RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/WGTI/M/6 
3 November 1998 
 (98-4266) 
Working Group on the Relationship 
between Trade and Investment   
 
 
REPORT ON THE MEETING OF 1 AND 2 OCTOBER 1998 
 
Note by the Secretariat
 
 
1. The Working Group on the Relationship between Tr ade and Investment held its sixth meeting 
on 1 and 2 October 1998 under the Chairmansh ip of Ambassador Krirk-Krai Jirapaet. 
2. The Working Group discussed Items I-IV of th e Checklist of Issues Suggested for Study 
(WT/WGTI/M/1, Annex 1), reverted to the i ssue of observer status for international 
intergovernmental organizations and had a first exch ange of views on the structure and content of the 
report to be submitted to the General Council at the end of the year.  
3. The representative of Egypt  expressed concern about the co nvening of four important 
meetings on the same day. The Chairman stated that he understood this concern but that the date of 
this meeting had been decided at the end of 199 7 in accordance with the guidelines regarding the 
scheduling of meetings in the WTO.  
A. IMPLICATIONS  OF THE  RELATIONSHIP  BETWEEN  TRADE  AND  INVESTMENT  FOR  
DEVELOPMENT  AND  ECONOMIC  GROWTH  (ITEM  I OF THE  CHECKLIST  OF 
ISSUES  SUGGESTED  FOR  STUDY)   
4. The Working Group had before it in document No . 5229 a preliminary informal Note by the 
Secretariat on the effects of foreign direct investment ("FDI") on development.   
5. The representative of the Secretariat  explained that this Note was intended as the first 
instalment of a broader study which the Secretariat was preparing in response to the request made by 
the Working Group at the meeting of 16 and 17 June (WT/WGTI/M/5, pa ragraph 12) and which 
would provide a comprehensive survey of the literature on the relationship between FDI and 
development.  Given the limited resources availabl e in the Secretariat, the study was being conducted 
with the aid of two well known experts in the field of FDI and development.  The first part of the 
study, which had been circulated in the Secretaria t's preliminary informal Note, dealt with what was 
generally considered to be a key aspect of the re lationship between FDI and development, namely the 
indirect effects of FDI on host countries that aros e from the diffusion of technology and other know-
how and from other kinds of spillover effects.  Th e study was intended to cover the issues that had 
been the subject of debate in the Working Gr oup, including issues that had been stressed by 
delegations at the meeting in June as requiring furt her examination, and would also take into account 
inputs received from a number of delegations in respon se to an airgram issued by the Secretariat in 
July inviting delegations that wished to do so to make suggestions regarding issues to be covered by 
the study and to draw attention to relevant litera ture.  As regards the second study which the Working 
Group had requested the Secretariat to prepare, on the historical evolution of FDI policies, the Secretariat hoped to make this study available in time for the meeting of the Working Group in 
November, or shortly thereafter. WT/WGTI/M/6 
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 6. The representatives of the Philippines
, speaking on behalf of ASEAN WTO Members, India  
Cuba and Japan  thanked the Secretariat for the preliminar y informal Note and reserved the right to 
revert to it at the next meeting along with the next  instalment of the study.  The representative of 
Japan  underlined the importance of the issue of t echnology spillovers and e xpressed appreciation for 
the detailed and balanced treatment of th is subject in the Secretariat's Note. 
7. The Working Group took note  of the statements and agreed  to revert to Item I of the Checklist 
at its next meeting.   
B. THE  ECONOMIC  RELATIONSHIP  BETWEEN  TRADE  AND  INVESTMENT  (ITEM II  OF 
THE  CHECKLIST  OF ISSUES  SUGGESTED  FOR  STUDY) 
8. Under this agenda item, statements were  made on investment incentives and on the 
relationship between investment and competition policy.  
Investment incentives 
9. The Chairman  drew attention to a recently circ ulated Note by the Secretariat 
(WT/WGTI/W/56) on the impact of investme nt incentives and performance requirements on 
international trade.  
10. The representative of Korea, in introducing a contribution (WT/WGTI/W/62) on Korea's 
experience with tax incentives, discussed the various types of incentives commonly used by 
governments.  Non-discrimination in the applicati on of incentives was important to avoid distortions 
of competition that could result from the granting of incentives only to foreign enterprises.  Similarly, 
from a competition perspective it was also essentia l that incentives should not take the form of 
monopoly rights to enterprises.  Incentives could ha ve negative effects in terms of economic 
efficiency but in countries where the business environment was unfavourable to foreign firms 
incentives could play an important rôle in compen sating for the country-speci fic barriers. However, 
when the initial barriers to FDI no longer existed,  the distortive effects of incentives could potentially 
outweigh their benefits.  Korea ha d provided tax incentives to foreign invested enterprises ("FIEs") 
since the 1960s but this incentive programme ha d been gradually scaled down because of the 
disappointing results of the incentives and because the liberalization of Korea's FDI policy meant that 
incentives could no longer be justified on the grounds that they were necessary to compensate for the 
effects of discrimination against foreign investment . In the latter regard,  increasing concern had been 
expressed that, against the background of FDI libera lization, tax incentives gave a disproportionate 
advantage to FIEs as compared with domestic firms.   In response to this legitimate concern, the 
Korean Government had started to link FDI liberaliz ation to the reduction of tax incentives for FIEs.  
However, tax incentives for FIEs conditional on th e introduction of advanced technology had actually 
increased during the last ten years.  The tax exemp tion period for such FIEs had also been extended 
from five years to seven years recently.  The aim of this policy was to close the gap between the 
private and social  rates of return.  Korea was undergoing rapid economic st ructural reform and was 
actively seeking to attract advanced technologies as the social rates of returns of advanced technology 
investment had increased.  It was agreed that ta x incentives granted by Korea had generally failed to 
achieve their desired effects because the level of taxation was only a minor consideration in 
investment decisions of firms and because the tax incentives were insufficient compensation for 
Korea's relatively high factor costs such as wage and interest rates.  In addition,  the effects of tax 
incentives had been partially nullified as tax sparing was not granted to Korea by some of the major 
investor countries.  It had been estimated th at during the period 1982-1988 about 39 per cent of the 
amount of tax exemptions and re ductions to FIEs in Korea had been collected by their home 
governments when the FIEs repatriated their profits.   WT/WGTI/M/6 
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 11. The representative of Korea  identified three themes warranting closer examination in the light 
of his country's experience.  A first theme concer ned the  relationship between FDI liberalization and 
the rationale for granting investment incentives.   The argument that incentives were sometimes 
justified on the grounds that they were necessar y to compensate for discriminatory treatment of 
foreign firms had less merit as discrimination against foreign firms diminished.  A second point was 
that, while incentives had an important positive rôle to  play in correcting market failures by bridging 
the gap between private and social rates of return , it was also likely that competition among countries 
to attract FDI would become so fierce that they might end up offering incentives whose costs 
outweighed their benefits.  This situation resemb led a prisoner's dilemma in which only cooperation 
among participants provided a mutually beneficial solu tion.  Finally,  the relationship of incentives to 
bilateral taxation agreements deserve d further consideration.  In particular, the absence of tax-sparing 
provisions in home countries would largely nullify th e potential benefits of tax incentives in the host 
country when profits were repatriated.  
12. The representative of Mexico  underlined the need for a thorough study of the use of 
investment incentives and their possible distortio nary effects on investment and trade flows, 
especially when countries were involved in a compet ition to attract FDI through the granting of such 
incentives.  Studies conducted by several interna tional organizations had demonstrated that 
investment incentives were not a major determinan t in location decisions but could influence the 
choice of location where all other circumstances were equal between two sites.  In the last decade, the 
use of incentives had increased and the types of ince ntives used had become more diversified.  This 
had engendered a harmful competiti on between countries to attract FDI.  The indiscriminate use of 
incentives could result in a distortion of investment fl ows in favour of countries that could afford to 
finance incentives but, in the long run, it implied lo sses for all countries involved in such competition, 
ultimately resulting in a transfer of local resources to  foreign investors.  Competition for FDI through 
incentives not only resulted in a loss of resources but also diverted resources from uses that were more 
productive for development, such as the improvement  of physical infrastructure, which was a more 
important determinant of investment decisions.  Mo reover, incentives could distort international trade 
flows by artificially favouring production in certain countries to the detriment of countries that were 
not able to grant incentives, especially when produc tion was destined for export.  Empirical studies 
had also shown that investment incentives could di stort the productive structure in host countries by 
favouring production in certain sectors.  In a ddition, investment incentives entailed high 
administrative costs, were difficult to administer and were often granted in a non-transparent manner. 
In sum, there was a need for further work to achieve a better understanding of the real costs and 
benefits of investment incentives and their distortio nary effects and for international cooperation to 
explore various options to arrest the unfair comp etition engendered by the use of such incentives.  
13. The representatives of the European Community ,  Switzerland  and the United States  agreed 
that investment incentives only had a marginal imp act on investment decisions and often failed to 
produce the expected results.  The representatives of Switzerland  and the United States  referred in this 
regard to the experience with the granting of incen tives by sub-federal authorities in their countries.  
The representative of the European Community  further observed that, while the argument that 
incentives were justifiable as a means to compensat e for discrimination against foreign investors 
logically implied that the use of incentives should d ecline as a result of investment liberalization, in 
reality there had been more widespread use of an  ever increasing diversity of incentives. There was 
also a tendency to discriminate positively in favour  of foreign enterprises.  The current situation 
regarding the use of investment incentives had been rightly analyzed in terms of a prisoner's dilemma. 
All governments were confronted with this dile mma.  Although there were good reasons for granting 
incentives on regional development or social grounds, it was clear that there was a growing realization 
that more discipline was necessary in this area.  This topic underlined the importance of discussing 
investment in a multilateral forum as experience had s hown the difficulty of achieving restraint on the 
use of incentives unilaterally or through bilateral approaches.  WT/WGTI/M/6 
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 14. The representative of the Philippines
, speaking on behalf of ASEAN WTO Members , referred 
to the contribution from ASEAN presented at the last meeting of the Working Group (WT/WGTI/W/41) which discussed three main reasons  why investment incentives remained a useful 
policy variable in the development strategies of gove rnments.  First, investment incentives provided a 
partial counterweight to poor ec onomic fundamentals.  Second, investment incentives played a 
positive rôle as tools by which investment could be directed to meeting particular development or 
regional objectives.  Third, investment incentives c ontributed to long term-competitiveness in that 
they could help countries to secure dynamic gain s arising from economies of scale and from learning 
by doing.  The argument that incentives were nothi ng more than a transfer of income from countries 
to firms failed to give due recognition to the fact that incentives were not intended to support 
enterprises that were not viable.   Rather, they were geared towards attracting growth, income and 
employment-creating investment.  The part transf er of income through incentives would not have 
been politically feasible in the first place if not for this wealth-creating impact of FDI.  Incentives also 
provided an important tool through which countries could regulate the type of FDI they received.  In particular, they helped curtail the activities of "fly  by night" investors.  For instance, the granting of 
incentives could be tied to a commitment to seque ntial investment in the form of additional 
production capacity, modernization, upgrading or di versification into related products.  Such 
sequential investments also provided a positive demons tration effect for potential new investors. In 
the more dynamic context of growth and developmen t, incentives provided an important tool through 
which countries could tap the gains, accruing ove r time, from economies of scale and from learning 
by doing.  As investment proceeded and unit cost s declined with increased output, a country could 
acquire a comparative advantage in an expanding in dustry.  Another argument often advanced against 
the use of investment incentives w as that the benefits from a partic ular FDI project were likely to 
accrue to certain groups within an economy while th e costs of the incentives were likely to be spread 
more evenly across the economy.  It had been argued that this different incidence of the benefits and 
costs of incentives among groups in a host country opene d the door to rent-seeking.  However, this 
problem was not unique to incentives.  Rent-seeki ng and other directly un productive activities were 
possible outcomes of any market intervention by go vernments.  The question that should be posed 
was how governments should deal with such direc tly unproductive activities.  Experience showed that 
the more stringent were the institutions of government s, the less likely they were to be captured by 
vested interests.  The appropriate response wa s therefore to strengthen the institutional and 
administrative capacity of governments to administer  incentives effectively rather than to prohibit 
incentives.  The third main argument against th e use of investment incentives was that their 
administration required detailed knowledge of th e value and size of the positive externalities 
associated with a project, which in practice was an almost impossible task.  Related to this, it was 
often argued that incentives competition could also give rise to overbidding.  Experience on this account was mixed.  The capacity to apply incenti ves effectively varied widely among countries.  
Nevertheless, this did not in itself constitute an argument against incentives per se .  In sum, the 
arguments put forward against the use of incen tives did not detract from their usefulness as 
developmental policy instruments.  The fact rema ined that incentives could help attract growth, 
income and employment-creating investment.  The views expressed by a number of delegations appeared to be somewhat internal ly contradictory in that they contended, on the one hand, that 
investment incentives often resulted in distortions of  investment and trade and, on the other,  that 
incentives did not play a major rôle in location decisions.  
15. The representative of the European Community
 responded to the statement by the Philippines 
by saying that a balance should be struck between  recognizing the benefits of incentives as domestic 
policy tools, on the one hand, and limiting their harmful effects in the context of increasing 
competition between countries to attract FDI, on the other. The analogy with the experience with 
international cooperation with regard to the impact of subsidies on international trade was useful in 
this respect.  Existing WTO rules on subsidies reflec ted a recognition of the importance of the use of 
subsidies as domestic policy tools but at the same time provided disciplines to avoid trade-distorting 
effects arising from the use of subsidies.  An importa nt aspect of this balance was that the fact that a  WT/WGTI/M/6 
 Page 5 
 
 
 subsidy was aimed at achieving an important polic y objective did not by itself obviate the need for 
disciplines to control its possible trade-distorting e ffects.  The issue of investment incentives should 
be considered from a similar perspective.  In r esponse to the comment made by the Philippines that 
there was a contradiction between the argument th at incentives could be highly distortive and the 
argument that incentives did not have a large imp act on FDI decisions, the representative of Korea 
stated that his delegation's contribution did not argue that incentives had highly distortive effects but 
simply that empirical evidence had shown that be nefits resulting from the granting of incentives had 
not met the expectations.  The contribution should not be interpreted as an attempt to argue against the 
concerns of ASEAN Members.  Rather, it was an effort to provide empirical evidence based on the 
experience of a country that until recently had sh ared similar concerns and experiences in the 
formulation of its investment policy. 
16. The representative of Venezuela  said that there was a tendency to focus too much on the rôle 
of incentives as tools to attract investment.  In this  regard, it was increasingly realised that incentives 
were not a major factor in determining the location of  investments.  More attention should be paid to 
the rôle of incentives to promote development obj ectives, in which connection she mentioned the 
positive experiences of her country with the gr anting of incentives to stimulate enterprise 
development, for example by improving productivit y through encouraging the creation of linkages 
between foreign enterprises and small- and medium-s ized domestic enterprises.  The representative of 
El Salvador  considered that further discussion of invest ment incentives should focus on the benefits of 
incentives for small developing countries.  While it  might be true that in some cases incentives had 
failed to produce the expected positive results, it was necessary to guard against generalisations, 
bearing in mind  the different levels of development, objectives and needs of countries.  At least in 
some countries incentives had been shown to be a us eful instrument, for example for the creation of 
employment, the attainment of regional developmen t objectives and the spr ead of technology and 
know-how.  
The relationship between investment and competition policy 
17. As agreed by the Working Group at its meeting in June, the Chairman of the Working Group 
on the Interaction between Trade and Competiti on Policy, Professor Frederic Jenny,  made a 
statement on the discussion that had taken place in that Group on the relationship between investment and competition policy.   
18. Professor Jenny
 stated that the discussion on the relationship between investment and 
competition policy in the Working Group on the In teraction between Trade and Competition Policy 
had focused on FDI.  Some Members had referred to what they saw as the potential benefits of FDI.  
Employment, technology transfer, foreign exchange earnings and alleviating external costs were seen 
as potential benefits of FDI.  Also, given the pers pective of the Working Group, much emphasis had 
been put on the contribution that FDI could make to increasing market competition.  The point had 
been made that this might be particularly important  for those services that were not tradeable or only 
tradeable with difficutly and expense, given th e absence of scope for foreign competition through 
cross-border movements in these sectors.  The point had also been made that the mere liberalization of FDI policy, by increasing the contestability of market s could add to competitive pressures even in the 
absence of actual FDI inflows.  However, many de legations had recognized that FDI could lead to 
two types of competition concerns.  First, a concern related to the potentially anti-competitive practices of the foreign investors themselves - exam ples of these had been given, in particular, of 
different cases in which an FDI in the form of a merger could lead to a lessing of competition.  
Second, a concern related to the practices of domes tic firms, whether locally or foreign-controlled, 
attempting to defeat the object of FDI liberali zation by seeking to block through anti-competitive 
practices the entry of foreign firms.  The point ha d been made that weak competition laws or policies 
generally tended to protect the positions of incumb ents vis-à-vis potential entrants.  Reference had 
been made in this regard to the results of the GATS negotiations on telecommunications where the WT/WGTI/M/6 
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 need had been seen for competition principles to ensu re that liberalized access for foreign investors 
actually was realised.  More generally, it had been noted that these co mplementarities between 
competition law and FDI liberalization explained wh y, in various multilateral agreements (the GATS 
for example)  access commitments provided that, in sectors where commitments were taken, including 
on investment through commercial presence, a supp lier in that sector did not abuse its monopoly 
position or act in a manner inconsistent with these  commitments.  Some delegates had raised the 
question of whether it would be useful to go further and to define the relevant abusive practices so as 
to avoid trade friction and to render the dis pute settlement system more effective.   
19. Therefore, delegates had emphasized the complementarity between liberalization of 
investment and competition policy.  Investment liber alization meant an increasingly important rôle for 
competition law and policy.  In this connection, it had been noted by some delegates that concerns 
about competition issues linked to FDI had,  in the past, often been met through ex ante  regulatory 
screening of FDI and performance requirements.  I nvestment liberalization world-wide meant that 
these forms of ex ante  regulation of FDI were less and less prevalent in today's economy, in part 
because they were perceived to deter rather than encourage FDI.  Thus, ex ante  regulatory oversight 
of FDI was more and more frequently replaced by the mainly ex post  supervision of market behaviour 
through competition law and policy.  One important aspect of competition law and policy relevant to 
FDI was merger review.  In this regard, the point had been made that FDI might involve a number of 
scenarios that necessitated review of possible anti- competitive effects of mergers.  These included 
mergers and joint ventures between foreign and local firms, and between foreign firms that had local 
affiliates in a developing country market.  The point  had been made by several delegates that the 
review of such mergers under competition law shou ld not be allowed to become a reinstitution of 
older forms of regulatory foreign investment screening in a different guise.  To prevent this,  delegates 
had suggested that it would be important to ensure that merger review be carried out in an objective 
and transparent fashion based on well-defined competition law tests and principles.   
20. It had also been pointed out that the adopti on of competition law had the added advantage of 
signalling a commitment to market institutions and mechanisms and of providing a stable and 
transparent legal environment of a kind familiar to most foreign investors.  Thus, on top of enabling 
the elimination of anti-competitive behaviour either by foreign investors or by domestic firms trying 
to prevent foreign investment, competition law coul d also contribute towards creating an attractive 
legal framework for foreign investors.  It had been  noted by some delegations, however, that such an 
advantage would materialize only if competition law was enforced in a transparent and non-
discriminatory way.  Because competition law enforcement necessarily entailed a case-by-case 
judgement and thus a degree of discretion on the part of the competition authority, it was necessary that adequate legal control of such authorities exis t, and that procedures be transparent to avoid any 
risk of discrimination in the enforcement of the law.  
21. A number of Members had observed that, in ma ny developing countries, the process of FDI 
liberalization was part of a broader policy package encompassing also measures of trade 
liberalization, privatization, dere gulation and the introduction or strengthening of competition law and 
policy.  The need for these various types of policy measures to be mutually coherent and harmonious 
had been emphasized.  For example, the point had b een made that FDI liberalization in the absence of 
trade liberalization and effective competition instru ments could have the effect of giving foreign 
investors unwarranted market power.  It had also b een noted that, in some developing countries, there 
was a fear that powerful multinational enterprises c ould, through FDI, eliminate the competition from 
smaller and sometimes less efficient domestic fi rms and therefore that applying competition law 
principles in such a context could lead to a decrease rather than an increase in competition.  Thus, in 
these countries, there was a question about the sequenc ing of events:  should liberalization go hand in 
hand with competition law and polic y or should liberalization and deregulation precede the adoption 
of competition law ?  Some delegates had argued th at they should be adopted simultaneously for the 
reasons mentioned previously, and that the concer n about the disappearance of competition could be  WT/WGTI/M/6 
 Page 7 
 
 
 met by keeping the sector open to other foreign in vestors.  Additionally, it had been noted that 
replacing inefficient firms by more efficient firms or a set of more efficient firms would benefit the local consumers.  Some delegates from developing c ountries, however, had suggested that the issue of 
sequencing should be put in a sligh tly different light.  While recognizi ng the benefits to be derived in 
the long-run from increased competition, they had pointed out that there could be short-term 
adjustment costs and that these costs had to be weighed against the long-term benefits from FDI 
liberalization.  In developing countries, as in ot her countries, competition policy might try to serve, 
simultaneously, several immediate goals such as promoting efficiency, achieving national 
developmental priorities, promoting or protecting sma ll- and medium-sized firms, etc.  Consequently,  
in the view of some delegations, the issue was not so much whether competition policy in developing 
countries was a useful complement to FDI liberal ization but more a question of how competition 
policy in such countries could be crafted so as to meet some of the broader socio-economic goals of 
the countries and the specificity of small economies.  In this respect, it had been suggested that a 
certain amount of flexibility might  be required to meet these concerns  at least in the initial stages of 
development, but it had been emphasized that any such flexibility should be transparent, should go no 
further than was necessary to meet the policy obj ective it was designed to ser ve, and should be subject 
to regular review in the light of changing circumstances. 
22. Finally, a number of delegates had suggested th at there was a need to examine the scope for 
enhanced international cooperation between the competition authorities of member countries in 
relation to FDI.  The rapid increase in FDI implied that an even larger number of mergers had cross-
border implications.  Also, a given merger might  have different implications in different 
circumstances.  Thus, cooperation could be a particular ly useful means to make sure that the interests 
of all countries concerned by an international me rger were respected and also to minimize the 
transaction costs associated with some of the merg er reviews involving FDI.  While cooperation in 
merger notifications and assessment was one dimens ion, it had been suggested that cooperation could 
extend to mutual assistance in addressing anti-co mpetitive practices associated with FDI more 
generally.   
23. The representative of the United States
 stated that a central theme of a recent contribution 
from her delegation (WT/WGTI/W/55) was that open investment policies and effective competition policies were most often mutually reinforcing.  They benefitted a country's welfare by increasing 
efficiency, stimulating competition and expa nding consumer choice.  The timing of the 
implementation of these policies was less important th an having both of these policies.  New suppliers 
resulting from an open investment régime increased competition and effective competition conditions 
encouraged new suppliers.  Recent studies by the OECD and UNCTAD and the WTO Secretariat 
synthesis paper in document WT/WGTI/W/38 conf irmed the importance of ensuring effective 
domestic competition to reap the full benefits of FD I.  Liberal investment policies could challenge 
domestic oligopolies that limited consumer choice,  raised costs to consumers and reduced the 
exportability of products.  Liberal investment po licies could also mitigate or eliminate local 
distribution bottlenecks.  Cartels and monopolies were more likely with restrictive investment policies 
that did not admit new entrants.  Competition laws  in turn could prevent both domestic and new 
market entrants from engaging in monopolistic or co llusive conduct.  The screening of FDI had often 
been rationalized as a means of maintaining a comp etitive environment.  In reality, the opposite often 
occurred, as screening of FDI in many cases protect ed established competitors and did not protect 
competition or consumers.  Countries had increasingly turned away form screening and the imposition 
of performance requirements in recognition of the f act that over time such interventions had stifled 
investment and growth.  
24. The representative of Korea
 introduced a contribution from his delegation (WT/WGTI/W/57).  
In considering the relationship between competition policy and investment policy, the rôle of trade 
policy should also be considered.  Trade policy de termined the relevant market for competition policy 
while investment policy determined the relevant play ers in the market.  Therefore, investment policy WT/WGTI/M/6 
Page 8  
 
 could not attain its competition objective unless the eff ect of trade policy in determining the relevant 
market was carefully considered.  While investme nt policy and trade policy had dealt with border 
measures of governments, they increasingly had to d eal with internal measures and private practices. 
This was where the interface occurred between comp etition policy on the one hand, and trade policy 
and investment policy on the other.  However, the existing WTO rules dealing with this interface were 
limited in scope. The objective of trade policy an d investment policy ultimately lay in promoting 
economic efficiency.  Competition was a key crite rion by which economic efficiency was usually 
gauged.  In turn, competition policy was an impor tant tool in complementing trade policy and 
investment policy with regard to the efficiency obj ective.  In judging the effect of investment policy 
on economic efficiency, both static and dynami c efficiency should be taken into account. 
Traditionally, competition policy had been concerned with static economic efficiency. When countries 
went through a process of economic restructuring, it was important to focus on dynamic efficiency to 
analyze the effect of private and governmental meas ures on competition.  For instance, the concept of 
static efficiency might not be sufficient to account  for efficiency gains when an industry was going 
through rapid economic restructuring, as was the ca se in Asian countries in the process of overcoming 
the financial crisis.  In judging the benefits of FDI in the domestic market, it was important to look at 
the effects of actual as well as potential competition on economic efficiency. Since potential competition could enhance economic efficiency, the degree of actual concentration in the market 
should not be the sole criterion in judging the compet itive conditions of the market.  Barriers  to FDI 
might be brought down but there could be other comp etition-related barriers in the form of vertical 
and horizontal restraints by firms already estab lished in the market.  Weak enforcement of 
competition laws tended to protect the incumbent firm s in the market and deter entry of new firms.  
Also, the difference in the degree of enforcement of competition laws could generate barriers to FDI.  
To effectively guard against anti-competitive use of vertical restraints, competition authorities 
resorted to the use of ex ante  or ex post  safeguards.  The preference of a particular form of safeguard 
depended on the market dynamics.  Most countri es, including Korea, had relied on non-structural 
safeguards in the area of telecommunications.  Ex ante  safeguards imposed prior to the onset of 
competition needed to be complemented by ex post  safeguards to promote competition.  
25. The representative of Korea
 further stated that the main interface between competition laws 
and FDI occurred when a foreign affiliate was estab lished by means of a merger, an acquisition or a 
joint venture.  Competition issues arose before and af ter the firms merged.  In many countries, when a 
domestic firm and a foreign firm me rged, national interest issues were included in the consideration of 
merger approval.  After a foreign company entere d the market through FDI, a foreign multinational 
could engage in anti-competitive practices.  Countri es with established competition laws could review 
the merger according to competition criteria app lied to domestic firms. The interface between 
competition and investment was an issue Korea had become aware of only recently.  Inward FDI had 
had positive effects on the adjustment of Korea's economic structure and would steadily increase the 
efficiency of Korea's economy by inducing specialization of local companies, alleviating the 
concentration of economic power and facilitating the exit of less competitive companies from markets.   Since the financial crisis erupted at th e end of 1997, Korea had engaged in dramatic efforts 
to liberalize FDI as part of economic restructuring.  Although the FDI liberalization in the context of 
general economic restructuring had caused adju stment problems, the Korean Government was 
committed to pursue vigorously its investment liber alization policy and other structural reforms. 
26. The representative of Japan
 introduced a contribution from his delegation (WT/WGTI/W/59).  
Investment had several positive effects on compet ition. Liberalization of investment encouraged 
market participation by new entrants, helped in tensify competition in the market-place by actively 
encouraging participation by domestic corporati ons, and ultimately contributed to the strengthened 
competitiveness of the market as a whole, includi ng its domestic players.  Market entry by 
multinational enterprises with advanced technol ogies was also an effective way of boosting the 
efficiency of domestic companies through technology transfer.  The positive effects of investment on 
competition were illustrated by Japan's experience w ith financial liberalization.  On the other hand,  WT/WGTI/M/6 
 Page 9 
 
 
 investment could potentially harm competition when investment liberalization facilitated market entry 
by large multinational enterprises.  However, if th e host country had an effective set of competition 
laws in place, the harm would be transient in na ture because the liberalized investment environment 
and effective application of competition law coul d be expected to encourage other multinational 
enterprises as well as new local firms to compete with  the multinational enterprise.  Attention had also 
been drawn to the danger that multinationals with  monopoly control over a given market might use 
their unique cross-border networks to exclude co mpetitors, pursue restrictive business practices and 
engage in other forms of anti-competitive behavi our.  Such monopolistic abuse of power should be 
addressed through an effective implementation of competition laws.  Competition laws should be 
enforced without regard to the nationality of th e firms.  It was also necessary to implement 
competition laws in regard to mergers and acquisitions . 
27. Regarding the effects of competition on investment, the representative of Japan  distinguished 
between home and host countries.  Increased competition in home countries often caused firms to rationalize their operations through outward investme nt.  In the case of host countries, the impact of 
competition on investment could be similar to that of competition on trade.  Market entry through 
investment could be blocked not only by government  actions but also by corporate actions.  Existing 
companies in the host country could block new en try by abusing their monopolistic position or by 
means of cartels comprising several companies.  Ordinarily, such anti-competitive behaviour was 
controlled by competition laws.  It had therefore been pointed out that the establishment of competition laws in the host country market and the securing of appropriate competitive conditions 
would increase the predictability for investing comp anies and promote investment.  In order to 
maximize the effectiveness of investment, it was crucial that competition laws be established in the 
host country.  Nevertheless, there were only some 70 countries with competition laws and even when 
such laws were in place they varied significantly from country to country.  It might therefore be 
desirable in establishing international investment rul es to incorporate some elements related to the  
creation of a competitive business environment.  Existing rules on competition in international 
agreements related to investment were rather li mited in scope.  The most detailed competition law 
standards appeared in the reference paper of the WTO agreement on basic telecommunication.  
28. The representative of Hong Kong, China
 observed that the relationship between investment 
and competition policy had not received as much attention as the relationship between trade and 
competition policy.  This subject therefore merite d further exploration an d deliberation in this 
Working Group, particularly in the light of the recognition of the significance of FDI in a globalizing 
economy.  Mutually reinforcing investment and competition policies promoted economic growth,  
economic efficiency and consumer welfare. On the one hand, an effective competition policy removed 
various kinds of market entry barriers, thereby pr oviding a favourable environment for FDI.  On the 
other hand, a liberal FDI policy stimulated competition in the host economy.  This underlined the importance of addressing investment and competition in  the WTO framework in a consistent manner.  
A one-sided approach was not adequate to reap the full benefits of a mutually reinforcing investment 
environment and competition régime.  The inter linkages between investment and competition were 
already reflected in a number of WTO instrument s such as the GATS, the TRIMs Agreement and the 
TRIPS Agreement.  However, while providing for consultation and cooperation procedures and 
paving the way for more detailed rules,  these exis ting instruments did not contain explicit provisions 
preventing restrictive business practices or limiti ng regulatory abuses in th e field of competition 
policy.  The challenge was how to remove the in adequacies of existing WTO rules in addressing the 
interaction issue, and how to increase the synergi es between investment and competition policies in a 
more systematic manner.  In sum, it was increasi ngly difficult to separate those aspects of conditions 
of international competition rela ted to trans-border movement of  goods and services from those 
related to movements of factors of production and,  in particular, movements of capital.  Recent 
discussions in international fora reflected a grow ing recognition of the close relationship between 
investment policy, trade policy and competition policy,  and of the need to ensure consistency between 
these policy domains.  WT/WGTI/M/6 
Page 10  
 
 29. The representative of the European Community
 emphasized the importance of an effective 
and transparent domestic competition policy as a key in strument in consolidating the benefits of an 
open investment régime.  Many of the concerns th at had been voiced in this Working Group from the 
perspective of host countries appeared to have as an underlying common theme the concern that 
excessive market power of foreign investors might distort the economic situation of host countries by 
stifling domestic competition and the development of an indigenous  industrial capability.  In this 
connection, the point had been made that any international agreement on investment should not 
unduly restrict the ability of host countries to d eal with these matters on a case-by-case basis.  
Experience showed that competition policy could be u sed as an instrument to deal with these types of 
problems on a case-by-case basis.  The case-by-case examination of the effects of individual 
investment under competition law standards was a mo re appropriate way of handling these issues than 
the application of general restrictions on FDI. 
30. The representative of Norway  stated that, in examining the relationship between investment 
and competition policies, one possible approach wa s to consider existing relevant WTO rules of a 
horizontal nature.  In regard to investment, some  horizontal rules existed in the GATS and the TRIMs 
Agreement. In the competition field, there were  no binding multilateral horizontal rules.  The GATS 
Article VIII related only to treatme nt inconsistent with MFN-obligations and specific commitments in 
the area of monopolies and exclusive service supplie rs.  WTO Members were shortly to consider 
whether there was a need to develop in the WTO a framework covering competition policy applicable 
to companies, whether foreign or domestic, in their rô les as traders or investors.  In this regard, it 
would have to be borne in mind that nationality was not a criterion in competition policies.  The 
interface of investment and competition could also be  usefully examined from the perspective of the 
distinction between the pre-establishment and the pos t-establishment phase of an investment.  Thus, it 
would be useful to examine the relationship betw een the nature of obligations contained in an 
agreement with respect to the admission of investment  and the nature of the provisions it contained on 
competition policy. For example, existing internatio nal agreements that provided for the removal of 
all barriers to the right of establishment, like the EC Treaty and the EEA, also envisaged the 
implementation of common competition policies.  Since an effective domestic competition policy was 
a condition for a successful implementation of a lib eral investment policy, application of national 
treatment and MFN treatment regarding the admissi on of investment in the context of a multilateral 
set of rules would require that a non-discriminatory competition policy be in place in order to secure well functioning markets.  A general application of  national treatment and MFN treatment in the area 
of competition would, in today's globalized econom y, be of particular importance.  Similar 
considerations applied with respect to the post- establishment phase of investment.  A horizontal 
application of non-discriminatory rules both with regard to investment and competition policies, 
subject to few exemptions, would strengthen th e mutually supportive relationship between these 
policies and lead to achievement of broader societal objectives. 
31. The representative of Canada
 said that elements of competition and/or competition policy 
were already included in a limited way in a number of investment-related trade agreements, including 
the GATS, the TRIMs Agreement and the NAFTA.  Ho wever, existing bilateral investment treaties 
did not directly address issues related to competition policy.  There was therefore clearly a gap in existing international rules in respect of the re lationship between investment and competition.  
32. The representative of India
 stated that some developing count ries were facing considerable 
problems of adjustment to competition as a result of the collective impact of FDI liberalisation, trade 
liberalization and domestic economic reforms.  Al though, in general, competition would lead to 
greater economic efficiency and ultimately to eco nomic growth and development, there could be 
reasons for some developing countries to limit the pursuit of efficiency as an immediate economic 
objective.  This arose from the need to take  into account competing objectives, including, in 
particular, development objectives and the promoti on of small- and medium-sized enterprises, and 
from the difficulty of pursuing  such objectives through measures that did not distort market  WT/WGTI/M/6 
 Page 11 
 
 
 behaviour or diminish efficiency.  Identifying a nd pursuing policies and measures designed to achieve 
their long-term economic development objectives wh ile ensuring the positive benefits for increased 
contestability and competition through FDI liberaliz ation was a very complex challenge for many 
developing countries.  It was in this context that  in formulating investment and FDI liberalization 
policies developing countries needed to study th eir existing domestic markets and export potential 
with particular reference to the goods and ser vices forming their primary economic activities, and 
examine the impact an open investment régime was li kely to have on those primary activities.  It was 
conceivable that an open investment régime might give rise to undesirable business practices.  Incumbent firms might also take advantage of FDI liberalization to privatize governmental restraints 
and block market entry.  In developing countries there might be many disincentives to market entry 
like small market size, limited availability of entrep reneurial or technical skills or production inputs or 
inefficient distribution and communication systems.   This therefore called for the formulation and implementation of an appropriate domestic competition policy.  Further study was necessary within 
the WTO framework of how to achieve consistenc y between investment and competition policies. 
33. The representative of Pakistan
 stated that, if, as observed by many speakers, competition 
policy was a necessary condition to benefit fully from FD I liberalization,  this logically implied that 
FDI liberalization should be impl emented gradually and perhaps be  phased in sequence with the 
progressive implementation of competition policy.  
34. The representative of the European Community , referring to the comments made on the 
difficulties faced by countries in adjusting to increased competition, stated that in today's 
interdependent economy all countries were faced with  this challenge.  An effective competition policy 
and open investment régime  were the only means available to gove rnments to facilitate the adjustment 
process.  In response to the comment by Pakistan on the gradual implementa tion of open investment 
policies, he said that the experience of the Eur opean Community had shown that  delaying the 
liberalization of investment policies and the impl ementation of competition policy had made it more 
difficult for countries to adapt themselves to a more competitive external environment.  
35. The representative of UNCTAD  highlighted the main points made in a special study on 
transnational corporations, market structure and co mpetition policy that had been published as part of 
the World Investment Report 1997 .  The starting point was the importance of FDI in delivering goods 
and services to foreign markets and in integrati ng the production structures of national economies.  
Given the rôle of FDI in development, all countries were seeking to attract FDI and to benefit from it, 
inter alia,  through liberalization of national investment  régimes.  Investment liberalization opened 
markets to greenfield projects, joint ventures and mergers and acquisitions.  Each of these forms of 
entry could lead to greater concentration in na tional markets but, in general, the entry of FDI 
increased the contestability of markets.  This effect  was especially significant with regard to service 
sectors where FDI, in many cases, was the only means to  introduce outside competition.  In order to 
reap the benefits of FDI, it was important to ensure  that public restraints were not replaced by private 
restraints like cartels and restrictive business prac tices in which multinational enterprises, like other 
firms, could engage. A reduction of barriers to FDI and a strengthening of standards of treatment of 
foreign investment therefore needed to be accomp anied by measures to ensure the proper functioning 
of markets.  This required implementation of an e ffective competition policy.  The review of mergers 
and acquisitions and of restrictive business practices was the main area of interface between investment and competition.  It was important to recognize the potential supply response through FDI 
and the increased efficiencies generated by internati onally integrated production.  At the same time, 
account should be taken of the fact that, while increasing contestability was a central objective of 
many competition laws, there were often compe ting objectives, for example regarding small and 
medium sized enterprises.  Finally, the relationshi p of investment to competition law should also be 
considered in the context of international agreements.  WT/WGTI/M/6 
Page 12  
 
 36. The Working Group took note
 of the statements and agreed  to revert to Item II of the 
Checklist at the next meeting.  
C. STOCKTAKING AND ANALYSIS OF EXISTING INTERNATIONAL INSTRUMENTS 
AND ACTIVITIES REGARDING TRADE AND INVESTMENT (ITEM III OF THE CHECKLIST OF ISSUES SUGGESTED FOR STUDY) 
(i) WTO provisions on matters related to investment 
37. The representative of the European Community 
raised as a matter for further consideration  
the extent to which existing WTO rules on subsidi es were applicable to i nvestment incentives. The 
WTO Agreement on Subsidies and Countervailing Measu res laid down an extensive set of disciplines 
on trade incentives or subsidies which, de facto, provided for fairly strong disciplines on investment 
incentives insofar as such in centives constituted subsidies, which w as the case when th ey were in the 
form of a financial contribution by governments.  Most subsidies were no longer tied to products but 
were granted to factors of production.  They were therefore, in fact, invest ment incentives, such as 
subsidies to create greenfield sites or subsidies to improve the operation of firms.  While the subsidies 
covered by the Agreement were therefore often dir ectly related to investment, the fact that the 
Agreement aimed at avoiding trade distortions mean t that its disciplines applied only once production 
had begun and products were sold e ither on the domestic market or for export.  These disciplines were 
fairly effective in remedying the trade distortive e ffects of subsidies but faile d to prevent the creation 
of an uneconomical production site. Thus,  subsid y disciplines were only partially remedial of a 
problem that could have been avoided had there been  disciplines on the subsidization of investment in 
the first place.  
38. The representative of Canada  observed that,  in addition to the Agreement on Subsidies and 
Countervailing Measures, a number of other WTO agre ements had been identified in the Working 
Group that dealt with investment issues but only in  an incomplete partial manner. A list of those 
agreements should be part of the Working Group's report to the General Council. The representative 
of India  stated that further discussion was necessary on the extent to which WTO provisions that had 
been referred to by some delegations we re indeed relevant to investment.  
39. The Working Group took note  of the statements and agreed  to revert to the first indent of 
Item III of the Checklist at its next meeting. 
(ii) Bilateral, regional, plurilateral and multilateral agreements and initiatives;  implications for 
trade and investment flows of existing international instruments 
40. The Chairman  drew attention to recently circulated contributions from Niger and Turkey on 
bilateral investment treaties (WT/WGTI/W/48 and 51, respectively). 
41. The representative of Canada  stated that widespread bilateral and regional rule-making on 
investment was taking place, which showed that  WTO Members had chosen to build rules-based 
investment relations.  The outstanding question w as what could be gained by consolidating this 
activity at the multilateral level.  Existing bilatera l and regional agreements on investment covered 
most regions of the world but quite often were different in approach and scope.  There were also many 
common elements in existing agreements, such as in the areas of the definition of investment, 
admission, national treatment, MFN tr eatment, transfer of funds, expr opriation and dispute settlement. 
The WTO Agreements also touched on many of these subjects.  
42. The representative of Cuba  stated that the benefits of bilateral investment treaties were 
sometimes reduced by the application of unilateral ex traterritorial measures.  An important subject for 
consideration in regard to a multilateral approach to investment was how to  avoid such measures.   WT/WGTI/M/6 
 Page 13 
 
 
 43. The representative of India  stated that bilateral investment treaties provided a predictable 
climate for foreign investment, as evidenced by thei r recent proliferation.  Discussions had shown the 
existence of a number of common elements of bilateral treaties as well as certain divergences. Studies had also pointed out that multinational enterprises mi ght often not even be aware of the existence of 
such treaties and that they were not a major de terminant of FDI decisions. India and many other 
developing countries firmly believed that investme nt should take into account their developmental 
needs and concerns.  While it could be argued that an investment-friendly agreement was ipso facto  
development-friendly, the experience of many developing countries was that the development 
dimension could not be taken care of merely by statem ents of principle or by exhortations in a treaty. 
The pursuit of developmental objectives in the li ght of the unique needs and circumstances of 
individual countries required sufficient freedom and flexibility for countries to pursue their own 
policies.  This meant that there should be freedom to  regulate the entry of foreign investment while at 
the same time providing predictable policies, laws  and regulations once the foreign investment had 
entered.  It was significant, in this connection, th at most of the bilateral investment treaties provided 
an assurance for investment protection in accord ance with host countries' laws, regulations and 
policies.  Any multilateralization or consolidation of bilateral investment treaties might not serve this 
objective of such treaties.  Discussions had not shown clearly the benefits emanating from multilateralization of bilateral treaties. Given that bi lateral investment treaties had been shown not to 
be a major determinant of investment decisions, th ere was little support for the view that a multilateral 
framework based on such treaties would have a significant impact on investment flows.  It might therefore be more advisable to continue with  the existing trends and arrangements, namely 
autonomous liberalization of FDI policies and régim es together with bilate ral, regional and inter-
regional treaties, and continue discussion on the crucia l issues identified by the Working Group.  This 
would enable existing trends and arrangements to evolve and gather further strength and momentum 
in time for a review once the discussions on the issues before the Working Group had reached a 
definitive stage.  While the objective of the WT O was trade liberalization through the establishment 
of rules on market access, including national treatme nt and MFN treatment,  investment liberalization 
was conceptually different from market access and therefore required in-depth and broad discussion 
before it could be taken up in the WTO. 
44. The representative of the European Community
 expressed scepticism in regard to the notion 
that work in the WTO should be aimed at promo ting bilateral investment treaties.  Bilateral 
investment treaties were the most  widespread instrument used by countries to provide predictability 
and stability to investment but there were also im portant regional agreements on investment with 
different degrees of strength and coverage.  It was significant that the countries most in favour of 
regional and multilateral approaches to investment we re those with the largest number of bilateral 
investment treaties.  While the educative process on which the Working Group had embarked was not 
easily confined within a time constraint, this app lied to any subject under discussion in the WTO.  He 
therefore expressed concern regarding the suggestion that the educative process should be continued 
for a considerable period of time.  He agreed with the point made by Canada on the need to consider 
the benefits of a multilateral approach to invest ment.  A key consideration was that a multilateral 
approach, especially in the WTO context,  coul d build on a body of basic principles, such as non-
discrimination, transparency and predictability of po licies, which were applicable to a wide range of 
economic transactions.  
45. The representatives of the European Community  and the United States  disagreed with the 
statement by India that bilateral investment treaties provided an assurance of protection of investment in accordance with the domestic laws  of host countries.  The purpose of such treaties was to establish 
an international standard of protection irrespectiv e of host country laws.  The representative of India
 
stated that the bilateral investment treaties concluded by India and many other countries provided in 
their national treatment and MFN clauses that these disciplines were subject to national laws.  
Contributions by international organi zations had made the same point.  WT/WGTI/M/6 
Page 14  
 
 46. The representative of Japan
 recalled that on several occasions the point had been made that to 
a large extent an investment-friendly environment was also development-friendly.  It was important to 
view this subject in the light of the factors that  motivated investment decisions of firms.  The 
contribution from his delegation in WT/WGTI/W/ 11 had presented evidence on the importance of 
predictability of host country laws and policies as a major factor influencing investment decisions.  A 
multilateral agreement was a means of enhancing such predictability. In considering the merits of a 
multilateral framework on investment,  insufficient acc ount had been taken so far in the debate of the 
fact that there could be different kinds of multilate ral rules.  Further work in the Working Group on 
this subject would benefit from a greater focus on th e various possible options for multilateral rules.  
47. The representative of Pakistan  disagreed with the view that an investment-friendly 
environment was also development-friendly.  While  predictability was positive for investment, it was 
questionable whether a multilateral agreement was the best guarantor of such predictability.  This 
could also be provided by other arrangements.  Mo re generally,  there was little empirical evidence to 
suggest that location decisions were greatly influe nced by the existence of investment agreements. 
48. The representative of Brazil  posed several questions regarding possible rationales for 
multilateral rules on investment.  First, there was the question whether a case could be made that a 
multilateral framework would help host countries to attract investment.  In this respect, it was 
necessary to reflect on the implications of the fact  that the experience with bilateral investment 
treaties appeared to indicate that their rôle as de terminants of investment decisions was not as 
important as that of other factors.  A related ques tion was whether there was evidence that investment 
decisions were influenced by whether or not a country was a party to a regional investment 
agreement.  Second, given that trade relations were affected by governmental measures, while 
investment involved private parties, the argument in favour of a multilateral approach to trade was 
perhaps not equally applicable to investment.  Th ird, how to ensure parallelism between rules on 
investment and rules on the conduct of enterprises also required attention.  
49. The representative of Venezuela stated that, if a multilateral framework on investment were 
simply designed to consolidate the provisions on i nvestment promotion and protection of bilateral 
investment treaties, such a framework could have been established relatively easily as most 
developing countries had long accepted the need for in ternational rules on investment protection.  
However,  it appeared that the suggestion for a multilateral approach to investment went beyond 
investment promotion and protection to include li beralization of investment régimes. It was not 
productive to debate the possible need for a mu ltilateral framework on investment in terms of 
investment promotion and protection when, in reality, the intention was to address issues that were far 
more sensitive for developing countr ies and required further study.  
50. The representative of the European Community  stated that a parallel could be drawn between 
trade liberalization and the desirability of a mu ltilateral framework for trade on the one hand, and 
investment liberalization and the desirability of a multilateral framework for investment on the other.  
Trade and investment were not as different has had b een suggested by some of the previous speakers.  
Both trade and investment involved private actors.   Multilateral rules on trade governed governmental 
measures that hampered trade.  As in the case of trade, the basic question arising in regard to 
investment was whether governments collectively were  prepared to submit themselves to rules that 
prevented each of them individually from hampering th e flows of investment.  To the extent that trade 
and investment were becoming more closely interrela ted, the lack of rules on investment reduced the 
effectiveness of existing rules on trade, as illustrated by the limited effectiveness of the WTO rules on 
subsidies with respect to investme nt incentives.  As investment flows were becoming more important 
than trade flows, the need for action by government s to provide a framework of rules on investment 
became more urgent.  The expansion of the networ k of bilateral investment treaties increased the 
potential for distortions of investment flows arisi ng from the discrepancies between such treaties.  The 
proliferation of the number of such treaties also i ndicated that the need for rules to provide stability  WT/WGTI/M/6 
 Page 15 
 
 
 was generally recognized.  While it was true that some investment issues were likely to be more 
controversial between WTO Members than others, the same applied to trade.  However, it was easier 
to find an accommodation and balance between different  interests in a multilateral context than in a 
bilateral setting.  
51. The representative of the Philippines , speaking on behalf of ASEAN WTO Members ,  made a 
statement covering both Items III and IV of the Checklist.  ASEAN Members had individually entered 
into a number of bilateral investment treaties with  both developed and developing countries.  These 
treaties, which normally focused on the promotion a nd protection of foreign investment,  allowed for 
flexibility for the parties to pursu e locational, sectoral and developm ental objectives. The content of 
individual bilateral investment treaties varied in  scope and strength. In addition, ASEAN Members 
were parties to the ASEAN Agreement on the Pr omotion and Protection of Investments.  The 
coverage of this Agreement was br oad by virtue of the definition of investment which included all 
forms of assets, property and property rights, sh ares, stocks, debentures and other instruments 
signifying interests or claims, intellectual prope rty rights and goodwill and concessions. However, the 
right to invest or establish was conferred on the basis of prevailing domestic law.  ASEAN was also 
working on an agreement on an ASEAN Investment Area.  In its present form, the draft agreement 
aimed to establish an investment area by 2010 so as to create a more liberal and transparent investment régime.  ASEAN countri es were to accord national treatment to all investors by 2020, 
subject to country-specific reservations.  Bilateral investment treaties and regional agreements added a 
level of comfort for both the foreign investor and the host country but they were not by themselves a 
determining factor in investment decisions.  Ec onomic fundamentals remained the prime driving force 
for both inward and outward FDI.  Many issu es would need to be considered before any 
pronouncement could be made on th e advantages and disadvantages of a possible multilateral set of 
rules on investment.  These included, among others :  definitions; rules on entry;  performance 
requirements;  incentives;  national treatment;  MFN treatment; taxation and other related issues; 
status of personnel; technology transfer;  payments and financial transfers; competition;  restrictive 
business practices;  transparency;  expropriation and compensation, and dispute settlement.  One 
argument made in favour of a multilateral framewo rk of rules on investment was that, by going 
beyond the bilateral and regional approaches, it woul d create a stable, transparent and consistent 
environment for firms operating in the global ma rket. While this might be an appropriate 
consideration, it appeared to confine the considerat ion of benefits to those that would accrue to the 
source of the FDI.  To balance the discussion,  it should also be asked whether multilateral rules 
would indeed translate into more investment flows a nd consequent net benefits for host countries.  In 
this regard, an important consid eration was that in the current context of closer global economic 
integration each country, being a potential recipient of  investments, was likely to make every effort 
through legislation or best practices to succe ssfully compete for FDI.  Having recognized the 
importance of FDI to development, governments wo uld not easily reverse policies and risk damaging 
development prospects.  Furthermore, in discu ssing the advantages and disadvantages of multilateral 
rules, it was necessary to assess whether the bilate ral investment treaties and regional arrangements 
were working well and serving their purpose, and to consider whether it was necessary to work 
towards multilateral rules whose value was at best untested.  Certain concepts might easily apply to 
trade in goods (or services) but not to FDI.  In particular, under the WTO the right to trade under free and non-discriminatory conditions was an  accepted principle but the right to invest or establish, which 
more often than not meant production operations taki ng place in the same country of sale, did not lend 
itself easily to the same approach.  For example,  it was unclear how it could be ensured that all 
countries benefitted from a multilatera l framework of rules on investment when host countries might 
not have the same capacity or interest to invest  abroad as home countries.  In addressing these 
questions and issues, perhaps a good starting-point would be to think of the right to invest or establish 
as a good in itself, whose price was determined by the interaction between supply and demand forces.  
Indeed, some countries would probably prefer an  approach where the starting-point was not the 
foreign investor's right to invest or establish, but the host country's permission for it to do so.  The feasibility of multilateral rules in investments would hinge on whether or not they filled a void that WT/WGTI/M/6 
Page 16  
 
 must be filled and, if so,  on whether these rule s would address in a balanced manner the diverse and 
evolving interests of all countries.  Future discussi ons, if any, on this matter would require a very 
pragmatic approach, especially in respect of issues such as the right to invest or establish and other 
elements  relating to the development dimension.  
52. The representative of Australia
 wondered why one should expe ct an automatic correlation 
between the existence of bilateral investment treaties and the size of investment flows, given that such 
treaties were concluded by governments and not by private parties.  Governments presumably 
negotiated such treaties for a variety of reasons and it was possible to conceive of situations in which 
governments entered into negotiations on such trea ties for long term benefits without necessarily 
expecting short term results.  Bilateral investment  treaties and other investment agreements were 
valuable in that they put a floor on the ability of  governments to add new impediments that would not 
necessarily be seen at the time by the investor.  Th is was a concept that was very familiar from the 
WTO context and which enhanced predictability .  Regarding the distinction made by some 
delegations between investment a nd trade, he observed that all WTO Members pursued trade with 
countries that were not Members of the WTO.  While  traders did not make membership of the WTO a 
precondition for trading with non-members, the real  question was whether it was in the long term 
interest of traders if such countries were parties to an established body of trad e rules.  This was where 
the analogy with investment was quite pertinent.  A nother aspect of this analogy  was that trade rules 
did not stop governments from taking measures having an effect on trade.  Rather, governments had 
agreed to circumscribe their discretion in a politi cally and economically rational way.  The same 
concept applied to existing investment agreements and to any future multilateral rules on investment.  
53. The Chairman  drew attention to several recently circulated documents that contained 
information concerning UNCTAD's work on inv estment.  These were:  document WT/WGTI/W/46, 
which contained the report of the expert mee ting on existing regional and multilateral investment 
agreements and their development dimension held  on 1-3 April 1998;  document WT/WGTI/W/50, 
which contained a calendar of UNCTAD meetings a nd seminars in the field of investment;  and 
document WT/WGTI/W/53, which contained a list of  recent UNCTAD publications relevant to the 
work of the Working Group.  
54. The representative of UNCTAD  informed the Working Group of recent seminars on 
international investment agreements and their development dimension organized by UNCTAD in 
India in July and in Jamaica in September.  A simi lar seminar would be held in November in Peru.  
He also updated the Working Group on the meeti ng held on 14-18 September 1998 of the UNCTAD 
Commission on Investment, Technology and Related Fina ncial issues.  The agreed conclusions of that 
meeting were available in document WT/WGTI/W/58.  One of the topics of the Commission's agenda 
had been issues relating to a possible multilateral fra mework on investment.  The debate on this item 
had focused on the development dimension.  Considerable emphasis had been placed on the 
importance of domestic capacity building and the n eed for flexibility in international investment 
agreements.  In this regard, the notion had been discussed that an investment-friendly agreement was 
also to a large extent a development-friendly agreem ent.  The emphasis was on "to a large extent" as 
FDI could have positive and negative effects and, a lthough it was generally agreed that on balance the 
positive effects were far more important than the ne gative effects, there was still room for increasing 
the contribution of FDI to development.  The emphasi s on flexibility was also re flected in the decision 
taken by the Commission to convene an expert meeting in 1999 which would deal with concepts, such 
as exceptions and other mechanisms, allowing for a certain flexibility, including in the field of 
technological capacity building, in the interest of  growth and development, to allow countries in 
different stages of development to benefit fro m international investment agreements.  The 
Commission had also proposed an expert meeti ng on portfolio investment flows and FDI.   
55. The representative of Jamaica  said that the symposium organized by the UNCTAD and OAS 
in Kingston on 28 and 29 September 1998 had provided  an excellent opportunity for an exchange of  WT/WGTI/M/6 
 Page 17 
 
 
 views on the implications of international i nvestment arrangements and commended the OAS and 
UNCTAD secretariats for their efforts in organizing  this seminar.  She was confident that future 
events would also embrace French  and Spanish speaking Caribbean countries.  The representative of 
Venezuela  said that the symposium in Kingston had been the occasion for an intense debate on 
priority issues for developing countries in respect of current trends in international investment 
arrangements and in respect of ongoing initiatives in  the context of the WTO, the OECD and the 
FTAA.  The symposium also had provided a compre hensive analysis of relevant key concepts of 
international investment arrangements, such as scope of application, definition of investment, 
admission and establishment of investment, and dispute settlement.  Among the key themes emerging from the discussion, she identified the following.  First, developing countries with scarce human 
resources and information faced difficulties in partic ipating in various negotia tions on investment at 
bilateral, regional and multilateral levels.  Second, there was concern on the part of small developing 
countries with respect to their vulnerability to inv estment flows.  Third, concern had been expressed 
as regards the problem of ensuring coherence between obligations contained in investment 
arrangements concluded at various  levels.  Finally,  the need to incorporate the development 
dimension into international investme nt agreements had been emphasized.  
56. The representative of India
 congratulated the UNCTAD on the investment symposium held in 
New Delhi. The concluding statement adopted at the symposium had mentioned the concerns of 
participants regarding discussions on a multilateral level, in which regard they had underlined the 
special concerns of the least-developed countries.  The participants had also expressed a generally felt 
desire that international discussions on investment  should take into account countries' abilities to 
pursue development-oriented national policies and im plement domestic  economic  and social goals.   
57. The representative of the OECD  informed the Working Group that the Negotiating Group on 
the Multilateral Agreement on Investment ("MAI") w ould hold its next meeting on 20 and 21 October 
1998, after a period of assessment decided at the April OECD ministerial meeting to allow the 
negotiating parties to engage in consultations among themselves and with interested parties in their 
societies on the main aspects of the MAI.  She also  referred to several forthcoming events organized 
by the OECD's Committee on International Inv estment and Multinational Enterprises with non-
Member countries:  a workshop on 9-10 November 1998  in Bangkok, Thailand on the implications of 
the financial crisis for FDI policies and the imp lications of adhering to multilateral rules for host 
developing countries in Asia;  a workshop on 4- 5 December 1998 in Lima, Peru on investment 
promotion in Latin America; and a conference in early 1999 on key policy issues arising from the 
relationship between FDI and the environment in  the context of a globalizing economy.  The 
representative of the OECD also brought to the attention of the Working Group a recent study prepared by the OECD secretariat entitled "Ope n Markets Matter:  The Benefits of Trade and 
Investment Liberalization." 
58. The Working Group took note
 of the statements and agreed  to revert to Item III of the 
Checklist at its next meeting.  
D. ITEM IV OF THE CHECKLIST OF ISSUES SUGGESTED FOR STUDY 59. The representative of the European Community
 underlined the point made in a recently 
circulated communication from his delegation (WT/ WGTI/W/54) that international investment 
agreements that provided binding rules regarding the pre-establishment phase of investment in most 
cases required parties to accord non-discriminatory treatment to foreign investment.  As a relative 
standard, this non-discrimination requirement provide d for some built-in flexibility and needed to be 
distinguished from more stringent, absolute standa rds like right of establishment which appeared only 
in treaties such as the Treaty of Rome and which we re therefore not relevant to the debate in this 
Working Group.  WT/WGTI/M/6 
Page 18  
 
 60. The representative of Norway
, referring to the list of concepts in section II of the contribution 
from the European Community, stressed the differen ce between the concept of right of establishment 
on the one hand, and the application of non-discrimination principles to the pre-establishment phase of investment on the other, and raised the questi on of whether the existence of a common competition 
policy could be said to be a prerequisite for th e existence of a right of establishment.  The 
representative of the United States
 agreed with the points made in the contribution from the European 
Community that,  in the absence of  treaty-based rules, there were very few protections for foreign 
investment under international law and that a comb ination of national treatment and MFN treatment 
seemed to be the most prevalent and practical st andards to use in regard  to the admission and 
treatment of investment.  In rega rd to the discussion in paragraph 10 of this contribution of the 
concept of "like circumstances", she commented that  in investment treaties concluded by the United 
States this concept was not confined to maki ng comparisons within the same sector. The 
representative of Canada , referring to paragraph 23 of the contri bution, noted that a major difference 
between the national treatment provisions of the GATS and the GATT was that, in the GATT, national treatment applied only to the products and not to the enterprises producing the products.  It 
was clear that there was a gap in WTO rights and obl igations.  The concept of national treatment was 
well known and developed in the GATT but it require d further elaboration in the context of the 
treatment of investment and investors. 
61. The representative of the European Community
 said that the only agreements that provided 
for a right of establishment - the Treaty of Ro me and the EEA - also provided for common 
competition policies.  While the right of establishmen t might be difficult to realize in the absence of 
such common policies, he did not wish to go as far as to suggest that a common competition policy 
was a necessary precondition.  On the concept of " lik e circumstances," he stated that this was a useful 
concept to ensure a degree of flexibility in the a pplication of national treatment.  He would welcome 
further precision as to how this concep t was used in the NAFTA context.  
62. The representative of the United States  made a statement on the importance of non-
discriminatory treatment regarding the entry of forei gn investment.  Her delegation considered that to 
protect investment adequately, an investment agre ement must address the three time periods in the life 
of an investment:  entry, operation after establishm ent, and liquidation of investment.  The treatment 
of investors and their investment should be non-discriminatory in each of these periods.  The standard for non-discrimination was appropria tely national treatment and MFN treatment.  Entry was the point 
at which governments could deny market access alto gether, demand government or local participation 
in the ownership or control of the investment or set conditions such as performance requirements.  
The conditions which applied to and determined entry to a mark et were often conditions which 
remained in force throughout the life of an inv estment.  This was the ca se because the government 
could set the terms of the investment's entry and op eration at this point and also because, once such 
conditions had been set, even if later lifted by the go vernment, it was often too costly or impractical to 
then restructure the investment.  In other words, th e issue of discrimination and an investor's ability to 
compete on equal terms with the domestic investor  might be moot after establishment because the 
discrimination that had taken place upon the establishment of the investment had put the investor at a competitive disadvantage for the life of the investment  or precluded the investment altogether.  From 
the point of view of the host country, entry was also the point where discretion and possibly corruption took place.  Market access w as also a key ingredient    of an investment treaty.  The ability 
to establish an investment and the terms of est ablishment were the critical market issues for 
investment.  WTO rules applied to trade in goods  and services necessarily addressed discriminatory 
treatment of products both at the time a product ente red a market and once it had crossed the border.  
If a product was able to cross a border free of tariffs but could not be sold once it had crossed a border due to an internal restriction, the value of ta riff-free entry was nullified.  Similarly, if a quota 
prevented entry, non-discriminatory treatment of the product after entry was meaningless.  This 
analogy applied to investment.  A commitment not to discriminate was meaningless if the investment  WT/WGTI/M/6 
 Page 19 
 
 
 was precluded altogether or so handicapped by  restrictions and conditions applied during 
establishment that it was at a competitive disadvantage vis-à-vis its competitors.  
63. The representative of Hong Kong, China  addressed the first indent of Item IV ("identification 
of common features and differences, including ove rlaps and possible conflicts, as well as possible 
gaps in existing international instruments"). In an earlier contribution (WT/WGTI/W/33) his 
delegation had given a number of examples to illust rate the differences betwee n existing international 
investment instruments in terms of their approach , coverage, legal nature, strength and treatment of 
the development dimension.  Possible gaps and co nflicts among existing instruments might restrict 
market contestability, distort investment flows, reduce economic efficiency, and thus frustrate the 
objective of such instruments.  Several policy questi ons required further reflection by Members.  First, 
certain investment policies might cause distortions  of international investment.  These policies 
included the denial of national treatment or right of establishment to internatio nal investors, the failure 
to provide a certain threshold of investor protecti on,  measures that would distort competition between 
domestic and foreign firms, performance requirement s and investment incentives.  Since substantial 
economic gains might be derived from further liberali zation of these investment policies,  a pertinent 
question was whether and how such policies should  be altered in today's globalized economy.  
Second,  certain  types of investment incentives mi ght fall within the definition of subsidies of the 
WTO Agreement on Subsidies and Countervailing Measu res, but since this Agreement was oriented 
towards trade in goods it might not be adequate to d eal with such incentives.  Similarly, the coverage 
of performance requirements in the Agreemen t on Trade-Related Investment Measures was 
incomplete.  The question should be addressed as to whether these apparent gaps in the existing WTO 
instruments pointed to the need for reforming investme nt-related rules at the multilateral level.  Third, 
there was a need to consider to what extent overa ll economic benefits were affected by the markedly 
different standards in existing investment instrume nts at various levels and whether global economic 
welfare would benefit from a comprehensive and coherent framework for investment.  
OECD Guidelines for Multinational enterprises 
64. The Chairman , referring to the discussion on the Gu idelines that had taken place at the 
meeting in June, drew attention to a communication recently received from UNCTAD (WT/WGTI/W/52) which contained a comparison between the OECD Guidelines for Multinational 
Enterprises and the draft UN Code of Conduct for Tr ansnational Corporations  and which reproduced 
the text of this draft Code as well as of the draft code on the Transfer of Technology and the Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices. 
65. No statements were made on this subject. 
Criteria for evaluating investment ag reements from a development perspective 
66. The Chairman
 recalled that the Working Group had consid ered this matter at  its last meeting 
on the basis of a statement made by the representative of UNCTAD on various approaches that were being considered in the framework of UNCTAD w ith regard to the development dimension of 
international investment agreements.  
67. The representative of UNCTAD
 stated that the issue of the development dimension of 
investment agreements had most recently been discussed at the meeting of the UNCTAD Commission 
on Investment, Technology and Related Financia l Issues held on 14-18 September 1998.  The 
UNCTAD secretariat had received further guidance from the Commission as to how to proceed in regard to its work on this subject and was now  in the process of preparing necessary background 
papers.   WT/WGTI/M/6 
Page 20  
 
 68. The representative of India
 stated that the approaches that  were being considered in the 
framework of UNCTAD with respect to the devel opment dimension of international investment 
agreements might not adequately address the c oncern that a multilateral framework of rules on 
investment would inherently be incompatible with  the need for developing countries to have the 
flexibility to pursue policies tailored to their indi vidual needs and objectives.  The discussions on the 
previous items of the Checklist provided a certain direction for an understanding of how the 
development dimension of international investment agreements should be approached.  He stressed, in 
this context, that progress under Item IV depended on the extent to which the Group could arrive at a 
common understanding on these previous items of the Checklist.  He then presented the views of his 
delegation on how the work carried out to date by  the Working Group under the previous items of the 
Checklist related to the development dimension.  
69. In this connection, he stated that the conven tional analysis of the relationship between FDI 
and trade in terms of whether FDI and trade we re complements or substitutes was becoming less 
relevant in a globalizing economy in which trade an d investment were determined simultaneously by 
decisions of multinational enterprises regarding the location of their production facilities.  The 
determinants of investment decisions had been di scussed and it had been found that an investment 
agreement might not be one of the important determ inants.  The three main reasons for multinational 
enterprises to invest in developing countries were  availability of natural resources, a large domestic 
market, and the existence of a suitable platform fo r manufacturing exports.  The choice of a particular 
country might also depend upon the strength of local  institutions, the quality of local infrastructure 
and work force, and the degree of macroeconomic stability. In the latter regard, a favourable and 
attractive domestic investment régime along with strong fundamentals, strong domestic regulatory 
and adjudicatory institutions, and a predictable régi me of investment protection, might influence FDI 
flows.  On the other hand, with regard to availa bility of natural resources, capital requirements of 
developing countries might be more relevant as a fact or influencing investment decisions.  This was a 
significant development dimension in the FDI-trade relationship. FDI was not a panacea nor the most 
important factor in development.  National polici es, on the other hand, might significantly influence 
development-oriented FDI flows. In particular, nati onal policies had  an important rôle to play by 
attracting FDI through a liberal régime, encourag ing FDI in priority areas and reducing possible 
negative effects of FDI.  FDI might, in certain circum stances, need to be phased in at a slower rate 
than the rate determined solely by market forces.  Also, the importance of a sound and sustainable 
macroeconomic and financial envi ronment could not be overemphasized.  It had been stressed by 
many delegations that the negative effects of FDI needed to be explored further and that sectoral 
targeting might be effective in addressing not on ly national but also regional or sector specific 
objectives.  While non-market capital flows were more  amenable to addressing development priorities 
due to the inevitable involvement of national govern ments, free market flows might need stricter 
disciplines at the national as well as international levels.  It was questionable that these disciplines 
could be multilateralized in view of the unique circ umstances of each FDI recipient.  Selective and 
judicious intervention by governments might ofte n be required to support domestic industry and 
technology creation and to ensure a level playing fi eld for domestic enterprises.  The recent financial 
crisis in Asia and the rôle of prudential regulation for managing portf olio equity investment and bank 
lending needed to be especially cons idered in this regard.  As mentioned in the Secretariat synthesis 
paper in document WT/WGTI/W/38, while on the w hole FDI had positive effects, it was essential to 
consider the possible negative effects, such as restric tions on the transfer of technology, the impact on 
balance of payments and exchange rates and the possible crowding-out of domestic entrepreneurial 
activities.  Furthermore, a correct policy environmen t was a prerequisite to the full realization of 
benefits of FDI.  India's contribution presented at the last meeting on the issue of transfer of technology was particularly relevant in this rega rd.  While there might be an assumption that FDI 
promoted technology transfer, various studies had pointed out that countries at low levels of 
development were likely to be able to induce FDI only into low technology activities.  This suggested 
that national policies, like India's policy in the co mputer sector, had an important rôle to play in 
promoting the transfer of intangible assets.   WT/WGTI/M/6 
 Page 21 
 
 
 70. The representative of India  further stated that discussions on the issue of the economic 
relationship between trade and investment had be nefitted from the Secretariat Note in document 
WT/WGTI/W/7, but that many questions required furt her consideration.  Some concluding remarks in 
this Note attempted to simplify a very complex re lationship, complicated further by the variety of 
economies which were FDI recipients as well as the variety of developmental reasons for which FDI 
could be desirable.  As had been pointed out by a number of delegations,  there was a need for an 
examination of the relationship between investment  liberalization and econom ic development through 
historical analysis of the evolution of investment policies in individual countries.  In addition, it should be recognized that the rôle of FDI in econo mic development went far beyond its relationship to 
trade and required broader consid eration of its impact on the welf are of host countries.  There was 
little doubt that developing countries were net importers of capital a nd technology and that there was 
a huge competitive gap between their enterprises, par ticularly small- and medium-sized enterprises 
and the multinational enterprises.  Developing c ountries recognized the importance and value of FDI 
and foreign technology to their growth and developm ent.  Their autonomous liberalization of FDI and 
trade régimes and their increasing shift towards mark et and outward oriented approaches in economic 
policy-making bore ample testimony to this.  Howeve r, their experiences showed that the building up 
of domestic entrepreneurial industr ial and technological capabilities was essential not only to cope 
with, but also to realise the full benefits from,  FDI and foreign technology.  Without sufficient 
domestic capabilities, FDI and fore ign technology seldom permeated the productive system of the 
national economy.  Selective and judicious interven tions by governments were therefore considered 
necessary.  Developing countries also needed to employ an appropriate mix of incentives and 
performance requirements for FDI to achieve sp ecific developmental and political and social 
objectives.  The ASEAN and UNCTAD contributions on investment incentives were relevant in this 
context. 
71.  The representative of India
 stated that the discussion that had taken place so far on Item IV 
had given insufficient consideration to basic developm ent issues.  Instead, issues like the definition of 
investment and the concept of right of establishment,  which should have been taken up at a much later 
stage, were already being discussed. This lack of  adequate attention to development issues under 
Item IV arose from a failure to recognize that th e work under the previous items had generated a 
number of issues that required further discussion in  this educative process before any conclusions 
could be drawn for the work on Item IV.  The de velopment perspective of a future course of action 
should be addressed more fully, through a deepen ing and widening of the debate in the Working 
Group, while at the same time existing agreements should be a llowed to continue and evolve 
organically.  In parallel, work might be progressed on some issues relating to rights and obligations. 
In this context, a common definition of investment would have to be explored further.  The issue of 
admission of foreign investment also needed further work as indicated during the discussions at the last meeting.  On the question of obligations of investors, discussions had identified the OECD 
Guidelines for Multinational Enterpri ses, the draft UN Code on Transnational Corporations and the 
UN Set of Multilaterally Agreed Equitable Principles for the Control of Restrictive Business Practices 
as some of the existing arrangements that could be e xplored further.   Work being undertaken in other 
fora on investor obligations could also be used to enlighten the discussions.  
72. The representative of Switzerland
 stated that many of the issues raised by India for further 
consideration had already been addressed in the abundant documentation provided to the Working 
Group, as summarized in the synthesis paper of the Secretariat in WT/WGTI/W/38.  This was not to 
deny that there were not issues requiring further at tention, as for example i nvestment incentives.  As 
regards the desirability of a multilateral framework of  rules on investment, he expressed the view that 
a stable and predictable framework of rules was a ce ntral element to encouraging investments.  On the 
content of such a framework further work remained to be done, for example in regard to the definition 
of investment  and other issues listed in document No. 6004/Rev.3.  The contribution of the European 
Community in WT/WGTI/W/54 was important in that the approach to non-discrimination discussed therein could accommodate many of the concerns rais ed by India.  The repr esentative of the European WT/WGTI/M/6 
Page 22  
 
 Community
 stated that, while views could differ on whether development issues had been addressed 
sufficiently, it could not be said that they had been  neglected in the Group's work.  The contributions 
from other international organizations, notably UNCT AD, had been particularly important in this 
regard.  A common element of many of the points ra ised by India regarding the implications of a 
possible multilateral framework of rules on investment appeared to be a desire to protect the ability of 
countries to regulate economic activities in the interest  of their peoples.  This concern was valid and 
shared by all countries but did not constitute an  argument against the benefits of establishing 
collective disciplines regarding the exercise of regulat ory authority in certain areas.  While it might be 
justifiable for regulatory purposes to make a di stinction between investments depending on objective 
characteristics, it was difficult to find a rationale for making a distinction between investments solely 
on the grounds of their foreign ownership.  EC rules and international agreements to which the 
European Community was a party did provide for the ability of parties to make regulatory distinctions 
based upon objective factors but subject to the requirement of non-discrimination on grounds of 
nationality.  The same principle operated in WTO agreements.  While it was true that favourable 
market conditions and the existence of a stable domestic legal and regulator y framework were more 
important as a determinant of investment decisions than  adherence to international investment rules,  a 
favourable domestic environment coul d change over the lifetime of an investment.  International rules 
were therefore important to enhance the stability pr ovided by domestic rules.  As to whether this 
purpose was best served by international rules in a bilateral or a multilateral context, it was significant 
that EC Member states, which had concluded a very large number of bilateral investment treaties, had 
found that the proliferation of sometimes differing b ilateral treaties now created the need for a more 
coherent approach in a multilateral setting.  
73. The representative of India stated that a number of academic studies showed that FDI had  
contributed optimally to development in those c ountries where governments had played a strong rôle 
in directing FDI to certain sectors.   On the issue raised by the Eur opean Community on the rôle of a 
multilateral agreement in enhancing predictability, he said that this might be true from the perspective 
of providing protection to foreign investment, wh ich was important for capital-exporting countries, 
but that from the perspective of capital-importing countries such an agreement would not enhance 
predictability, given that there was no guarantee that  it would actually lead to increased inflows of 
FDI.  In response to the comment by the Europ ean Community on the issue of discrimination of 
foreign investment on the grounds of nationality,  he stated that discrimination on ground of 
nationality was common in respect of movement of persons, in which context he recalled his 
delegation's views on the need to adopt a consiste nt approach to the movement of capital and the 
movement of labour.  
74. The representative of the European Community  stated that EC Member states were both 
capital exporting and capital importing countries and unde rlined the importance of inward FDI to the 
economies of EC Member states.  The dissimilarities in perspective were therefore not as great as 
suggested by India.  As to the issue of the lack of a guarantee that a multilateral agreement would lead 
to increased investment flows, a parallel could be dr awn with multilateral rules on trade liberalization.  
What could be guaranteed by such rules was not  increased trade flows but increased opportunities to 
trade.  These opportunities could be exploited by fi rms depending on their co mpetitiveness.  The same 
applied to multilateral rules on investment.  
75. The representative of Hong Kong, China  responded to India's comments by saying that 
Hong Kong, China had concluded fewe r bilateral investment treaties than India and had not engaged 
in policies to attract or direct FDI but had pursued an open investment policy, characterised by non-discrimination and the absence of special regulations  on FDI, as a natural concomitant of an open 
trade policy.  He referred to the discussion of  Hong Kong, China's positive experience with FDI 
experience in his delegation's contribution in WT/WGTI/W/10.  WT/WGTI/M/6 
 Page 23 
 
 
 76. The representative of Brazil  said that the notion of predictability as a possible rationale for 
multilateral investment rules was more relevant to long-term than to short- term investment. This 
highlighted the importance of clarifying whether such rules should cover both long-term and short-term capital flows. Given that FDI involved activities of private firms, a framework of rules on the 
treatment to be accorded to private firms by governme nts would need to be balanced by a set of rules 
on  the conduct of firms, notably in the field of competition policy.  
77. The representative of Venezuela
 said that her country was both a capital exporting and capital 
importing country.  The development dimension should not be viewed from the angle of a 
confrontation between home countries of multinati onal enterprises and host countries.  The key to 
giving effect to the development dimension of a possible set of multilateral investment rules was an 
appropriate degree of flexibility so that it would neither subject de veloping countries to an unqualified 
application of such rules nor provide for a total ex emption of developing countries from disciplines.   
The GATS exemplified the type of approach that could be taken to the development dimension.  
Another aspect of flexibility was the need to take  into account the interests of both capital exporting 
and capital importing countries.  For example, devel oping countries had a legitimate interest in the 
promotion of transfer of technology on reasonable commercial terms as part of technological capacity 
building, while developed countries had an equally le gitimate interest in the adequate protection of 
intellectual property rights.   
78. The representative of Pakistan  stated that the lack of a multilateral investment framework had 
not hindered investment flows and that there was no evidence that the creation of such a multilateral 
framework would lead to increased investment flows and a more even spread of investment.  As a 
consequence,  the costs of embarking on a multilate ral investment negotiation needed to be weighed 
against benefits that were  uncertain.  
79. The representative of the Philippines , speaking on behalf of ASEAN WTO Members , stated 
that the contours of any set of rights and obligations on investment would depend on whether the objective was the promotion, treatment and protection of investment, its liberalization, or both.  The 
definition of investment would also be relevant in  identifying such rights and obligations.  Broadly 
speaking, the host country would need to ensure th e effective promotion, fair treatment and full 
protection of FDI, while the home country would n eed to respect the policies and rules of the host 
country and actively assist in the realization of its objectives or, at the very least, not undermine such objectives.  For ASEAN, the crux of the matter was how multilateral rules could take into account the 
development dimension in a more meaningful ma nner than through references in preambular 
considerations and through trans ition periods.  The development di mension should be manifest in 
each of the elements that comprised any set of multilateral rules on investment.  For example, it might be argued that in respect of the issue of the right to  invest or establish, which was invariably linked to 
the matter of extending national treatment to foreign investors at the entry stag e, the incorporation of 
the development dimension would require that there be no such automatic right.  This would ensure 
that host countries retained the ability to screen, allow and oversee onl y the types of FDI that would, 
on the one hand best suit their industrial policies and developmental needs and, on the other, not stifle 
both investment and development. The question of whether a positive or negative list approach, or a 
combination of both, should be followed to the i ssue of applying national treatment to investment 
approval had been raised in a contribution fro m Japan in document WT/WGTI/W/34. This was 
certainly something to which the Working Group woul d need to give further thought, especially in the 
light of the experience that had been gained in  the negotiation and implementation of the GATS.  
Preliminarily, his delegation believed that, if one were  to follow this route, there was a likelihood that 
the positive list would end up being very short an d the negative list being very long because host 
countries would wish to maintain a certain level of  flexibility in screening and approving investment.  
In addition to the issue of the positive-negative list approach, the Working Group might also need to 
consider the advantages and disadvantages of devel opmental exceptions.  Taking into account existing 
WTO obligations, the use of performance requireme nts and incentives was another area in which the WT/WGTI/M/6 
Page 24  
 
 development dimension could be manifested.  In particular, a developing host country should be 
allowed the flexibility to institute certain measures that would permit the establishment and growth of 
ancillary industries, whether upstrea m or downstream.  In regard to payments and financial transfers, 
the ability to freely repatriate or remit earnings was an important consideration for the home country 
or investor.  Host countries were clearly aware of this.  At the same time , however, investors were 
expected to bring in fresh capital so as not to put  undue pressure on the domestic financial market of 
host countries.  The transfer of technology was a nother area where the deve lopment dimension should 
be addressed, although it was not clear how binding  obligations on technology transfers might be 
formulated given that this was primarily a matter for private enterprises. This issue was nonetheless 
important for developing host countries, especially  those which needed to display an economic 
justification for their production and export cap ability and thus avoid being vulnerable to anti-
circumvention measures in the framework of anti-dumping laws.  
80. The representative of the European Community 
  stated that it was difficult to point to a single 
cause of the tremendous increase in FDI flows but that there was a clear correlation between this 
increase and the widespread liberalisation of investment  régimes.  This raised the question of how to 
consolidate this liberalization by international rul es.  In this regard, bilateral treaties were a second 
best approach compared with a multilateral framewor k.  Thus,  more relevant than the question of 
whether the lack of a multilateral framework for investment had hindered investment flows was the 
value of a multilateral framework in avoiding a back sliding of liberalization.  Whether investment 
flows would actually increase as a result of such a fr amework was impossible to predict  just as there 
had been no absolute certa inty that a multilateral framework for tr ade would lead to increased trade at 
a time when the GATT was concluded.  In regard  to the concept of investment promotion, he 
wondered how international rules could address this , given that this was foremost a matter for 
individual countries.  International rules could at best confirm the freedom of countries to take measures to promote investment, although there was a need for disciplines on the granting of 
investment incentives.  Technology transfer wa s a fundamental issue for both developed and 
developing countries but it was again somewhat diff icult to see how this subject could be addressed 
by international rules. 
81. The representative of Japan
 stated that, as a result of trade liberalization, markets had become 
more integrated, which allowed investors to choose where they wanted to produce, sell and procure 
inputs.  Since investors had a wider sphere to m ove, a common set of rules was necessary to provide 
greater predictability.  This was a long term effort.  It was therefore not possible to give definite 
answers on whether the creation of a multilateral fra mework for investment would have a direct 
impact on FDI flows.  In the case of trade, effort s at multilateral liberalization made over the past fifty 
years had sometimes been slow in producing results.  The same applied to FDI.  The effect that a 
multilateral framework would have on investment flows also depended upon whether it would address 
impediments to FDI that arose from unnecessary regulations on FDI and differences in trade régimes. 
Protection of investment was important not only for capital exporting countr ies but also for host 
countries insofar as investment was a source of gr owth of host country economies. Finally he 
proposed that there be a more detailed discussion of the costs and benefits of a multilateral framework 
on investment.  An expansion of the list of issues annexed to the Chair's note in document No. 6004/Rev.3 could be the starting-point for such a discussion. 
82. The representative of Korea
 stated that on many previous occasions his delegation had shared 
with other delegations his country's experiences w ith FDI and its rôle in economic development by 
providing empirical evidence of the positive impact of FDI on development.  In this respect, he recalled the contribution from his delegation in document WT/WGTI/W/16.  It was evident from the debate in the Working Group that there remained concerns about the development impact of FDI and 
that this matter deserved further discussion.  Future  discussion on this issue should be conducted in a 
more concrete and focused manner.   WT/WGTI/M/6 
 Page 25 
 
 
 83. Regarding the effects of bilateral investment treaties on investment flows, the representative 
of the United States  stressed that her country concluded such  treaties to provide protection to existing 
investment rather than to promote increased flows of investment.  Neverthele ss, it was significant that 
investors with an interest in investing in a partic ular market because of factors such as market size, 
labour productivity and proximity to other markets,  often encouraged her G overnment to conclude 
bilateral investment treaties because they regarded  such treaties as providing a margin of comfort 
regarding the investment climate in the country in question.  The fact that in many cases negotiations 
on bilateral investment treaties were initiated at the request of foreign countries showed that in their 
perspective such treaties made a difference in attracting investment. 
84. The representative of Costa Rica  stated that the discussion in the Working Group could give 
the impression that there existed a single conception of the development dimension of a multilateral 
agreement.  This was not the case.  Costa Rica had a régime that was quite open to foreign investment 
and its constitution guaranteed national treatment of foreign investment.  For Costa Rica, the development dimension was conceived in terms of openness and protection of FDI.  Another 
approach was difficult given its high dependence on FD I.  It had based its development approach in 
recent years on attracting FDI and it viewed th e development dimension within a regulatory 
framework that permitted openness and predictability .  A multilateral agreement would contribute to 
these objectives.  
Definition of investment in int ernational investment agreements 
85. The Chairman
 drew attention to an informal Secr etariat Note in document No. 4709 which 
listed issues that had been identified at the meeting in  June as meriting further study with regard to the 
definition of investment in international inv estment agreements.  Written contributions on the 
definition of investment had been received from Japan and Korea (WT/WGTI/W/43 and 49, 
respectively). 
86. The representative of Costa Rica  introduced a contribution (WT/WGTI/W/60) on the 
definition of investment in treatie s concluded by his country.  Invest ment was defined in these treaties 
in a broad and comprehensive manner to include a ny asset that was susceptible of being invested and 
that was owned or controlled by a foreign investor.  This included both direct and portfolio investment but excluded movements of capital that were mere  financial transactions with speculative purposes, 
commercial contracts for the sale of goods or services,  credits to a state and loans that were not 
directly related to an investment.  Another basic el ement of the definition of investment concerned the 
criteria to determine the character of an investment  as foreign.  The treaties concluded by Costa Rica 
provided, in this respect, that the investment must be owned or controlled by a foreign investor and 
that it must be the result of a transfer of capital to  the recipient country or of the reinvestment of 
profits.  In regard to the first criterion, the term c ontrol required further clarification. The definition of 
control  in the GATS was a useful starting-point  but should be expanded to take account of the 
existence of direct and indirect forms of control.   In respect of the term investor, the treaties 
concluded by Costa Rica included both natural and juridical persons. The definition of the nationality 
of natural persons was left to the respective laws of  the parties, while in regard to the nationality of 
juridical persons, these treaties relied on the criteria of place of incorporation and place of administrative seat.  In some cases, these criteria were supplemented by a requirement that an 
enterprise be engaged in real economic activities in the territory of a party. 
87. The representative of New Zealand
 stated that a key concept that should underly any 
definition of investment was that  an investment was a capital tr ansaction in which the investor 
expected a return.  This concept of an expectati on of a return would ensure that government grants 
and contractual arrangements for the supply of goods and services were not included within the 
definition of investment.  WT/WGTI/M/6 
Page 26  
 
 88. The representative of India
 reiterated the view expressed by his delegation at the previous 
meeting that at the time of the establishment of th is Working Group it had be en generally understood 
that its work would be limited to FDI.  If delega tions now sought to alte r this understanding, his 
delegation might wish to seek a clarification from the General Council as to whether this was  in accordance with the mandate of the Work ing Group. The representative of Korea 
 drew attention to 
the proposal made in his delegation's contribution in document WT/WGTI/W/49 that the work of the 
Working Group be confined to FDI when consideri ng issues relating to liberalization.  It was the 
understanding of his delegation that, notwithstan ding that the Singapore Ministerial Declaration 
referred to investment rather than direct investme nt, the Working Group had not been intended to deal 
with portfolio investment. He also proposed that, if a definition of FDI was necessary, the Working 
Group use the IMF definition. 
89. The representative of the European Community  stressed the need to view the definition of 
investment in relation to the nature and objec tives of an agreement.  A broad definition had 
historically evolved in the context of agreements th at mainly aimed at providing protection of foreign 
investment in the post-establishment stage.  A narro w definition, limited to direct investment, had 
been found to be insufficient in that context as it would not cover the full range of assets of an 
investor that needed to be protected.  On the othe r hand, whether this broad definition was suitable in 
the context of an agreement that also dealt with  the entry of foreign investment was a legitimate 
question.  One possible approach was to adopt a narro w definition and apply it to all obligations of an 
agreement;  another, and preferable approach , was to adopt a broad definition but limit the 
applicability of the substantive obligations of an agr eement to particular elements of the definition.  
90. The representatives of Japan , Canada , the United States  and Norway  stated their views on the 
advantages of a broad, asset-based approach to the defin ition of investment.  It was stated that such an 
approach was preferable in order to provide adeq uate protection to foreign investment, to ensure 
consistency with the large number of existing agreements that used  this broad definition, and to avoid 
the difficulty of distinguishing between direct and in direct investment.  Problems that could arise from 
the inclusion of portfolio investment in the definition could be addressed through exceptions and 
qualifications to obligations.  Thus, including portfoli o investment in a definition of investment in an 
agreement did not necessarily imply that all oblig ations of the agreement would apply to such 
investment. More generally, the point was made that  the establishment of investment rules in the 
WTO would not mean that Members would assume obligations in respect of all aspects of international capital movements.  
91. The representatives of Brazil
 and Venezuela  stated that further consideration of how 
obligations of an agreement would apply in relatio n to the specific elements of a broad, asset-based 
definition was necessary not only in regard to portfolio  investment but also in regard to other elements 
of such a definition, for example, rights arising fro m contracts and rights relating to contributions of 
technology.   
92. The representative of Australia  reiterated a suggestion made by  her delegation at the last 
meeting that the Working Group examine whether ex isting international instruments on investment 
drew any distinction between FDI and portfolio i nvestment. She also reminded the Working Group of 
several issues that her delegation had raised at th e last meeting as meriting further consideration in 
regard to the definition of investment, as recorded in paragraph 57 of WT/WGTI/M/5.  
93. Following a request by the representative of the Philippines, speaking on behalf of ASEAN 
WTO Members, the Working Group agreed  to request the IMF to make available the IMF's definition 
of FDI.1  
                                                      
1 See document WT/WGTI/W/61.  WT/WGTI/M/6 
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 94. The Working Group took note  of the statements and agreed  t o  r e v e r t  t o  I t e m  I V  o f  t h e  
Checklist at the next meeting.  The Chairman stated  that the informal list in his Note No. 6004/Rev.3 
would be revised to reflect the points made at this meeting.  
E. OBSERVER STATUS FOR INTERNATIONAL INTERGOVERNMENTAL 
ORGANIZATIONS 
95. In the light of the ongoing process in th e General Council, the Working Group agreed  to 
maintain the status quo by inviting those organiza tions present at the meeting to attend the next 
meeting on the same basis. 
F. STRUCTURE AND CONTENT OF THE REPORT TO THE GENERAL COUNCIL  96. The Chairman
 recalled that at the meeting in June he had raised as a subject for the agenda of 
this meeting the issue of the report to be submitted by the Working Group at the end of the year to the 
General Council.  The report should be seen in th e light of the provision in paragraph 20 of the 
Singapore Ministerial Declaration that the General Council will keep the work of the Working Group 
under review and will determine after two years how the work of the Working Group should proceed.  
Accordingly, the report should be of such a nature  as to enable the General Council to review the 
work carried out by the Working Group and to decide on future steps.  In this connection, he recalled 
his suggestion at the June meeting that the report c ould contain two basic parts - a descriptive part and 
a section containing any recommendations that the Group could agree on - and that he had invited 
delegations to be prepared to offer specific sugg estions on these two elements at the present meeting.  
Specifically with respect to the descriptive part of the report, he had pointed to two possible options.  
One option would be to submit a very brief fact ual report along the lines of the report submitted by 
the Working Group to the General Council in 1997.  This kind of report would identify the main 
themes discussed in the Working Group but would not attempt to summarise the substance of the debate.  Another option would be to present a long er report that would reflect in a balanced and 
descriptive way the substantive points made in rega rd to the various items of the Checklist.  The 
Secretariat had suggested that a more elaborate d escription of the work of the Working Group could 
perhaps be prepared on the basis of a consolidation of  the sections of the reports on the meetings that 
related to particular items of the Checklist.   As regards the recommendations to be made, the key 
question would appear to be how the work should proceed after 1998.  One aspect of this was the 
time-period for a possible extension of the mandate ;  another aspect was whether the report should 
perhaps identify particular subjects that should be taken up in further meetings after the end of 1998. 
As announced at the meeting in June, informal cons ultations had been held in preparation for the 
discussion of this item at the present meeting.  These consultations had taken place on 22 September 
in an informal meeting to which all Members had been invited.  During these consultations most 
delegations had expressed a preference for the second op tion with respect to the descriptive part of the 
report. Some delegations had warned that this  might involve extensive negotiations.  On the 
recommendations, most of the delegations present at  the informal meeting seemed to envisage a roll-
over of the mandate of the Working Group.  A number of issues had been raised in regard to such an 
extension, including its duration, the possible need for future work to be focused on specific issues 
and the idea that an extension of the Group's ma ndate be viewed as sepa rate from the General 
Council's special session process for preparation of the third Ministerial Conference.  
97. The representative of the Secretariat
 informed the Working Grou p of the discussion that had 
taken place at the meeting of the Working Group on the Interaction between Trade and Competition 
held on 28 and 29 September 1998 on the approach that  the Working Group would take to its report.  
That discussion had also been based on the suggestion that the report contain a descriptive part and a 
section with recommendations.  The Working Group had agreed to request the Secretariat to prepare a 
draft descriptive part of the report that would descr ibe the substance of the work done in the Working 
Group and be based on the records of the meetings.  It  was understood that this part would be factual, WT/WGTI/M/6 
Page 28  
 
 descriptive and balanced, reflect the views expressed by Members, and that it would not attempt to 
highlight areas of agreement or disagreement.  It was also understood that the descriptive part would 
be drafted in such a way that it would not prejudi ce the possibility of any issue being reverted to. The 
Working Group had agreed to revert at its next meeting to the issue of the recommendations to be 
made.  
98. Delegations supported the proposal by the Chairm an that the report of the Working Group to 
the General Council be divided into a descriptive part and a section containing recommendations.  
99. As regards the nature of the descriptive part  of the report, the representatives of Japan
, the 
European Community , Korea , Hong Kong, China , Norway , the United States , the Philippines on 
behalf of ASEAN WTO Members , Australia , Cuba , Switzerland , Brazil , Mexico , Canada , New 
Zealand , Hunga ry, Turkey , Peru , Costa Rica , Argentina  and Egypt  indicated a preference for the 
second option suggested by the Chairman, i.e., a substa ntive description of the work carried out by the 
Working Group based on the records of th e meetings.  The representatives of India  and Venezuela 
stated they were flexible as to which of the tw o options was chosen. The representatives of Pakistan  
and Colombia  preferred a brief descriptive part along the lines of the first option but were prepared to 
join the emerging consensus view. It was stressed by many representatives that this descriptive part 
should be factual, balanced and non-prejudicial in any direction and should not attempt to identify the 
degree of support expressed for particular points of  view.  The importance of avoiding a lengthy 
debate at the next meeting on the descriptive part was also emphasized.  
100. Delegations also expressed support for the idea that the report of the Working Group to the 
General Council should contain a recommendation for an extension of the Working Group's mandate. 
However, the representative of Australia  stated that her delegation was still reflecting on the 
complexities that might arise from the question of extending the mandate of the Group in the light of the General Council's work in 1999 to prepare for the next Ministerial Conference. 
101. Delegations expressed views on the duration of an  extension of the mandate of the Working 
Group.  The representatives of Japan
, the European Community , Korea , Hong Kong, China , 
Switzerland , the United States , Mexico , Canada , New Zealand , Hungary , Costa Rica  and Argentina  
stated that an extension should be of limited dur ation in order to ensure coherence with the 
preparatory process in the General Council for the next Ministerial Conference.  More specifically, 
the representatives of Japan , Korea , Norway , Canada , New Zealand , Hungary , Turkey , Peru , Costa 
Rica,  Colombia  and the United States  suggested that an extension should be limited to a period of six 
months.  The representative of India  stated that, in formulating recommendations regarding an 
extension, the Working Group should be guided on ly by the mandate laid down in the Singapore 
Ministerial Declaration and that considerations relating to the General Council's preparatory process 
for the next Ministerial Conference were not pertinent in this regard.  The Working Group should, rather, make an honest assessment of the work th at still remained to be done under this mandate and 
then suggest an appropriate period for extension with out being influenced by the preparatory process.  
He underlined in this regard that there was no commitment that investment would necessarily be 
included as a subject for the next Ministerial Confer ence.  His delegation favoured an extension of the 
mandate of the Working Group by two years. The representative of Egypt 
stressed that an important 
factor warranting an extension of the mandate of the Working Group was the fact that, as a result of 
the simultaneous scheduling of meetings, many deve loping countries had been unable to participate 
effectively in the work of the Group. His delega tion believed that it was not appropriate to set a 
precise time frame for such an extension.  In par ticular, the requirement in the Singapore Ministerial 
Declaration that the Working Group draw on the work of UNCTAD and other international organizations in order to ensure  adequate consideration of the development dimension meant that 
account should be taken of the fact that UNCTAD's work  in this area would continue at least until the 
next UNCTAD conference in the year 2000.   The representative of the Philippines
, speaking on behalf 
of ASEAN WTO Members , suggested that the Working Group could recommend the General Council  WT/WGTI/M/6 
 Page 29 
 
 
 to allow it to continue to work at leas t in 1999.  The representative of Venezuela  stated that her 
delegation was flexible as regards the length of an  extension of the mandate of the Working Group.  
The representative of Cuba  favoured an extension for as long as necessary for the Working Group to 
complete its examination of the issues that had been raised.   
102. The need for future work of the Working Group following an extension of its mandate by the 
General Council to be more focused on specifi c themes was emphasized by the representatives of 
Japan , Korea , the European Community , Switzerland , Mexico , Hungary , Peru , Costa Rica , Brazil , the 
United States , Canada , New Zealand  and Argentina .  In this connection, Item IV of the Checklist, 
investment incentives and the relationship of nationa l industrial policy to international investment 
rules were mentioned as specific subjects warranting further attention.  It was stressed by many of 
these representatives that, while fu ture work should be more focused, there should be sufficient 
flexibility to enable Memb ers to raise issues of interest to them. The representative of Venezuela  
agreed with the need to concentrat e future work on specific issues but considered that this could be 
decided only once the General Council had decide d to extend the mandate of the Group. The 
representatives of India , Pakistan  and the Philippines  expressed disagreement with the suggestion that 
the Working Group should attempt to identify particular  issues on which future work should focus.  In 
view of the multifaceted nature of the subject de alt with by the Group and the differences between 
Members as regards the aspects in which they were particularly interested,  it was highly unrealistic to 
expect the Working Group to be able to reach ag reement on this.  Future work should therefore 
continue to be based on the Checklist of Issues Sugg ested for Study.  Given the Member-driven nature 
of the process in the Working Group, a focus on specific issues would arise naturally from the 
interventions and contributions made by Members.  The representatives of Canada  and New Zealand  
indicated that they saw merit in the suggestion that  it was best to let the fo cus of future work be 
determined by the interventions a nd contributions from Members.  
103. A number of delegations made further comments during an informal session of the meeting.  
104. Following the resumption of the formal session of the meeting, the Chairman  stated that there 
appeared to be agreement that the Secretariat would be asked to prepare a draft descriptive part of the 
report to be submitted to the General Council that would describe the substance of the work done in 
the Working Group and be based on the records of th e meetings.  It was understood that this part 
would be factual, descriptive, bala nced and non-prejudicial, that it would reflect the views expressed 
by Members and that it would not attempt to highlight areas of agreement or disagreement. The Working Group would revert to the issue of the reco mmendations to be incorporated in the report at 
its meeting in November.  While there appeared to be broad support for a recommendation regarding 
an extension of the mandate of the Working Group, the duration of such an extension and the work to 
be done during that period required further discussion.  
Arrangements  for the  next meeting  
105. The Chairman
 stated that the next meeting of the Working Group was scheduled for 23 and 
24 November.  In the light of concern expressed by  some delegations about the overlap of this 
meeting with an informal meeting of the General Council,  he stated that he would request the 
Secretariat to consider the possibility of changing the date of this meeting.2  
 
__________ 
  
                                                     
 
2 Members have subsequently been informed th at the next meeting will take place on 25 and 
26 November 1998.