RESTRICTED
WORLD TRADE WT/WGTI/W/4
7August 1997
ORGANIZATION(97-3338)
Original: English Working Group ontheRelationship
between Trade andInvestment
COMMUNICATION FROM THE OECD
Reproduced herewith isinformation presented bytherepresentative oftheOECD atthemeeting
oftheWorking Group of2and3June1997 under theagenda item"Existing International Activities
andInitiatives".WT/WGTI/W/4
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I. INTRODUCTION
1. Trade andinvestment havebeenattheheart oftheOECD ’sactivities since itwascreated
in1961. OneoftheOrganisation ’smain aimsis"tocontribute totheexpansion ofworld trade on
amultilateral andnon-discriminatory basis". Inpursuit ofthisobjective, OECD members willmake
efforts "toreduce orabolish obstacles totheexchange ofgoods andservices andmaintain andextend
theliberalisationofcapitalmovements".Theseundertakings,whicharecontainedintheOECDfounding
Convention, reflect theOrganisation ’sbasiccommitment tothefreeflowoftradeandcapital, including
investment, which areviewed ascentral totheachievement ofsustainable growth, employment and
development inmember countries andintheworld economy.
2. Cross-border trade andinvestment activities aredistinct economic phenomena withdifferent
characteristics andeffects, andareusually subject todifferent governmental regulations driven by
different policy motives. Consequently, thetwosubjects havetraditionally beentreated separately
inOECD aselsewhere. Increasingly, however, trade andinvestment areviewed asclosely related,
eachplaying anessential roleintheprocess ofinternational integration andglobalization. Bothare
vehicles fortheachievement ofeconomies ofscale andexpanding markets forenterprises, broader
choice andlower costs forconsumers andthetransmission ofmodern technology andefficient
management practices essential toeconomic efficiency anddevelopment.
3. Matters relating tomarket presence ormarket access -thesetofconditions governing theability
offirms toestablish andoperate inforeign markets -have come toassume acentral rolein
interpenetration ofmarkets brought about bythelastdecade surge incross-border activity. Inthe
process, tradeandinvestment havecome todisplay increasing complementarity. Internationally active
firms, indeed, view trade andinvestment ascomplementary means forcarrying outcomprehensive
global production activities, rather thanasalternative strategies forpenetrating markets. Inshort, they
viewtrade andinvestment asflipsides ofthesame market access coin.
4. Thework ofOECD inthefieldoftrade policy iswellknown totheWTO. Thefollowing
presentationofOECDactivitiesthushighlightsinvestmentquestions.Itdoeshoweverincludediscussion
ofbroader issues suchasglobalization, aswellasmore specific issues, including employment and
theenvironment, which areimportant forbothinternational trade andinvestment.
5. Some ofthese activities arebased onformal instruments, sometimes legally binding butmore
often intheform ofapolitical commitment withfollow-up procedures toensure transparency and
encourage compliance. These "rules ofthegame" areaninherent partoftheOECD andadherence
tothem isanobligation ofmembership. They havebeendeveloped inareas where consensus could
befound among OECD countries tocarry international cooperation astepfurther thanwaspossible
inwider international fora.
II. ANALYTICAL WORK AND POLICY DIALOGUE
6. Considerable analytical work isundertaken insupport ofthelegalinstruments oninvestment,
including policy reviews ofeachmember country toassess theextent ofcompliance andencourage
further liberalization. Inaddition, independent analysis isundertaken indifferent parts ofthe
Organisation. Thisanalysis forms thebasisofpolicy dialogue through committee meetings attended
byofficials frommember governments and,increasingly, "roundtables" involving representatives of
theprivate sector, andseminars andworkshops forpolicy makers from member andnon-member
economies especially from Asia, Latin America andCentral andEastern Europe.WT/WGTI/W/4
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A. Globalization
7. Attheannual meeting oftheOECD Council atMinisterial levelon26-27 May1997, Ministers
underlined that"globalisation offers arealopportunity toimprove living standards intheirowncountries
andtoallow allcountries toparticipate insustainable world development" andthat"thechallenge for
governments istopursue policies whereby thebenefits ofglobalization arefullyrealized andwidely
shared byallgroups ofsociety".
8. Anewstudy Towards aNewGlobal Ageoutlines avision fortheyear2020 which, provided
therightpolicies arefollowed, promises alarge increase inprosperity andwelfare across theworld
andtheprogressive integration ofdeveloping andtransition economies intotheglobal economy. As
partofthefollow-up tothis"linkages" study, theEconomics Department willprepare anextensive
review oftheeffects ofinward direct investment oneconomic performance, including trade, andprepare
twopossible scenarios fortheyear2020.
9. Foranumber ofyears, analytical work anddiscussions havetaken place intheOECD Trade
Committee onthe"new" dimensions ofmarket access arising inaworld ofdeepening economic
integration. Thiswork hasemphasized theadvantages tobederived from approaching theissues of
market access inabroad manner, encompassing thecontinuum oftrade, investment, competition and
regulatory policy domains. Greater market access could beachieved byprogressively rolling back,
inacoordinated way,arange ofgovernment measures andprivate practices thatimpair theefficient
functioning ofmarkets andthatrestrict theopenness ofnational markets toglobal competition.
10. TheIndustryCommitteeisundertakingacross-sectoralanalysisofglobalizationandthechanging
nature ofthefirm, focusing onintangible assets. Thiswork willexploit available statistical dataon
theactivities offoreign-owned andcontrolled firms. Itwilldeepen analysis developed inamajor study
onGlobalisation ofIndustry: Overview andSector reports (1996) andwork onSMEs, published in
Globalisation andSmall andMedium Enterprises (1996). Inaddition, adatabase onactivities offoreign
affiliates hasbeendeveloped covering production, employment, investment, imports andexports, R&D
expenditures inthemanufacturing sector. Firstpublication isexpected byfallof1997. Thedatabase
iscurrently limited toinward investment inOECD countries, butwillbeextended tooutward investment
aswell. Aproposal todevelop a"Manual" fortheconstruction ofGlobalization Indicators iscurrently
being examined.
11. Areport onGlobalisation andtheEnvironment ,submitted toMinisters attheirmostrecent
meeting andnowpublished, provides athorough assessment oftherelationships between globalization
andenvironmental policies, including pollution prevention andcontrol andthesustainable useofnatural
resources. Thereport wasdesigned todeepen understanding ofthelinkages between environmental
policiesandstructuralissues,includingcompetitiveness,employment,investment,tradeandtechnology,
andoftheextent towhich policy developments inthese areas promote theinternationalization of
environmental costs. More detailed background material isbeing compiled forpublication shortly.
B. Trade andInvestment
12. Inaddressing policy linkages onthetrade-investment front, recent Trade Committee work has
focused onanumber ofcoreissues. These include analysis of:
(a) thereasons fortheincreasingly complementary relationship between trade andinvestment
(e.g.evolving patterns ofintra-industry trade andspecialization; functional requirements of
internationally-active firms; thegrowth ofservices trade; thenewprominence ofdeveloping
countries ashosts andFDI-originating countries; regionalism);WT/WGTI/W/4
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(b) thetreatment ofinvestment-related matters intheMarrakesh Agreement (e.g.GATS, TRIMs,
TRIPS, GPA, SCM andDSU);
(c) differing rule-making responses andnegotiating approaches tothetrade-investment interface
(e.g.NAFTA, APEC, European Energy Treaty);
(d) theinterface between investment andcompetition policy; and
(e) thenature,incidenceandmarketaccess-impairingeffectsofinvestment-relatedmeasuresaffecting
trade inservices.
13. TheIndustry Committee hasstudied thevarious linksbetween foreign direct investment and
trade andtested hypotheses empirically using datafrom France, theUnited States andJapan. The
studies confirm thattradeandinvestment areoftenclosely linked andrarely puresubstitutes, intra-firm
tradebeing veryimportant. Further work willdepend ontheavailability ofsatisfactory dataforother
OECD countries.
14. TheCommittee onInternational Investment andMultinational Enterprises (CIME) conducted
astudy on"transplants" exploring thedifferent forms offoreign direct investment andtheimportance
oflinkages tothehosteconomy.
15. AttheMay1997Ministerial Meeting, Ministers called forafocused, multidisciplinary study
ofthebenefits oftrade andinvestment liberalization.
C. Policy Competition forForeign Direct Investment
16. TheDevelopment Centre iscarrying outresearch toassess thechanging degree orintensity,
theeconomic effects andthepolicy implications ofintergovernmental competition toattract direct
investment. Theresearch project, entitled Policy Competition andForeign Direct Investment, looks
atbothincentives-based andrules-based competition bynational andsub-national governments -the
latter, including state, provincial andlocalgovernments, areoften themore active players. Thestudy
includes several countries from Asia, Latin America andtheCaribbean, aswellasCanada, Europe
andtheUnited States.
17. TheOECD Industry Committee ’sWorking Party onPublic Support toIndustry isincharge
ofadata-reportingprojectcoveringdirectandindirectmeansofpublicsupporttomanufacturingindustry.
Thedatabase contains quantitative andqualitative information onapproximately 1,500 support
programmes inOECD member countries, theSlovak Republic andatthelevel oftheCommission
oftheEuropean Union. Themethodology applied inthisproject hasbeendocumented intheOECD
publication Industrial Subsidies: AReporting Manual ,Paris 1995. Theanalytical report onthelatest
datacollection exercise fortheperiod from 1989 to1993 isalsoavailable (OCDE/GD(96)82).
18. Theeffect oftaxincentives oninvestment decisions hasbeentheobject ofanalysis bythe
Committee onFiscal Affairs, andpolicy dialogue witheconomies intransition fromCentral andEastern
Europe andtheemerging economies ofAsiaandLatin America. Reports havebeenpublished.
19. Mobilizing finance fordevelopment isacentral element oftheDevelopment Assistance
Committee ’s"partnerships strategy". Adevelopment finance agenda seeks tomobilize andusein
effective andsustainable ways resources from allsources, including FDI. Inaddition, theDAC’s
Orientations forDevelopment Co-operation inSupport ofPrivate Sector Development (1995) emphasize
theimportance ofenterprise development andattracting FDI,indicating where support fromaiddonorsWT/WGTI/W/4
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ismore appropriate. TheDAC isreviewing experiences ofdonor andpartner countries withthese
Orientations inorder toidentify andpromote "best practices".
D. Trade, Investment andEmployment
20. Apreliminary assessment oftheeffects onemployment oftrade andinvestment wasmade in
theJobs Study (1994). Inthesame year, theCIME heldaroundtable discussion, including
representatives ofbothbusiness andlabour, toconsider thequantitative andqualitative implications
ofinward andoutward flows ofdirect investment. Theproceedings were published inareport on
FDIandEmployment (1995).
21. AreportonTrade,EmploymentandLabourStandards(1996)providedinsightsintothecomplex
interrelationships involved andprovided thebasis fordialogue withnon-member countries.
22. More recent analysis examines thepossible effects onemployment ofunskilled workers of
expandingtradebetweenOECDcountriesandemergingmarketeconomies.Theresultswillbepublished
inthenextissue ofEmployment Outlook (July 1997).
E. Foreign Direct Investment: Policies, Trends andStatistics
23. Acomprehensive survey ofpolicies towards FDIwasconcluded in1992andpublished under
thetitleInternational Direct Investment: Policies andTrends inthe1980s .Since then,policy reviews
havebeenconducted country bycountry bytheCIME meeting jointly withtheCommittee onCapital
Movements andInvisible Transactions (CMIT) which isresponsible forimplementing theCodes of
Liberalisation. These reviews result inpolicy recommendations tothegovernments concerned and
reports arepublished. Similar reviews havebeenconducted onArgentina andChile which havenow
adhered tothe1976Declaration ofInternational Investment andMultinational Enterprises andbecome
observers totheCIME.
24. Infurther work involving non-member countries, aproject hasbeenlaunched toanalyse the
roleofforeign direct investment indevelopment. Theanalysis willbebased oncasestudies from
thetwomost important regions forinward investment outside theOECD area: Latin America and
Asia. Thestudy willalsoinclude adiscussion ofthetreatment offoreign investment within Asiaand
MERCOSUR andoftheeffect ofregional integration onFDIwithin andintoeachregion.
25. Recent trends inflows andstocks offoreign direct investment (FDI) arereviewed bytheCIME
andpublished annually intheJuneissueofFinancial Market Trends. Analysis isbased ondatareported
totheOECD andEurostat andpublished byOECD inanannual FDIStatistics Yearbook. TheOECD
Benchmark Definition ofFDI(3rdEdition), which iscompatible withtheIMFBalance ofPayments
Manual (Fifth Edition), provides abasis forpromoting international consistency intherecording of
FDIdataandapractical guide tostatistical compilers. Thedegree ofcompliance iscurrently being
assessed inajointIMF/OECD study.
F. Investment Activities withNon-Member Countries
26. Avarietyofactivitieshasbeendevelopedtopromotedialogueoninvestmentissueswithemerging
market economies andtoassist economies intransition todevelop afavourable investment climate:
- regular workshops havebeenheldwiththeemerging economies ofAsiaandLatin
America, withincreasing focus inrecent years onmultilateral rules ofthegame;WT/WGTI/W/4
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- anAdvisory Group onInvestment (AGI) hasoperated since1992asaforum forregular
exchanges ofviews andexperience among FDIpolicy makers intransition economies,
OECD countries andtheprivate sector. Topics covered include theroleofFDIin
theservice sector, small andmedium-sized enterprises, regional integration and
investment incentives;
- aBaltic Rim Economic Forum reviews trade andinvestment issues (including
competition, accounting andfinancial markets) ofinterest totheBaltic States and
neighbouring provinces ofRussia;
- theOECD provides support totheannual meetings oftheMinisters ofIndustry and
Trade oftheGroup ofSeven andreforming countries ofCentral andEastern Europe;
- "Investment Guides" providing comprehensive andobjective information oninvestment
conditions havebeenprepared incollaboration withtheauthorities ofseveral countries,
international organizations (UNIDO) andtheInternational Chamber ofCommerce;
- investment legislation isperiodically reviewed byCIME expert groups attherequest
oftheauthorities oftheRussian Federation andtheUkraine;
- investmentlegislation,investmentpromotionandothersubjectsaredealtwithincourses
offered attheIstanbul Center forPrivate Sector Development.
III. LEGAL INSTRUMENTS
27. Aframework fortheliberalization ofcross-border investment flows wasestablished in1961
when theCode ofLiberalisation ofCapital Movements came intobeing, buttheinitial coverage of
theCode wasseverely limited covering primarily therepatriation offinancial assets andtheproceeds
ofliquidation ofdirect investments. In1964, amajor reform brought within theCode disciplines a
broad range ofinternational capital movements, including boththetransfer offunds andunderlying
capital transactions, buttwofurther amendments wererequired tocomplete thecoverage thatapplies
today: in1984itwasagreed toinclude theprinciple ofnational treatment forforeign direct investment
andsince 1992 allshort-term capital movements havebeencovered aswell.
28. Theprincipleofnationaltreatmentforestablishedenterprisesunderforeignownershiporcontrol
fallswithin the1976Declaration onInternational Investment andMultinational Enterprises, asdothe
Guidelines forMultinational Enterprises.
A. Draft Convention ontheProtection ofPrivate Property
29. TheDraft Convention, which waspublished initscurrent formin1967, differs fromtheother
OECD investment instruments inthatithasnofollow-up procedures. TheDraft Convention hasserved
widely asamodel forbilateral investment treaties.
B. Declaration andDecisions onInternational Investment andMultinational Enterprises
30. TheDeclaration onInternational Investment andMultinational Enterprises isprobably themost
wellknownoftheOECDinvestmentinstruments.Unchangedsinceitsadoptionin1976,theDeclaration
contains fourdistinct elements woven intoabalanced overall package ofinstruments designed toaddress
keyissues forinternational cooperation. TheDeclaration isapolitical undertaking, supported bylegally
binding Decisions oftheOECD Council thatprovide active follow-up procedures covering notification,
policy monitoring, review andconsultation. Follow-up procedures aresetoutinCouncil Decisions.WT/WGTI/W/4
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31. Thefourelements oftheDeclaration areasfollows:
- aNational Treatment Instrument providing thatOECD members should treat
foreign-controlled enterprises operating intheirterritories nolessfavourably than
domestic enterprises inlikesituations;
- Guidelines forMultinational Enterprises which establish voluntary standards ofconduct
representing thecollective expectations ofOECD governments astothebehaviour of
suchenterprises;
- aninstrument onInvestment Incentives andDisincentives thatencourages transparency
andprovides forconsultation andreview;
- aninstrumentonConflictingRequirementsdesignedtoavoidorminimizetheimposition
byOECD governments ofconflicting requirements onmultinational enterprises and
toprovide aforum forconsultation.
C. Codes ofLiberalisation ofCapital Movements andCurrent Invisible Operations
32. TheCodes ofLiberalisation, which arelegally binding Decisions oftheOECD, promote the
progressive liberalization ofcapital movements andcurrent account transactions. They cover most
international transactions other thantrade ingoods. Asearly as1961, when theCodes wereadopted
atthesame timeastheOECD came intobeing, specific provisions were included oninward direct
investment, including thecreation ofnewenterprises; expansion ofexisting enterprises; mergers,
take-oversandparticipationindomesticenterprisesbynon-residents.However,itwasonlyinApril1984
thatagreement wasreached tomake theseprovisions fullyeffective byrequiring thatmember countries
apply thenational treatment principle when considering applications forlicences, orotherauthorizations
needed forconducting business inthecountry concerned.
33. Although ofdifferent legalstanding, theCodes ofLiberalisation andtheNational Treatment
Instrument form together acoherent setofinstruments topromote anopenclimate forinternational
investment, freeofgovernmental barriers. They apply formally onlytotheOECD area. However,
theCodes recommend thatliberalization beextended toallmembers oftheInternational Monetary
Fund. TheEuropean Community (1991) hasjoined intheDeclaration ofOECD member governments
thatcontains thenational treatment principle. In1997, Argentina andChile adhered totheDeclaration
initsentirety andtoitsfollow-up procedures aswell.
34. Taken together, theinstruments provide for:
- national treatment, bothbefore andafterestablishment;
- repatriation ofprofits, dividends, rents, andtheproceeds ofliquidated investments;
- transparency ofregulations;
- amechanism ofconsultation todealwithcomplaints; and
- peerreview topromote rollback ofremaining restrictions.
These provisions donotinterfere withtheright ofmembers toprotect public order inthenational
security, butanysuchmeasures aresubject toscrutiny bythecompetent OECD Committees whichWT/WGTI/W/4
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provide ongoing policy monitoring andconduct thepeerreviews ofallmeasures affecting foreign direct
investment.
D. Transfer Pricing
35. Transfer pricing guidelines havebeendeveloped tohelpnational taxauthorities settheright
price fortheintra-firm transactions ofmultinational enterprises. TheGuidelines apply togoods and
services, trade, financial transactions andtransfers ofintangible assets (know-how). TheGuidelines
areregularly updated andtheirapplication subject tomonitoring under theCommittee onFiscal Affairs.
E. Bribery inInternational Business
36. In1994theOECDadoptedaRecommendationwhichcallsonmembercountriestotakeeffective
measures todeter, prevent andcombat thebribery offoreign public officials inconnection with
international business transactions. In1996, member countries agreed totakeaction toeliminate the
taxdeductibility ofsuchbribes. InMay1997, members agreed toanewRecommendation which
contains morespecific commitments inthefields ofcriminalization ofbribery offoreign public officials,
accounting, andpublic procurement including adecision tonegotiate aconvention oncriminalizing
bribery offoreign public officials before theendof1997. TheRecommendation alsocontains
strengthenedfollow-upprocedurestoreviewmembers’performance,andcooperationwithnon-members,
theprivate sector andother organizations.
IV. MULTILATERAL AGREEMENT ONINVESTMENT (MAI)
37. Thenegotiations onaMultilateral Agreement onInvestment (theMAI) werelaunched atthe
OECD Ministerial Meeting ofMay1995. TheMAIistobeafree-standing international treaty open
toallOECDmembers,theEuropeanCommunitiesandnon-OECDcountries.Theaimofthenegotiations
istoprovide abroad multilateral framework forinternational investment withhighstandards forthe
liberalization ofinvestment regimes andinvestment protection andwitheffective dispute settlement
procedures.
38. Inparticular, theaimofthenegotiations istoachieve anagreement, withasatisfactory scope
andbalance ofcommitments, thatwould:
(a) sethighstandards forthetreatment andprotection ofinvestment;
(b) gobeyond existing commitments toachieve ahighstandard ofliberalization covering both
theestablishment andpost-establishment phase withbroad obligations onnational treatment,
standstill, roll-back, non-discrimination/MFN, andtransparency, andapply disciplines toareas
ofliberalization notsatisfactorily covered bythepresent OECD instruments;
(c) belegally binding andcontain provisions regarding itsenforcement;
(d) apply these commitments toallparties totheMAI andtoalllevels ofgovernment;
(e) dealwithmeasures taken inthecontext ofregional economic integration organizations;
(f) encourage conciliation andprovide foreffective resolution ofdisputes, taking account ofexisting
mechanisms;WT/WGTI/W/4
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(g) takeaccount ofmember countries ’international commitments withaviewtoavoiding conflicts
withagreements intheWTO suchasGATS, TRIMs andTRIPS; andwithtaxagreements;
andsimilarly seektoavoid conflicts withinternationally accepted principles oftaxation.
39. TheMAInegotiations areaproduct ofseveral years ofanalytical study anddiscussions, and
builduponestablishedcooperationamongOECDcountriescentredontheOECDCodesofLiberalisation
andthe1976 Declaration andDecisions onInternational Investment andMultinational Enterprises.
Theyalsorespond toadesire topulltogether under asingle instrument theinvestment disciplines found
inOECD instruments, bilateral investment treaties andregional agreements (such asNAFTA).
40. Theaimistocreate amore favourable investment environment forenterprises confronted with
thechallenge ofglobalization andthereby encourage investment flows. Strong international ruleswill
offernewopportunities forinvestors andprevent back-sliding onliberalization already achieved. They
willfavour economic growth andefficiency byreducing distortions toinvestment decisions. They
willalsoprovide aneffective means ofresolving disputes thatmayarisebetween investors andhost
governments andhelptoaddress potential frictions between participating governments.
41. Major progress hasbeenmade. Texthasbeendrafted onmost elements oftheMAI and
indications arethattheinitial ambition ofabroad, comprehensive andhighstandards agreement can
beachieved. However, thescope andcomplexity oftheagreement hasraised technical challenges
andimportant policy considerations. Final agreement willdepend onachieving asatisfactory scope
andbalance ofcommitment among thenegotiating parties, including agreement onthetext,exceptions
andsafeguards, andcountry-specific reservations. Negotiations aimed atachieving ahighlevel of
liberalization haveonlyrecently begun.
42. Inthesecircumstances,OECDMinistersdecidedattheirannualmeetinginMay1997tocontinue
thenegotiations beyond theinitial target date. Atthesame time, theyexpressed theirdetermination
toconclude theagreement intimeforthe1998Ministerial Meeting. (TheNegotiating Group ’sReport
toMinisters andtheMinisterial Statement ontheMAI areattached.)
43. Afeature oftheMAIisthatitwillbeopentoaccession bynon-OECD member countries that
arewilling andabletomeetitsobligations. With thisinmind, extensive efforts havebeenmade to
inform non-members andtoprovide first-hand opportunities fordiscussion asthenegotiations have
progressed. Regular briefings havebeenprovided toEmbassy representatives inParis andregional
conferences havebeenheldinAsia, Latin America andEastern Europe; aconference forAfrican
countries isplanned forthefallof1997. Itisnowintended topursue anintensified dialogue with
non-member countries particularly those interested injoining theMAI.
44. Throughout thenegotiations, carehasbeentaken toensure thattheMAIwould becompatible
withother international agreements, including theIMFandtheWTO agreements, anditisagreed that
theMAIshould notcreate obligations onParties thatwould conflict withtheirobligations under those
agreements. Indeed, theMAIisdesigned tobecomplementary totheWTO agreements andthusto
strengthen themultilateral system. Thestatus oftheWTO Secretariat asaregular observer atMAI
meetings reflects thewishes ofMAI negotiators inthisregard.WT/WGTI/W/4
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OECD DOCUMENTS AND PUBLICATIONS1
1. Legal Instruments
Introduction totheOECD Codes ofLiberalisation ofCapital Movements andCurrent Invisible
Operations (1995)
OECD Instruments forPromoting theLiberalisation ofForeign Direct Investment
OCDE/GD(95)36
National Treatment forForeign-Controlled Enterprises (1993)
Minimizing Conflicting Requirements
Approaches of"Moderation andRestraint" (1987)
TheOECD Guidelines forMultinational Enterprises
OCDE/GD(97)40
Revised Recommendation onBribery inInternational Business Transactions (1997)
(available ontheInternet)
Transfer Pricing Guidelines forMultinational Enterprises andTaxAdministration (1995)
2. Foreign Direct Investment Policies, Trends andStatistics
International Direct Investment -Policies andTrends inthe1980s (1992)
Financial Market Trends (June issue 1994-97)
International Direct Investment Statistics Yearbook (1996)
OECD Benchmark Definition ofForeign Direct Investment: Third Edition (1996)
3. Foreign Direct Investment Reviews
Argentina (1997), Denmark (1995), Finland (1995), France (1996), Greece (1994),
Ireland (1994), Italy (1994), New Zealand (1993), Norway (1995), Portugal (1994),
Sweden (1993), Switzerland (1996), United States (1995), Chile (forthcoming)
4. Trade andInvestment
Market Access After theUruguay Round, Investment, Competition
andTechnology Perspectives (1996)
Foreign Direct Investment, Trade andEmployment (1995)
1OECDdocumentsandpublicationscanbeorderedfromOECD/MailOrders2rueAndréPascal,75775Paris,
Cedex 16-phone: (33-1) 45248200/fax: (3301) 49104276attheOECD Bookshop, 33rueOctave-Feuillet,
75016 Paris. SeealsoInternet: Compte.PUBSINQ@oecd.orgWT/WGTI/W/4
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Trade andInvestment: Transplants (1994)
Trade, Employment andLabour Standards (1996)
Trade andInvestment Interface (1996) (available ontheInternet)
Globalisation, Trade andCompetition (Article inTheOECD Observer No.201of
August-September)
NewDimensions ofMarket Access inaGlobalising World Economy (1995)
Investment andtheFinal ActoftheUruguay Round: APreliminary Stocktaking (1994)
(available ontheInternet)
ThePeformance ofForeign Affiliates inOECD Countries (1994)
5. Globalization
Globalisation ofIndustry: Overview andSector Reports (1996)
Globalisation andSmall andMedium Enterprises (SMEs) (1996)
ThePolicy Challenges ofGlobalisation andRegionalisation, Policy Brief No.11(1996)
TheJobsStudy (1995)
Economic Globalisation andtheEnvironment (forthcoming )
Private Sector Development: AGuide toDonor Support (1995)
Support ofPrivate Sector Development (1995)
6. Seminars andWorkshops withNon-Member Countries
TowardsMultilateralInvestmentRules,WorkshopheldinWellington,NewZealand,April1995.
Privatisation inAsia, Europe andLatin America ,Workshop heldinSãoPaulo, Brazil,
29-30 March 1994.
OECD Symposium onCorruption andGood Governance, held inParis, France,
13-14 March 1995.
OCDE/GD(96)129
Chile Workshop onTrade Policy foraGlobalising Economy: Ensuring Openness ofMarkets
toGlobal Competition.WT/WGTI/W/4
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7. Advisory Group onInvestment (AGI)
Assessing Investment Opportunities inEconomies inTransition
(Warsaw, Poland -July1993)
Investment inServices inTransition Economies
(Bucharest, Romania -November 1994)
OCDE/GD(95)83
Small Firms asForeign Investors: Case Studies from Transition Economies
(Sofia, Bulgaria -September 1995)
Investment Incentives inTransition Economies
(Bled, Slovenia -June1996)
OCDE/GD(97)101 -Forthcoming
8. Investment Guides
Belarus (1994), Bulgaria (1996), Estonia (1996), Russian Federation (1996), Ukraine (1993
-tobeupdated ),Uzbekistan (1996)
(Guides areinpreparation onLatvia, Lithuania, theFYROM, Mongolia, Ukraine and
Kazakhstan.)WT/WGTI/W/4
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MULTILATERAL AGREEMENT ONINVESTMENT2
Ministerial Statement, May1997
SG/COM/NEWS(97)45
Progress Reports bytheNegotiating Group
May1996
OCDE/GD(96)78
May1997
OCDE/GD(97)82
Report bytheOECD Committee onInternational Investment andMultinational Enterprises andthe
Committee onCapital Movements andInvisible Transactions (CMIT)
OCDE/GD(95)65
Proceedings from Workshops
Conference on"Investment Policies inLatin America andMultilateral Rules onInvestment ",
16-18 July1996, RiodeJaneiro, Brazil
OCDE/GD(96)157
Second Workshop onMultilateral Rules onInvestment ,Brasilia, Brazil, 4-5February 1997
OCDE/GD(97)38
MAI: State ofPlay inApril 1997, Selected Presentations from theSymposium onthe
Multilateral Agreement onInvestment ,Seoul, Korea, 3-4April 1997(available ontheInternet)
Frequently Asked Questions andAnswers
2Allthismaterial isavailable onInternet (OECD Internet Page -http://www.oecd.org/daf/cmis/mai.htm)WT/WGTI/W/4
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Ministerial Statement onthe
Multilateral Agreement onInvestment
(OECD Council atMinisterial level, 26May1997)
Ministers areconvinced oftheimportance ofinternational investment andtheneedforfair,transparent
andpredictablerulesforinvestorsandinvestments.Theywelcomethemajorprogressmadeindeveloping
acomprehensive Multilateral Agreement onInvestment (MAI) withhighstandards fortheliberalisation
ofinvestment regimes andinvestment protection andwitheffective dispute settlement procedures. They
recall thattheMAI willbeafree-standing international treaty open toallOECD countries andthe
European Community, andtonon-OECD countries.
Ministers express theirdetermination:
1. toresolve outstanding questions andachieve ahighstandard ofliberalisation andinvestment
protection;
2. toachieve asatisfactory scope andbalance ofcommitments;
3. topursueintensifieddialoguewithnon-Membercountries,particularlythoseinterestedinjoining
theMAI;
4. toconclude theAgreement intimeforthe1998 Ministerial Meeting.WT/WGTI/W/4
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Report bythe
MAI Negotiating Group
May1997
Thisprogress report waspresented bytheMAI Negotiating Group totheOECD Council meeting
atMinisterial levelinMay1997.
Summary
Since thelaunching ofnegotiations in1995, major progress hasbeenmade indeveloping aMultilateral
Agreement onInvestment (MAI) which would provide acomprehensive framework forinvestment
withhighstandards ofliberalisation andinvestment protection, andwitheffective dispute settlement.
More work, however, isneeded torealise thegoals setbyMinisters.
Texthasbeendrafted onmostelements oftheMAIbutfurther refinement isneeded andpolicy choices
havestilltobemade onoutstanding issues. Substantial progress hasbeenmade inproviding forabroad
definition ofinvestor andinvestment, fairandnon-discriminatory treatment forforeign investors, high
standards ofinvestment protection, andaneffective dispute settlement mechanism. Newareas not
satisfactorily covered byexisting OECD instruments willcome under MAI disciplines.
Final agreement willdepend onachieving asatisfactory scope andbalance ofcommitments among
thenegotiating parties, including agreement onthetext,exceptions andsafeguards, andcountry specific
reservations. Negotiators areaware thatamajor effort willberequired toensure successful conclusion
oftheMAI.
TheMAIistobeafreestanding treaty, opentoaccession bynon-Members whoarewilling andable
tomeet itsobligations. Considerable effort hasbeenmade toinform non-Members andtoprovide
first-hand opportunities fordiscussions astheMAInegotiations haveprogressed. Activities included
regular briefings ofembassy representatives inParis, andregional meetings forLatin America, Asia,
andBaltic countries.
Theambitious andcomplex nature oftheMAI raises technical challenges andimportant policy
considerations. There areoutstanding issues which might onlyberesolved inthefinal stage of
negotiations butforwhich solutions arealready being explored. Negotiations aimed atachieving a
highlevelofliberalisation andinvestment protection needtobepursued.
State ofplay: results achieved andfurther work
Scope oftheMAI
TheMAI istobeacomprehensive agreement covering allforms ofinvestment coming from MAI
investors, including theestablishment ofenterprises andtheactivities ofestablished foreign-owned
orcontrolled enterprises. Itsaimistoapply MAI disciplines toallsectors andatalllevels of
government. Itextends beyond traditional foreign direct investment toencompass portfolio investment
andintangible assets. Further work isfocusing onintellectual property rights, indirect investment,
concessions, public debtandrealestate.WT/WGTI/W/4
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Treatment ofinvestors andinvestments
Broad obligations onnational treatment andmostfavoured nation treatment (MFN) arecentral elements
oftheMAI. There isanunderstanding thatdejureanddefactodiscrimination against foreign investors
andtheirinvestments arecovered, although more work isneeded ondefactodiscrimination. National
treatment andMFN apply toallinvestment phases withscope forlodging country specific reservations.
Texts arebeing considered concerning theentry, stayandwork ofinvestors andkeypersonnel, the
participation offoreign investors inprivatisation activities, investment incentives, aprohibition against
certain performance requirements imposed oninvestors, andaprohibition ofnationality requirements
forsenior management positions. Delegations arediscussing howtotreatissues relating tomonopolies,
concessions, andstateenterprises.
Theobligations oftheagreement willapply toallinvestments related tofinancial services, including
banking, securities andinsurance activities. Special provisions onfinancial services havebeendrafted
includingaccesstoinformationtransferanddataprocessing.Whetherissuesaddressedintheseprovisions
should bedealtwithhorizontally isstillunder consideration. TheMAIwillallow financial authorities
totakeprudential measures withrespect tofinancial services, including measures toprotect investors
anddepositors ortoprotect theintegrity oftheirfinancial system. There aredifferent views withrespect
toproposals addressing market access issues inthefinancial services sector.
There isagreement thattheMAIwillcontain asingle article dealing withtaxation matters following
theapproach ofageneral "carve-out" oftaxation intheMAI, withsome aspects oftaxation "carved
in". TheMAI willnotinterfere withtheability ofgovernments totakemeasures toprevent tax
avoidance orevasion norwillitconflict withtheprovisions andprocedures ofbilateral taxtreaties.
Thetaxation article willinclude disciplines onexpropriation andtransparency. Whether andtowhat
extent other MAI provisions mayapply totaxation isnotyetresolved.
Concerns havebeenexpressed relating totheprotection andconservation oftheenvironment and
sustainable development. Several approaches toaddress theseconcerns intheMAIarebeing examined,
including aprovision which callsongovernments nottolower standards inaneffort toattract foreign
investment. Delegations indicated thatadditional proposals willbepresented. Similar approaches are
being considered withrespect tolabour standards.
There isaproposal thattheMAIshould include aspecific provision dealing withmeasures taken by
Contracting Parties which aremembers ofregional economic integration organisations. Views differ
onthismatter.
There aredivergent views onhowtoaddress theissueofconflicting jurisdiction. Proposals havebeen
made toincorporate intheMAIprovisions aimed atavoiding conflicting requirements andprohibiting
secondary investment boycotts. Countries areexploring appropriate solutions.
Protection ofinvestors andinvestment
TheMAI aimstoprovide highstandards ofinvestment protection based ontheprinciples enshrined
inbilateral investment treaties. Texts havebeendeveloped onthegeneral treatment ofinvestors and
investments, expropriation, protection from strife, transfer offunds, subrogation andtheprotection
ofexisting investments. Some outstanding questions remain tobesettled.WT/WGTI/W/4
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Dispute settlement
TheMAIwillencourage theresolution ofdisputes through negotiation orconsultation among theParties
concerned. Where investment disputes covered bytheMAI cannot besettled amicably, detailed
procedures have been worked outwhich would allow submission ofthedispute forbinding
investor-to-state orstate-to-state dispute settlement. Different options remain insomecases, inparticular
inthefieldofmultilateral consultations andconcerning thescope ofdispute settlement. Thedispute
settlement textandtheremaining unresolved issues arebeing examined bytheNegotiating Group.
General exceptions andsafeguards
TheMAIwould allow Contracting Parties totakemeasures toprotect theiressential security interests
andthefulfilment oftheirobligations under theUnited Nations Charter concerning themaintenance
ofinternationalpeaceandsecurity.Discussionscontinueonaclausetopreventabuse.Therearedifferent
views whether theMAI should contain ageneral exception forpublic order.
Given thebroad definition ofinvestment, atemporary safeguard provision hasbeendeveloped toallow
dispensation fromcertain disciplines oftheMAIintheevent ofserious balance ofpayments andexternal
financial difficulties orwhere capital movements cause serious difficulties formonetary orexchange
ratepolicies. Recourse tothesafeguard clause would besubject tosurveillance bytheParties Group
andtheIMF. Aprovision isbeing considered tocarve-out transactions carried outbyacentral bank
ormonetary authority inthepursuit ofmonetary orexchange ratepolicies.
Views diverge onhowtoaddress cultural matters specifically intheMAI; different approaches have
beenproposed including ageneral exception forcultural measures orcountry specific reservations.
Country-specific reservations
Atop-down approach intheMAIwould permit non-conforming measures tobemaintained provided
theyarecovered bycountry specific reservations. Alldelegations havenowsubmitted apreliminary
listofspecificreservations.Workiscontinuingtoidentifymechanismstoachievestandstillandrollback.
Relation toother international instruments
Ithasbeenproposed toassociate theOECD Guidelines onMultinational Enterprises withtheMAI
without changing theirlegalstatus asnon-binding recommendations concerning theresponsibilities
ofcorporate citizens. Theproposed textprovides thatallContracting Parties should beinvited to
participate infuture OECD work ontheGuidelines. However, theissueoffollow-up procedures and
other questions remain under consideration.
TheMAI should becompatible withother international agreements, including theIMFandWTO,
andshould notcreate obligations onParties thatconflict withtheirobligations under those agreements.
Implementation andoperation
APreparatory Group comprised ofSignatories totheFinal ActandSignatories totheagreement, will
prepare forratification andundertake other duties specified intheFinal Act.After entry intoforce,
aParties Group willberesponsible fortheoperation oftheagreement. Asageneral rule,decisions
willbetaken byconsensus. Views diverge onwhether adifferent voting ruleisnecessary incertain
cases.WT/WGTI/W/4
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Accession
TheMAIwillbeopentoaccession bynon-OECD Member countries thatarewilling andabletomeet
itsobligations. Negotiators willpursue intensified dialogue withnon-Member countries, particularly
those interested inacceding totheMAI. Non-Member countries willbeabletonegotiate theconditions
oftheiraccession andinparticular theircountry specific reservations.