept.  Agreements tended to refer instead to “admission” or the “right of entr y”.  Instead of talking about positive and negative 
lists, it might be more useful to talk about the GATS approach.  He agreed with Switzerland that 
scheduling of commitments in the manufacturing sector would be much easier than for services – 
for developed as well as for developing countries.  It might be a useful exercise if Members 
undertook an examination of their own sectors in this respect, and the EC would certainly undertake such an exercise itself.  On the subject of the ASEAN Investment Agreement, he 
disagreed with Malaysia that the Agreement di d not require progressive liberalization, and he 
quoted from the UNCTAD compendium of internati onal investment agreements.  More generally, 
he agreed with the Secretariat paper that even under a regime of progressive  liberalization there 
was no really binding obligation on Members to eliminate barriers or to open up their markets. 
275. The representative of Japan
 recalled that in the lengthy discussion in the Working Group 
on development provisions and non-discriminat ion the key concepts that had emerged were 
flexibility and balance.  In terms of translating t he need for flexibility into operational terms, the 
GATS-type positive list approach to pre-establ ishment commitments provided one important way 
to achieve that goal.  Japan took note that some developing-country delegations – such as India 
and Malaysia – had expressed concern about the concept of pre-establishment commitments.  He 
wished to clarify that Japan did not want to simply copy GATS provisions into a multilateral framework for investment.  The Working Group needed to elaborate on the GATS concept, and to 
customise it if appropriate or necessary.  He al so appreciated the support of other delegations 
(Chinese Taipei, Chile, Korea, and Switzerland) fo r Japan’s call for further examination of the 
issue of industrial classifications, and he reiterated that this was not just a technical issue, but one 
that affected the architecture and operational na ture of a possible investment framework.  He 
repeated the conclusion of a survey of Japanese industry that confirmed that transparency and pre-establishment treatment were considered th e most two important features of a possible 
multilateral framework.  Regarding the EC paper, he supported its basic point that open and transparent entry rules would facilitate the more e fficient allocation of capital.  He also suggested 
that the examples of investment restrictions and controls cited in Section II of the EC paper might 
be a subject for further study.  In response to Malaysia’s suggestion that developing countries be completely exempted from pre-establishment commi tments, he suggested that, in a world of free 
flowing capital, such an idea might be self-def eating for developing countries hoping to attract 
footloose global investors.  Japan also support ed the EC in its interpretation of the ASEAN 
Investment Agreement.   WT/WGTI/M/18 
 Page 71 
  276. In response to Malaysia, the representative of the United States
 said that the United States 
was advocating a top down or negativ e list approach, not a bottom up or pos itive list approach.  
She reiterated that there were over 2,100 bilate ral investment agreements in existence, and that a 
number of developing countries were very familiar with the type and level of protection that these 
agreements afforded, and the flexibility they pr ovided.  The Working Group had also heard from 
developing country delegations that bilateral treaties had served them well, especially with regard to development needs.  Her delegation’s view was that it would be useful to draw upon that 
experience in crafting a multilateral  agreement with similar standards of treatment.  It was highly 
important for the United States to maintain the same standards in the WTO as it had already 
achieved in its BITs. 
277. In response to the EC and Japan, the representative of Malaysia
 pointed out that under the 
terms of the ASEAN Investment Agreement the te mporary list of exemptions was subject to a 
phasing-out date, but the sensitive list was subject to no such requirements.  
278. The representative of UNCTAD  highlighted certain concerns from a development 
perspective that might arise in international investment agreements with respect to pre-
establishment commitments based on a GATS-ty pe positive list approach.  He said that 
UNCTAD had provided comprehensive analyses of the issues raised by a GATS approach in a number of studies published over the last few years, notably the  UNCTAD Series on Issues in 
International Investment Agreements, and in particular the paper on Flexibility for Development.   
As already mentioned in the context of discussi ons on non-discrimination, pre-establishment 
commitments were a relatively recent development in a few international investment agreements.  
Traditionally, international investment agreements had been limited to treatment of investors after 
entry, thus preserving the discretion and sovereign  right of host countries to screen and control 
the entry of foreign investment into their territory.  He recalled that it took the OECD more than 
20 years in its Codes of Liberalization of Capi tal Movements and Current I nvisible Operations to 
agree on commitments in the area of the right of es tablishment, and that, in its current practice, 
even among OECD countries the list of exceptions  and reservations was significant.   
279. There were two approaches to organizing such exceptions to pre-establishment 
commitments:  a top-down, or negative list approac h, or a bottom-up or positive list approach.  
The top-down approach had been favoured by No rth American BITs and some regional 
integration frameworks. The positive list appr oach was, of course, exemplified by the General 
Agreement on Trade in Services, in which both market access and national treatment could be qualified through attachment of conditions and limitations in accordance with Articles XVI and 
XVII.  He noted that the positive list approach co uld also be an option when dealing with the 
post-establishment phase.  He argued that a po sitive list approach provided more flexibility and 
policy space for developing countries to make pr e-establishment commitments in the area of 
investment at their own pace, offering to them  their own choice of sequence and sectors of 
commitments, such as might be considered commensurate with their level of economic and regulatory development.  This included the possibi lity of attaching conditions and limitations, 
such as the use of performance requirements and incentives. In this context, it needed to be recognized that, even under this approach, peer pressure could be exerted in favour of progressive liberalization.  Furthermore, this approach did not, in itself, provide the answer to the more 
pressing question of the need of developing count ries to attract FDI, and to channel it to the 
industries and activities that they considered im portant for their development.  This underlined 
the importance of having sufficient policy space to allow developing countries to pursue national policies aimed at deriving real benefits from and minimizing the risks of investment 
liberalization.  These efforts, furthermore, could  be encouraged if developed countries committed WT/WGTI/M/18 
Page 72   themselves to encourage their transnational corporations to invest in developing countries, e.g. through the provision of information about inves tment opportunities in developing countries, 
technical assistance, risk insurance and through other types of fiscal and financial incentives. 
280. The representative of the European Communities
 asked UNCTAD whether, according to 
their analysis, a positive list approach could allo w development countries with the necessary 
flexibility to pursue development policies and objectives.  
281. The representative of UNCTAD  responded that a positive list approach would indeed 
appear to provide developing countries with more flexibility to pursue international agreements while at the same time preserving policy space. 
(iv) "Scope and definition" and "Transparency" 
282. The Chairman
 drew attention to two written contributions on "scope and definition" and 
"transparency" that had been received from the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (WT/WGTI/W/128 and WT/WGTI/W/129). 
283. The representative of Chinese Taipei 
introduced its submission (WT/WGTI/W/128).  He 
noted that his delegation was following up on t he discussion that had taken place in the Working 
Group at its meeting in April 2002.  His delegatio n was of the general view that the definition of 
"investment" in a future multilate ral framework should be broad in scope so as to afford adequate 
protection for investors.  Indeed, the adoption of  an asset-based definition of "investment" would 
be consistent with various bilateral investment agreements already in existence among WTO Members.  While he did not envisage that the existi ng laws and policies of Chinese Taipei would 
pose any particular obstacle to the implementation of future WTO rules on investment that 
adopted a broad definition of "investment", his delegation was of the view that if portfolio 
investment were included in such a definition, movements of capital that were mere financial 
transactions - speculative in nature - and which might have an adverse impact on the financial system of a jurisdiction, should prefer ably be excluded from the obligations. 
284. In adopting an asset-based definition, there might be significant overlapping problems 
with other existing WTO agreements.  If, for exampl e, intellectual property were embraced in the 
definition of "investment" in a future framework, such rules would inevitably overlap with the protection afforded in the TR IPS Agreement.  The TRIPS Agreement not only required Members 
to ensure that relevant intellectual property was provided with exclusive rights in their respective 
jurisdictions, it also imposed obligations on Me mbers to provide protection for the intellectual 
property (and the right-holders) from other Member s.  Including intellectual property rights in 
future investment rules might give rise to issues concerning the proper application of different 
rules regarding the protection of intellectual proper ty.  Likewise, the poten tial for overlap with the 
provisions of the GATS and the Government Pr ocurement Agreement would also need to be 
resolved. 
285. His delegation also noted that GATS practices  - and the structures embodied therein – 
provided significant reference points for the drafting of future rules on investment.  Under the GATS, services were defined as including any se rvice in any sector except services supplied in 
the exercise of governmental authority.  However, a number of ways had been designed to limit the scope or effect of this broad definition of services trade, including:  allowing MFN exemptions, allowing the adoption of annexes so as to limit the practical scope of the application 
of the GATS, and applying a positive list app roach to the scheduling of pre-establishment  WT/WGTI/M/18 
 Page 73 
  commitments.  In the Doha Ministerial Declarat ion, it was decided that "modalities for pre-
establishment commitments" should be based on a GATS-type positive list approach.  His delegation considered it appropriate to apply the GA TS approach to definitional issues as well.  In 
other words, Chinese Taipei was in favour of a broad-based definition of investment to which Members could apply restrictions – e.g., through their schedules of commitm ents.  Chinese Taipei 
suggested this approach, not only to ensure consistency with existing WTO agreements, but also to avoid structural complexity on similar ma tters that could give rise to unnecessary 
administrative costs.  His delegatio n also felt that any future rules on investment should provide a 
certain degree of flexibility so that developing  Members could benefit fully from these rules.  
However, this need for flexibility should in no way affect the adoption of a broad definition of 
investment. 
286. Since previous discussions of the scope of investment had focussed exclusively on 
inward investment, perhaps Members should exch ange views on whether and how to deal with 
outward investment.  Although under the GATS Members were required to open up their service markets according to their commitments, the GATS placed disciplines on countries’ efforts to 
regulate or restrict the export of services.  Further study of this issue might provide a valuable 
reference point for Members in deciding whether it would also be in their interest to discuss - or 
even to negotiate - issues pertaining to the restri ction or regulation of outward investments by a 
Member. 
287. He then introduced submission WT/WGTI/W/129 and suggested that some additional 
inputs on the issues raised in the Secretariat's note on transparency might be of help for 
participants to further consider this issue.  Regardi ng the publication of rules, he noted there was 
a general consensus among delegations regarding the importance of transparency in this area.  Chinese Taipei concurred with this view.  However, mere publication of rules might not be 
adequate at times for Members and their industry to acquire a sufficient degree of knowledge on 
the domestic investment environment, regulatory or otherwise, of other Members.  Increased 
transparency not only helped foreign investors to understand more about the business 
environment in host countries - so as to better evaluate their opportunities and future operations there - but it also allowed host countries to create a more attractive environment for foreign 
investors.  Therefore it was preferable that a futu re multilateral framework on investment required 
Members to ensure that other Members and their firms were given the opportunity to request further information regarding their respective jurisdictions.  Establishing enquiry points - and 
unifying various offices to answer inquiries - might be a workable way to meet this particular 
need.  The relevant provisions of the GATS, for instance, might be used as a reference in this 
regard. 
288. He noted that, under existing WTO rules, notification of rules changes - in addition to 
publication - was required under, for example, Ar ticle III of the GATS.  Notification in advance 
of adopting a regulation was called for under Articles 2:9 and 7 of the TBT Agreement.  However, such advance notification, which only applied to specific matters, was unique, and perhaps should not be used as a future reference for rules on investment.  While Chinese Taipei appreciated the importance of transparency by wa y of advance notification, the administrative 
burden placed on developing Members by such obligations should be taken into special account 
while considering the question. 
289. As regards transparency in administrative procedures, he noted that existing WTO rules 
required not only transparency of the regulations themselves, but also transparency in the 
implementation of such regulations, including t he right to due process and administrative/judicial WT/WGTI/M/18 
Page 74   review in order to ensure consistency, fairness and re asonableness.  It was difficult to find reasons 
for a deviation from such general requirements with  respect to investment matters.  His delegation 
considered that future rules on investment perhaps should not depart from standard WTO 
practice. 
290. On the subject of developing countries, his delegation noted that under existing WTO 
rules, developing Members were usually given a relatively longer period to set up their respective 
enquiry points.  Apart from such concessionar y measures, Chinese Taipei considered that 
developed Members should also make definite commitments for providing technical assistance to 
meet the specific needs of developing-country Members with regard to transparency. 
291. On confidential information, his delegation believed that the protection of confidential 
information was vital to ensure that public an d legitimate commercial interests would not be 
compromised by notification obligations.  As ex isting WTO rules already provided for protection 
of confidential information, there was no reason why future rules on investment should make an exception. 
292. Since there was little experience or practice of having non-binding rules within the 
existing WTO framework, such an arrangement should probably be avoided so as to ensure 
consistency.  In addition, non-binding rules on transparency would impair the positive aspects of 
having a transparent investment environment.  Assu ming that the specific concerns of developing 
Members - such as their administrative and financial capacity constraints - were addressed, Chinese Taipei was of the view that there was no need to have non-binding rules regarding 
transparency.  
C. O
THER RELATED ISSUES  
293. The Chairman observed that no delegation had expressed a desire to raise a subject under 
this agenda item. 
D. OTHER BUSINESS  
294. The representative of OECD  offered the following points of information on the work 
being carried out by the OECD Committee on Inve stment and Multinational Enterprises (CIME).  
In early September two new publications would be released.  The first concerned the results of a 
one-year review of the most recent empirical evidence of the benefits and costs of FDI for economic development.  It suggested that there we re both positive and negative effects but that 
overall the benefits exceeded the costs.  Positive spill -over effects included FDI's contribution to 
growth, productivity and welfare, the better in tegration of the host country into the world 
economy, technology transfers, and human capita l upgrading.  On the downward side, the 
CIME found potential for a deterioration in the balance of payments, limited backward linkages to the local economy, and negative effects on domestic competition.  But outside the fact the net effect was positive, the CIME had also observed that the drawbacks could be mitigated by sound domestic policies. 
295. CIME would also launch in September a new annual publication series that would 
provide an international perspectives on inte rnational investment is sues.  This upcoming 
publication would contain inter alia  a special article on most recent OECD FDI trends.  It 
confirmed a sharp decline (57 per cent) in the level of FDI into and from OECD countries in 2001.  But this also seemed to mark a correction towards more sustainable levels than those  WT/WGTI/M/18 
 Page 75 
  of the "investment bubble" of 1999 and 2000.  The levels were still twice those reached in the mid-1990s however.  Moreover, the decline did not prevent the OECD area from becoming an even more important exporter in 2001 (US$45 billion) than in 2000 (US$12 billion).  Non-OECD countries seemed therefore to have increased their share of global FDI in 2001.  Another interesting observation was the continuous rise of the service sectors - telecommunications, public utilities and financia l enterprises – in total FDI flows, some 
65 per cent overall.  The article also contained a special analysis of the contribution of mergers and acquisitions to the observed trends.  Needless to say the CIME would make available to the WTO Secretariat copies of these two publications as soon as they were 
issued. 
296. As to future work, the CIME had embarked on two new projects - which also 
appeared in the WTO list of potential areas fo r future study.  The first project involved a 
study of the relationship between BITS, regi onal agreements and multilateral investment 
rules, and the second study looked at ways  of reinforcing cooperation in the area of 
investment incentives.  It should address the types of concerns cited in paragraph 64 of the 
Secretariat paper (WT/WGTI/W/118) about the inclusion of MFN obligations in separate 
bilateral investment treaties which could interact with each other in ways that might have 
been unforeseen at the time of the negotiation of one or more of the treaties. Some might 
argue that the compatibility issue was no longer  a real problem.  After all, governments must 
live up to all their international obligations.  There were also the interpretative rules under international customary law.  An ICSID award rendered recently on an investment dispute 
involving an Argentine investor and the Government of Spain, the so-called Maffezeti case, 
gave an interpretation of the MFN obligation  in BITS which was wider than the commonly 
shared view by the BITS parties. 
297. The second project concerned investment incentives.  What was specifically 
envisaged in the first instance was the establishment of a checklist of criteria to be considered 
by policy-makers in deciding on measures for incentives for foreign investments.  The 
checklist would cover the issue of regulatory incentives in addition to tax and financial incentives.  This might eventually lead to the establishment of enhanced mechanisms for 
consultations and to the exchange of information on incentives programmes.  CIME would 
keep the Working Group informed about the progress made under these two projects. 
298. The Chairman said that it would not be appropriate at this stage to attempt a summary 
of the Working Group’s deliberations.  However, he noted that he had been impressed by the depth and thoroughness with which the Working Group had addressed the issues laid down in paragraph 22 of the Doha Ministerial Declaration.  The Working Group was dealing with a very complex set of issues that gave rise to many opposing views, both on the general political level, and on the intricate specifics of each topic.  He believed that delegations were 
doing what they were required to do under such circumstances – that is to say, to clarify the 
issues, to put respective views on the table, and to be as interactive as possible, so that Members could try to understand better each others legitimate concerns and expectations on this subject.  After the Working Group had concluded this exercise, it would be in a much better position to chart a future course in relation to the Doha mandate. 
299. Following this approach, he said that the next meeting of the Working Group would 
take place on 16-18 September.  On that occasion, among other things, the Working Group 
would focus on the last two issues for clarification under paragraph 22:  exceptions and 
balance of payments safeguards, and consultations and the settlement of disputes between WT/WGTI/M/18 
Page 76   Members.  He understood that the Secretariat was preparing two background notes on these issues, to be distributed to delegations well in advance of the Working Group’s meeting.  Delegations were likewise encouraged to submit,  at their discretion, written contributions on 
those two topics.  He also expected at the September meeting that delegations would be prepared to make suggestions and discuss the approach that should be followed as far as the Group's Annual Report to the General Council was concerned.  He would be undertaking consultations on this topic from the beginning of September until the Working Group’s meeting.  Meanwhile, he expected that th e technical assistance programme currently 
underway would continue as scheduled.  The Secretariat would certainly take into account the 
comments and suggestions that had been made at the present meeting, and delegations were 
encouraged to present further observations and proposals directly to the Secretariat.  Finally, 
he informed delegations that the Secretariat would hold its second technical workshop for francophone Geneva-based delegations and officials on 15 September, immediately proceeding the next meeting of the Working Group. 
300. The meeting was adjourned
.     
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