RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/WGTI/M/21 
28 May 2003 
 (03-2853) 
Working Group on the Relationship  
between Trade and Investment  
 
 
 
REPORT ON THE MEETING HELD ON 14 AND 15 APRIL 2003 
 
Note by the Secretariat  
 
 
1. The Working Group on the Relationship betw een Trade and Investment met on 14 and 
15 April 2003 under the chairmanship of Ambassador de Seixas Corrêa (Brazil). The Working Group 
adopted  the agenda contained in WTO/AIR/2051/Rev.1. 
2. The Chairman  said that the purpose of the meeting was fourfold: (i) to receive an update from 
the Secretariat on recent technical assistance activities, and to hear from Members about their 
individual needs for technical assistance in the coming year; (ii) to invite the Working Group to 
continue its discussion of the subjects set out in pa ragraph 22 of the Doha Mi nisterial Declaration, 
particularly in view of the new written contributio ns from delegations; (iii)  to give the Group an 
opportunity to continue discussion of other issues that had been raised in the course of the Group's 
work so far;  and (iv) to invite delegations to discuss the nature and content of the report to be 
submitted to the General Council before Cancún.  
3. The Chairman  noted that on 17 March an informal meeting had been held, open to all 
delegations, in order to afford Members an opportuni ty to review the organization of the Group's work 
programme for this year. Discussion during that meeting had focused on how best to structure the 
Group's consideration of the issues identified in para graph 22 of the Doha Ministerial Declaration at 
the meetings to be held in 2003. It had appeared from this discussion that it would not be opportune to 
proceed with the issuance of a ch ecklist, as had been suggested at an  earlier stage, or to attempt to 
direct the work of the Group under paragraph 22 to pa rticular issues. The meeting had also considered 
questions relating to technical assistance and to the preparation of the Working Group's report to the 
General Council.  
A. PARAGRAPH 21 OF THE DOHA MINISTERIAL DECLARATION  
4. The representative of the Secretariat  stated that since the report pr ovided by the Secretariat to 
the Working Group at the meeting of Decemb er 2002 the full programme of WTO technical 
assistance activities for 2003 had been agreed upon by  the Members, and that the activities on trade 
and investment were described in document WT/COM TD/W/104/Add.1/Rev.1.  This reflected all of 
the requests that had been made by Members for technical assistance activities on this issue, and the 
aim of the Secretariat was to complete them all in advance of the Cancún Ministerial Conference.  
The Secretariat was on track to do so, but current travel restrictions might mean that some activities would have to be postponed. He then made a co mment of a more general nature on the activities 
called for under paragraph 21 of the Doha Ministerial Declaration.  Over the past year, Members had 
made several valuable suggestions on how WTO and UNCTAD technical assistance activities could 
be improved.  Those suggestions related to impr oving the division of labour between the WTO and 
the UNCTAD Secretariats, to better reflect their r espective areas of experience and expertise;  the 
availability of financing for UNCTAD to provide t echnical assistance in support of the Doha mandate, 
which in the past had not at times been fully secu re;  how other international organizations with 
expertise in this area might contribute, for ex ample in helping developing countries enhance their 
capacity to attract, absorb and benefit from FDI;   and systematically reviewing and evaluating WT/WGTI/M/21 
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technical assistance in this area, to ensure it was meeting Members’ needs. The Secretariat had 
discussed these issues with UNCTAD, and believed th at it was possible to take these suggestions on 
board in future technical assistance activities.  The WTO and UNCTAD Secretariats would like to 
submit a proposal in this regard, it being understood  that this should not be viewed as prejudicing in 
any way the decisions that Members might take in  Cancún. If the WTO were to continue providing 
technical assistance with UNCTAD on trade and invest ment over the longer term, it was necessary  to 
start planning to do so now.  Whether or not that plan would be implemented would, of course, depend on the decisions taken in Cancún.  
5. The representative of UNCTAD
 informed the Working Group of  various technical assistance 
activities that had recently taken place pursuant to the joint UNCTAD-WTO technical assistance 
programme on investment.  First, regional seminars had been held in January in Djibouti for French-
speaking African countries and in February in Bo tswana for English-speaking African countries. 
Some 70 government officials from 34 countries had participated in these events.  A regional seminar for Caribbean countries would be held at the end of  April in Jamaica. Second, national seminars had 
been organized in Tunisia in December 2002, in Morocco in March 2003, and in Argentina and 
Colombia in early April 2003.  Altogether, more than 100 senior government officials had 
participated in these seminars. National seminars  would shortly be organized in Mauritania and 
Malaysia. Third, a Geneva-based workshop had been organised at the beginning of April for English-
speaking Member countries. This activity would continue in the summer. Finally, the fifth joint WTO-UNCTAD intensive training course on issues in international investment agreements had recently been held in Pretoria, South Africa. Future trai ning courses were planned for Francophone Africa, the 
Caribbean, Latin America and Asia.  
6. The representative of UNCTAD then noted th at the UNCTAD Commission on Investment, 
Technology and Related Financia l Issues had held its seventh session in January 2003.  The 
Commission had recognized and commended the cont ributions of the UNCTAD Secretariat in the 
field of investment policy analysis and capacity-build ing. In this regard, it had highlighted the follow-
up to the Doha work programme in the area of  investment and technology and the successful 
cooperation of the UNCTAD Secretariat with the WT O Secretariat.  The Commission had called on 
the Secretariat to continue its post-Doha technical assistance and capacity-building work in the three 
areas covered by paragraph 21 of the Doha Ministerial Declaration.  Stressing the importance of 
continued cooperation with other inte rnational organizations in this context, the Commission had also 
called on the Secretariat to facilitate an ongoing  exchange of informa tion and experiences among 
investment negotiators.  
7. At the Secretariat level, UNCTAD had progressed  in its post-Doha work on policy analysis 
and development. Work on specific policy analysis on issues of relevance to developing countries in 
the post-Doha investment context had been initiate d in autumn 2002, with the commissioning of a 
number of analytical papers, some of which would h opefully be available before the summer.  At the 
same time, work was continuing on the UNCTAD series on Issues in International Investment 
Agreements , with the finalization of the papers on dispute settlement. The World Investment Report  
2003, scheduled for release on 4 September 2003, woul d deal with the issue of the development 
dimension of international investment agreements . Though good progress had been made in respect of 
both the joint UNCTAD-WTO technical assistance ac tivities and the UNCTAD's distinct technical 
assistance programme, an issue requiring greater em phasis was the development of the institutional 
capacity of developing countries to participate in international investment discussions and/or 
negotiations and to attract, and be nefit from, foreign investment.  In this connection, UNCTAD was 
working on the creation of a network of negotiato rs, and together with the WTO Secretariat was 
exploring possible linkages with the World Associa tion of Investment Prom otion Agencies (WAIPA). 
UNCTAD was  also continuing to strengthen its cooperation with civil society.  
8. UNCTAD's overall work programme on capacity-bu ilding in developing countries on issues 
in international investment agreements had recentl y been the subject of an independent external  WT/WGTI/M/21 
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evaluation, the results of which had been presented to the UNCTAD Commission on Investment, Technology and Related Financial Issues in Jan uary 2003. The report of this evaluation had 
emphasized the overall positive and measurable impact  of this work programme and its success in 
achieving its objectives in almost all areas of activ ities. The report had called for a strengthening and 
continuation of UNCTAD's work in this area a nd had made a number of specific recommendations 
concerning the manner in which UNCTAD conducte d this work. While highlighting the positive 
cooperation with the WTO, the evaluator had also st ressed that the issue of international investment 
agreements went beyond the WTO confines and st retched national capacities at both bilateral and 
regional levels, and that the broader need of  Member countries extended beyond the post-Doha 
process. Thus, the evaluator had called for UNCTAD's work in this area to be preserved and strengthened regardless of the outcome of the D oha/Cancún process.  In this latter regard, the 
representative of UNCTAD stressed that UNCTAD's joint activities with the WTO were embedded in 
UNCTAD's  work on international investment agreemen ts in general, the aim of which was to assist 
developing countries and economies in transition to participate as effectively as possible in 
discussions on, and negotiations of, international invest ment agreements at all levels, with a view to 
ensuring that the development dimension was appr opriately addressed in such discussions and/or 
negotiations.  
9. The representative of  Colombia
 thanked the Secretariat for its valuable participation in the 
recent national seminar held in Bogota.  She noted that such events contributed greatly to focusing 
and clarifying the policy debate within countries, thus  enabling ministers to take informed decisions in 
Cancún. 
10. The representative of Morocco  noted that at the request of the Government of Morocco the 
Secretariats of the WTO and UNCTAD had organized  a national seminar on investment at Rabat, on 
19 and 20 March 2003 that had been attended by 30 representatives of various government agencies 
and of the private sector. The contributions by the WTO and UNCTAD experts had focused on the 
presentation of WTO activities in the field of inv estment and an explanation of the seven key 
questions submitted for discussion under the Doha ma ndate. The interest shown in the seminar bore 
witness to Morocco's desire to contribute effectivel y to the ongoing debate within the WTO on the so-
called Singapore issues, including those relating to i nvestment. In this connection, the quality of the 
presentations and of the discussions had made this event a success and had enabled some participants 
to improve their level of information on the s ubject by means of a first-time discussion with 
international experts, while others  were enabled to deepen their u nderstanding of the issues involved 
in the negotiation of a multilateral instrument on i nvestment. The questions raised at the seminar 
concerned, on the one hand, understa nding the nature and parameters of the seven items mandated by 
the Ministers at the Doha Conference, while on the other hand they revealed major concerns regarding 
the development opportunities that might be offere d by a multilateral framework for investment in a 
country like Morocco.  In this connection, he provid ed a summary of the main elements of discussion. 
 
11. With regard to the issue of transparency, while emphasizing that Morocco had no problem 
with fully subscribing to the principle of transpar ency, and that this was a cross-cutting theme which 
was found in the other WTO Agreements, three major po ints were made on this subject: First, up to 
what level should legal texts be published and notified to the WTO?  Was it enough to notify laws or 
should decrees or other regulatory texts also be included? Second, the importance of technical assistance and of the strengthening of developing countries' capacity to discharge transparency 
obligations and the need to include provisions along those lines in any multilateral framework on 
investment. Third, the need for flexibility to fac ilitate provision of the info rmation required, with a 
view to reducing the workload and the attendant co sts for developing countries. Particular attention 
had been paid to the distinction between the pos itive list approach and the negative list approach and 
the room for manoeuvre that remained for countries in  each case.  It  had been argued that, in the case 
of a country like Morocco, the positive list approach  remained the most appropriate as it made it 
possible to select the sectors and activities that woul d be subject to obligations under any agreement, WT/WGTI/M/21 
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thereby to control the liberalization process and, at  the same time, to satisfy the concerns of other 
Members and their requests for liberalization. The General Agreement on Trade in Services was an 
eloquent example in that regard, one which had dem onstrated its relevance in terms of the necessary 
balance between investors' needs and the legitimate concerns of States. A high level of attention had 
been paid to the question of requiring investors to transfer technologies to host countries.  It had been 
pointed out that any agreement on investment shoul d include additional provisions responsive to this 
type of requirement, along the lines of those cont ained in Article 66 of the TRIPS Agreement. 
12. The obligations applicable to investors had been one of the major topics of discussion. An 
agreement did of course, in principle, include obliga tions to be applied by the signatory States and to 
which investors would be required to conform.  However, participants had emphasized that these 
obligations were inadequate in certain cases invol ving negotiation of an agreement, and that 
consideration should be given to the possibility of cl arifying the agreement by means of codes of good 
practice applicable to foreign enterprises. With r espect to anti-competitive practices, the discussion in 
this area had focussed on the position in a possible framework on investment of provisions aimed at 
forestalling the risk of anti-competitive practices such as abuse of a dominant position. In this 
connection, it had been emphasized by the experts that investment and competition were in fact 
interdependent issues and that it was proposed to merge the two working groups responsible for the 
relationship between trade and investment and the interaction between trade and competition policy. 
Participants had held a wide-ranging discussion on th e State/investor dispute settlement mechanism 
found in most bilateral agreements, the way in  which this mechanism was implemented, the 
international arbitration institutions such as the ICSID and UNCITRAL, and the procedural costs.  
Participants had also had the opportunity to evaluate  the differences between State-State and Investor-
State mechanisms and the way in which injury was identified in both cases.  Regarding the links with 
international investment agreements, inasmuch as Morocco was a party to a large number of 
multilateral agreements and was engaged in negotia ting free-trade agreements covering investment, 
the participants had shown particular interest in the interaction between the provisions of a possible 
multilateral investment agreement and those of existi ng bilateral or regional agreements. Particular 
emphasis had been placed on the need for cohe rence between the two types of provision. 
13. By way of conclusion, he reiterated that the se minar had been extremely useful to both public 
and private actors involved at different levels in investment operations.  It had thrown light on the 
nature of the multilateral discussions on the theme of investment, the desirability of closer multilateral 
cooperation in this field and the position that coul d be taken by Morocco in  the current discussions 
and possibly in the future negotiations.  The se minar had also provided an opportunity for the 
Moroccan participants to exchange views on the ad vantages of an international legal framework for 
national investment policies and the legal instrume nts capable of supplying such a framework while 
satisfying national development objectives. It shoul d be emphasized that, while Morocco upheld the 
legal principles governing international economic an d trade relations, and had long ago opted for the 
opening up and liberalization of its economy, it wished  to continue working for the establishment of a 
multilateral environment based on balanced rules, wh ich benefited all countries regardless of the size 
of their economies.  Morocco considered that th e seminar had been extremely instructive and it 
encouraged the WTO Secretariat to continue pursui ng this approach in order to enable officials, 
executives and negotiators in developing countries to strengthen their capacities in relation to 
frequently complex questions such as investme nt. Taking into account this preliminary and 
completely successful experiment, his delegation would like, under the next WTO technical co-
operation plan, to host a regional seminar for French-speaking African countries on this subject. 
14. The representative of  Argentina
 noted that the recent WTO-UNCTAD national seminar on 
investment held in Buenos Aires on 10-11 Ap ril 2003 was a success and represented a further 
valuable contribution to his country ’s understanding of the key issues.  Approximately forty officials 
and representatives took part from investment-related divisions and from certain bodies that carried 
out pre-investment analysis.  He noted that the fo rmat of the seminar was interactive which made it 
possible for participants to arrive at a clear idea  of the different elements and technical aspects  WT/WGTI/M/21 
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addressed in the Working Group.   He also wished to place on record his Government’s gratitude to 
the Secretariats of the WTO and UNCTAD.  He added that his Government placed great importance on the technical assistance programme, and urged that even more activities be planned for the future.  
15. The representative of Djibouti 
emphasized the importance that his delegation attached to the 
Secretariat’s programme of investment-related technical assistance, both in Geneva and in the field.  
His delegation found the regional seminar for franco phone African countries particularly useful.  The 
importance that his country attached to the event was reflected by the fact that it was opened by the 
President of the National Assembly and the Preside nt of the Chamber of Commerce, in the presence 
of accredited diplomats and representatives of the priv ate sector.  He agreed with the Secretariat’s 
suggestion about the need to clarify the link between the work carried out by the WTO and 
UNCTAD, as well as by the various regional organizations.   
16. The representative of Mauritania  drew attention to the national seminar that was being 
prepared for 4-5 May in Mauritania with the assistance of the WTO Secretariat and UNCTAD.  His delegation also supported, in principle, the Secr etariat’s proposals for placing long-term cooperation 
between WTO and UNCTAD on an even stronger footing.   He urged delegations to consider ways to 
better focus on priority topics for developing countri es, such as the optimum definition of investment 
in any prospective agreement, its relationship with the GATS, non-discrimination, balance-of-
payments exceptions, and policies for the promotion of small- and medium-sized enterprises.  The 
programme of technical assistance could also focu s on the best way to take into account developing-
country needs in assessing the impact of investment  policies on development.  The third priority was 
to think about ways to better coor dinate technical assistance activities with the work of the Investment 
Working Group and other relevant working groups.  Finally his delegation felt it was important to 
consider the best way to enhance the capacity of  host countries to develop a clear view of the 
implications of closer multilateral cooperation in i nvestment, before necessary decisions were taken. 
17. The representative of Cuba
 noted that while the joint WTO-UNCTAD programme of 
technical assistance had brought benefits in terms of  a better understanding of the implications of a 
prospective multilateral agreement on investment, th ere was nonetheless a great deal that was as yet 
unknown and many doubts that needed to be dispelled in  terms of the impact of such an agreement on 
development policies.  For this reason, his delega tion was looking forward to the national seminar in 
Havana planned for early July.  He joined other de legations in thanking the Secretariats of the WTO 
and UNCTAD for their technical assistance support. 
18. The representative of Indonesia  observed that technical assistance was at the foundation of 
any cooperation in international and bilateral fora.  His delegation considered that technical assistance 
was essential for developing countries to achieve  an appropriate level of knowledge as well as 
institutional capacity.  As a developing country, Indonesia was still facing many obstacles in 
understanding the issues being discussed in the Working Group.  In this respect, Indonesia highly supported the efforts of both the WTO and UNCTAD Secretariats to advance and implement the 
investment-related technical assistance programme.  His delegation was grateful that its request for 
technical assistance had been favourably considered, and he noted that the regional seminar held in 
Jakarta on 16 May 2002 – organized in cooperation w ith the Ministry of Trade and Industry and the 
Bank of Indonesia – had been useful.  However, he also noted that a one-day seminar was not 
sufficient to understand fully the complex issues invol ved in a possible investment negotiation.  It was 
his delegation’s hope that Indonesia could have a nother opportunity to receive similar technical 
assistance in the near future. 
19. The representative of Sri Lanka 
reiterated that the national seminar held in Colombo in 
November 2002 had greatly benefited the participants.  The event was attended by a cross section of 
Sri Lankan civil society – lawyers, bankers, and ot her representative of various financial institutions, 
as well as Government officials.  It helped the par ticipants to clarify and understand the implications 
of various elements of a possible multilateral invest ment agreement in much greater detail.  In the WT/WGTI/M/21 
Page 6  
 
2002 report of the Working Group, it was recogni zed that technical assistance and institutional 
capacity building in the investment area should be a continuous process, and his delegation fully endorsed this long-term view.  He urged that ins titutional and resource constraints on this important 
work should not be allowed to materialize.  His delegation requested that Sri Lanka’s proposal for 
hosting a regional seminar be included in th e technical assistance programme for 2004. 
20. The representative of Nigeria
 looked forward to the organi zation of the planned national 
seminar in Nigeria since his delegation attach ed great importance to the issues involved. 
21. The representative of Djibouti  reiterated how important the Ge neva-based workshops were to 
the work of the Group, and urged the Secretariat to c ontinue its efforts in this area.  These events were 
very important if Members wished to have a syne rgy – or interaction – between what took place in 
Geneva and in the various national and regional seminars in the field.  His delegation felt that it would 
be a good idea – to the extent possible – to reinfor ce these linkages.  His delegation also wished to 
suggest that it might be worthwhile to invite Ge neva-based delegations to participate in future 
regional seminars, drawing on their accumulated experience as regard the work in the Investment Working Group. As a final point, he suggested that  the Secretariat make greater reference in their 
documentation to the experience and needs of least-developed countries.   
22. The representative of th e European Communities
 briefly noted that the considerable progress 
that had been made – and the work that had been  undertaken – in the area of technical assistance was 
extremely encouraging.  He also noted that investment was becoming one of the most widely discussed and analysed subjects in th e history of the WTO, and this was to be commended.  This more 
focused and constructive work was attributable to the mandate set out in the Doha Declaration – and 
this underscored again why it was important to have  a positive decision in Cancún, to ensure that 
countries, and developing countries in particular, con tinued receiving this kind of technical assistance. 
23. The representative of Japan
 stated that the accumulation of these technical assistance 
activities led to the increase of the capacities of de veloping countries and thereby helped create a good 
basis for future discussions in the WTO. Japan had made its best effort to provide technical assistance 
and capacity building, which was essential for deve loping countries. With regard to the whole 
framework of technical assistance activities, Japan had decided to contribute CHF810,000.00 to the 
Global Trust Fund in 2003, in add ition to its contribution of CHF1 .5 million in 2002. His delegation 
hoped that this contribution would be utilised e ffectively in accordance w ith the actual needs of 
developing countries. Since the previous meeting of the Working Group held in December 2002, Japan had organized two seminars on a bilateral basis.  One of these seminars had been held at the end 
of January 2003 in Shanghai, with the coopera tion of the Shanghai WTO Centre and had been 
attended by officials of the Chinese Government  and the city of Shanghai and by industry 
representatives. In mid-March 2003, a seminar had ta ken place in Jakarta that had been organized 
jointly by the Governments of Indonesia and Japan. Both of these seminars would be beneficial to 
deepening participants' understanding with  regard to investment rules.  
24. Japan had also been actively engaging in capacity building directed towards African 
countries. First, in February, Japan co-hosted with  Egypt, a seminar on investment and competition, 
which had attracted senior officials from 24 African countries. Second, also in February, Japan had hosted the "Tokyo International Conference on I nvestment to Africa" which included high-level 
participation from African countries and internatio nal organizations. His Government intended to 
continue to consider ways in which to promote FD I to African countries. Third, Japan was funding the 
bulk of an important OECD Conference on Trade and In vestment to be held in Senegal in April that 
would bring together government officials and business people, and experts from international 
organizations, and would focus on how trade and inv estment could contribute to the development of 
Africa.  Finally, Japan International Cooperati on Agency would be supporting an investment 
workshop for French-speaking African counties to be held in June, organized by the WTO in 
cooperation with UNCTAD.  This would be identi cal to the workshop for English-speaking African  WT/WGTI/M/21 
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countries held in  December 2002, dealing with issu es more directly related to the discussions at the 
WTO. Japan was planning two regional seminars wi th the assistance of the APEC TILF Fund. One of 
these was scheduled for 19 May in Bangkok, and anothe r would be held in Beijing, on a date to be 
decided.  Both seminars would be attende d by participants from APEC economies.  
25. The representative of Canada  stated that the active and constructive participation of 
developing and least-developed countries in the Work ing Group was a testament to the quality and 
quantity of technical assistance and capacity-buildin g initiatives organized by the WTO Secretariat in 
cooperation with UNCTAD and other in ternational organizations.  The fact that in 2002 there were 21 
events held across five continen ts addressing the topic of trade and investment demonstrated the 
determination by Members to meet the mandate for trade-related technical assistance as specified by 
Ministers in paragraph 21 of the Doha Declaration.       
26. The representative of the United States  said that it was clear from the interventions that there 
had been an acceleration of efforts both by the WTO and UNCTAD Secretariats to provide ever-
higher levels of technical assistance.  He believe d that feedback from Members where national or 
regional seminars had been held was a very valuab le addition to the discussion, allowing the Working 
Group to get a feel for how technical assistance was proceeding and the utility that it had for the 
overall process.   His delegation was very encouraged by what it had heard, especially regarding the 
high level of interest, and how investment fit into  the wider work of the WTO.  The United States 
supported a continuation of this activity with the idea of leading to more substantive discussions. 
27. The representative of the Secretariat  observed that note had been taken of the requests for 
future activities that were not at present included in  the technical assistance work programme.  As far 
as possible, the Secretariat would attempt to respond to – and accommodate – these new requests.  
Regarding Djibouti's comments, there would be a workshop in Geneva immediately following the 
next Working Group meeting in June for French-s peaking African countries where one official from 
each capital would be invited, in addition to Ge neva-based delegates.  He thanked the Japanese 
delegation for providing fi nancial assistance to make this possible.   Unfortunately, it was not possible 
to finance the participation of Geneva-based delega tes in regional seminars, although he agreed with 
Djibouti that having people from Geneva who understood the process underway in the Working 
Group participating in national and regional seminars was valuable.  Perhaps this was something that 
could be considered in the future.  He also promised to look into th e concerns raised by Djibouti about 
the lack of reference to least-developed countries in WTO investment documentation. 
28. The representative of UNCTAD  took note of the request by several delegations to focus 
technical assistance work even more closely on the experiences of developing countries. 
29. The Chairman  reminded delegations that it had been pr oposed that the WTO Secretariat, with 
the assistance of UNCTAD, might present to the June meeting a plan or proposal for future technical 
assistance activities, and if it were agreed, he instru cted the Secretariat to prepare such a document. 
B. PARAGRAPH 22 OF THE DOHA MINISTERIAL DECLARATION  
30. The Chairman  drew attention to submissions that had recently been received from the 
European Community and its Member States on "P olicy space for development" (WT/WGTI/W/154), 
from Canada on "Transparency" (WT/WGTI/W/155)  and on "The interrela tionship and emerging 
infrastructure of a prospective WTO multilateral framework for investment based on elements 
identified in paragraph 22 of the Doha Declaration" (WT/WGTI/W/157), from Japan on "The relationship between future multila teral investment rules and th e GATS" (WT/WGTI/W/156) and on 
"Consideration of the necessity of multilateral i nvestment rules from diversified viewpoints" 
(WT/WGTI/W/158), and from China on "Scope and definition" (WT/WGTI/W/159) and on 
"Transparency" (WT/WGTI/W/160).  WT/WGTI/M/21 
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31. The representative of the European Communities
 introduced its submission on "Policy space 
for development" (WT/WGTI/W/154), one of the prin cipal aims of which was to stimulate further 
debate on the issue of pre-establishment commitments  on the basis of concrete examples. A recurrent 
theme in the work of the Group had been the c oncern expressed by developing countries on the need 
to preserve policy space in order to carry out speci fic developmental policies. He recalled that his 
delegation had presented a submission on this theme on an earlier occasion.1  The focus of the present 
submission on pre-establishment commitments was explai ned by the fact that the inclusion of  such 
commitments would constitute the most significant difference between such a framework and existing 
bilateral investment treaties and had proved to be  a particularly sensitive subject.  Against the 
background of the reference in paragraph 22 of  the Doha Ministerial Declaration to "pre-
establishment commitments based on a GATS-type , positive list approach," the contribution 
explained with concrete examples  how such an approach could acc ommodate domestic policies aimed 
at increasing employment, policies designed to gene rate and transfer technology, policies aimed at 
protecting minorities and other policies, including screening procedures. His delegation was convinced that this approach was compatible with the pursuit of development policies,  and in this 
regard, he encouraged developing countries to iden tify examples of specific development policies that 
were not addressed in the contribution. A second major theme addressed in the document was the 
concern regarding the "crowding out" of domestic  investment by FDI. His delegation was not 
persuaded that empirical evidence supported the argum ent. On the contrary, most evidence appeared 
to indicate that FDI had a positive effect on the development of domestic firms. Moreover, the "crowding-out" thesis was also contradicted by th e fact that most countries were actively attempting 
to attract FDI. However, the main point made by the contribution on this issue was that, regardless of 
whether there was evidence of the existence of such an effect, a GATS-type approach to pre-
establishment commitments accommodated any concerns about "crowding out" as it permitted countries to refrain from making commitments in sect ors where they were c oncerned about "crowding 
out". In conclusion, the merit of the proposed appr oach was that it would leave each country free to 
strike its own balance between an appropriate po licy space required to pursue national development 
objectives with an appropriate stable, predictable and transparent FDI framework through which firms 
were encouraged to operate. Such a balance c ould be reflected in each country's schedule of 
commitments.  
32. The representative of India
 stated that the development dimens ion was, in fact, supposed to be 
the cornerstone of the Doha Work Programme, wh ich some had euphemistically called the Doha 
Development Agenda. The intention expressed by th e European Communities in the introductory part 
of its submission was, therefore, encouraging. De fining the concept of "policy space" was not an easy 
task because the policy space required by count ries differed depending upon their levels of 
development. The basic distinction between econom ic growth and economic development had to be 
recognised. Economic development meant growth plus st ructural changes; mere growth in income did 
not result in economic development. Deve lopment was a complex process involving the 
transformation of the economy to acquire a strong industrial base, based on a shift from primary to 
secondary and tertiary economic activities. To maxi mize the positive contribution of FDI to economic 
development, host countries would require the ability to screen and channel inv estments to sectors of 
priority to them. It was in this context that his delegation had been stressing the importance of 
performance requirements and other policy flexibiliti es. To conclude that performance requirements 
were inefficient and that the same objectives coul d be achieved through other means would amount to 
what one author had recently referred to as "kicki ng away the development ladder" by depriving 
developing countries of  policy tools that most deve loped countries, including EC member States,  had 
used at earlier stages of their development.  
33. His delegation questioned the idea that a GATS- type positive list approach advocated by the 
European Communities in its submission would provid e enough policy flexibility. As discussed in a 
recent UNDP publication, "Making Global Trade Work  for Poor People,"  such flexibility under the 
                                                      
1 WT/WGTI/W/84.  WT/WGTI/M/21 
 Page 9 
 
 
GATS was difficult to realise in practice because of the time and high costs involved. The actual 
bargaining process and imbalances in negotiatin g leverage between de veloping and industrial 
countries did not allow developing countries to take advantage of the flexibilities. Implicit and even explicit pressure was brought to bear on developing  countries to offer commitments. According to the 
UNDP publication, such pressure resulted from three main factors. First, there was the inherent 
pressure emanating from the nature of the GATS, particularly as a consequence of the principle of 
progressive liberalization. Second, intense pressure  was brought to bear on developing countries 
during the negotiation process to liberalize key service sectors. Third, significant external pressure on 
developing countries resulted from IMF and Worl d Bank conditionalities. Furthermore, as 
acknowledged by the European Communities, the pr ocess of renegotiation of commitments under the 
GATS was not easy. While there might not be any experience with renegotiation of commitments 
under the GATS, the limited experience with rene gotiations of concessions under Article XXVIII of 
the GATT showed how difficult this was. The fact that multilateral disciplines would affect policy autonomy had also been recognised by other Members.  The United States, for ex ample, had stated at 
the meeting of the Working Group held in Decemb er 2002 that, as with any discipline agreed in the 
WTO, "multilateral investment disciplines would cons train, to some degree, the capacity of Member 
countries to impose certain domestic policies"
2 The question, then, was not whether a multilateral 
framework, with a GATS-type architecture, would constrain policy space, but the extent to which it would do so, and whether there were commensurate benefits accruing to the developing countries who 
were recipients of FDI. 
34. India further observed that the development process took many decades whereas the 
flexibility allowed by the GATS to list limitations only seemed to last a few years. Most developing 
countries lacked crucial data and information to assess which sector or sub-sectors to limit in their 
schedules and what kind of regulations to keep or  impose at the time of making initial commitments. 
Most developing countries were in the process of defining their developmental polices and strategies, 
which would lead to economic grow th and development. In this iterative process, it was important for 
governments to have room to manoeuvre and identif y the best policy mix. The possibility of making 
appropriate changes would be curtailed once bindi ng commitments were made. He wondered why a 
multilateral framework was required at all if all Memb ers were indeed free to offer what they could, 
as proposed by the European Communities in its subm ission, and how such a framework would add to 
predictability and certainty.  Obviously, such a sk eletal framework would have meaning only if the 
protagonists were confident that it could be fleshed  out subsequently, as in the case of the GATS. In 
that case, not only would developing countries such as  India have to pay more on a broader canvas of 
issues, but there would also be linkages established with other areas of negotiation such as agriculture 
and textiles. The point really was whether a GATS- type positive list approach added to the case for a 
multilateral framework on investment. In this context,  he referred to a statement regarding the TRIPS 
Agreement made by Professor T.N. Srinivasan that "the conventional argument in favour of unilateral 
liberalization of trade in small open economies in  goods is that gains from liberalization outweigh 
losses, so that in principle, a transfer schem e within each economy can be devised that will 
compensate the losers from liberalizat ion". In the case of TRIPS, however, the beneficiaries were in 
the rich developed countries and "only a few, if any,  in poor countries" and this being the case, even if 
gains outweighed losses, international transfers w ould be needed to compensate the losers. This 
situation would apply equally to investment, as the gainers would be principally the foreign investors 
rather than the domestic investors or host countries. 
35. During the course of the discussions in this  Working Group, India had expressed its 
apprehensions regarding a multilateral framework on i nvestment within the WTO. It had referred to 
the problems faced by regulators even in developed countries in respect of certain companies and the 
issue of accounting frauds that had surfaced during the l ast couple of years. In such a situation, many 
developing countries needed to have sufficient policy space and more time to develop their own 
regulatory mechanisms, without at this stage bei ng constrained by new binding commitments. India  
                                                     
 
2 WGTI/M/20, para.38. WT/WGTI/M/21 
Page 10  
 
had expressed doubts regarding the WTO being th e appropriate forum for an agreement on 
investment, since the WTO's area of core competence related to trade, not to capital flows. Finally, 
India had also raised the issues of investor ob ligations and home-country enforcement measures and 
the reinstatement of performance requirements as being essential components of the development 
dimension. However, there had been no positive re sponse from the protagonists as yet to all these 
issues. It thus seemed that an attempt was be ing made to launch nego tiations on a multilateral 
agreement without conviction, without satisfactory an swers to the questions that had been posed, and 
without unanimity among the proponents on the issues identified for clarification in paragraph 22 of the Doha Ministerial Declaration. The main purpo se appeared to be to use the provisions of the 
Dispute Settlement Understanding for the benefit of private investors without any real appreciation of 
the concerns and problems of developing countries.  Another objective could be  to broaden the scope 
of negotiating areas within the WTO, so as to shift the focus from certain areas in which WTO 
principles did not presently apply in their entirety. 
36. With respect to the issue of "crowding out", cont rary to what was stated in the EC submission, 
empirical studies by economists like Manual Agosin, and Nagesh Kumar had highlighted the 
incidence of such "crowding out". A study by Dr. Ghazali Atan on the effect of FDI in Malaysia had 
concluded that several conditions had to be met in or der for FDI to be beneficial. First, foreign capital 
inflows should not displace domestic savings si nce successful growth in developing countries 
depended essentially on raising domes tic savings to a high level, and then productively investing 
them.  Second, the factor payment costs had to be  minimized and prudently managed. Third, joint 
ventures should be encouraged so that part of the remittance accrued to locals and was retained by the 
local economy. Fourth, foreign firms should list th emselves on local markets. Fifth, FDI should be 
concentrated in the tradable sect or, especially in export-based activiti es. Sixth, local content of output 
should be raised over time to improve the trade ef fect. Seventh, the growth of domestic investment 
should exceed FDI growth. Eighth, developing co untries should increase their savings rate and 
maintain sound economic and political conditions. Dr. Ghazali had concluded that "countries using 
foreign investment without regard to the above c onditions would do so at their own peril." FDI was 
useful to the extent it fitted in with the overall development strategy of the host country. Studies by 
G.H. Hanson had also shown that FDI might not alwa ys be welfare- enhancing. The important issue 
was that the host country should be able to maxi mize the positive effects of FDI and minimize its 
negative effects. The type of provision contained in Article XXI of GATS was not adequate in this 
regard. The status of the prolonged and inconclu sive ongoing negotiations on emergency safeguards 
under the GATS was known to all. The EC submission  had made the point that Members could keep 
their commitments unbound if they wished. While this was very much in the realm of possibility, one 
had only to look at the requests made by develope d countries to developing countries as part of the 
ongoing GATS negotiations, to know what the reality was. 
37. In conclusion, he said that no convincing ar gument had been advanced that a single 
international standard could be applied across the boa rd to all countries in the form of a multilateral 
framework. In fact,  the historical experience of  economic development show ed a wide variation in 
the approaches of different countries. In additio n, no convincing argument had been presented to 
indicate that lack of predictability or certainty was the main constraint to investment inflows. 
38. The representative of Japan
 shared the view that the need to take into consideration the 
development policies of individual countries was an important point in discussions on an international 
investment framework, and he recalled in this respect that Japan had addressed this issue in several 
submissions, notably its submission on modalities for pre-establishment commitments (WT/WGTI/W/125) that had been presented in  July 2002. The EC submission presented very practical ideas on how pre-establishment commitments  had addressed the critical issue of the concern 
raised by many developing counties concerning the possible conflict between their development 
policies and prospective multilateral investment ru les. The first part of the submission provided 
concrete examples of the relati onship between multilateral rules and various domestic policies, 
including those aimed at increasing employment , generating and transferring technology, and  WT/WGTI/M/21 
 Page 11 
 
 
protecting minorities. The freedom of Members to  conduct such policies should be preserved in a 
flexible structure of rules. Each country should consider the extent of necessary policy space and the 
nature of the appropriate measures to reach its policy objectives. For example, as noted in the EC 
submission, it was important to enhance local cap acity to absorb technology through technology 
transfer, and policies involving mandatory technology transfer requirements were less effective.  
39. With regard to the second part of the EC subm ission, Japan considered that there might be 
individual cases in which FDI had a negative, "crowdin g out" effect impact in the form of "crowding 
out," but that it was also obvious,  from each Member's experiences,  that on the whole, the positive 
effects of FDI exceeded any such  negative eff ects. Members should concentrate on maximizing such 
positive aspects. Actually, as observed in paragraph 22 of the EC submission each country was trying 
to  open its economy in order to attract FDI. It w as for individual countries to decide on the degree of 
openness to FDI in accordance with their different stages of development and development objectives, 
and a multilateral framework on investment should ac commodate differing levels of development and 
development policies.  
40. The representative of Korea stated that his delegation shar ed the view of the European 
Communities that developing counties should mainta in their right and their policy space to pursue 
their development objective and that no internati onal agreement should prevent them from doing so. 
A GATS-type, positive list approach at the pre- establishment stage provided countries with the 
necessary flexibility to taken into account individual n eeds. Korea considered th at FDI was playing an 
increasingly important role in the process of econom ic growth and development. Host countries 
induced FDI as an important supplement to dom estic investment, and in both developed and 
developing countries FDI accounted for a considerab le share of exports in some industries. As 
described in a previous submission from his delegation3, FDI had played a major role in Korea's 
economic recovery after the Asia n financial crisis in 1997.  
41. The representative of Thailand  questioned the need for an international agreement containing 
pre-establishment commitments. On the one hand, it was not clear that a country would enhance its 
ability to attract FDI by entering into such comm itments. On the other hand, all countries were 
presently trying to attract FDI, and would therefor e not impose restrictions on FDI even where they 
had not undertaken international commitments with  respect to the pre-estab lishment phase. Regarding 
the notion that the GATS-type positive list appr oach constituted an appropriate model for an 
international investment agreement, she pointed ou t that an important difference between services and 
investment was that the international sale of services could take place through various modes, 
including on a cross-border basis, and thus di d not necessarily engender ownership of assets in a 
foreign country.  FDI was more complex and had a gr eater impact on host countries than international 
transactions in services. Her delegation considered in this regard that an agreement on investment, if 
any, would need to include provisions on invest ors' obligations. A GATS-type approach was not 
adequate to accommodate developmental concerns. Thus, the process of modification of schedules of 
specific commitments was not as simple as suggested by the European Communities in paragraph 9 of 
its submission and was subject to a requirement of  compensation. While it had been considered during 
the Uruguay Round negotiations that the structur e of the GATS provided ample flexibility for 
developing countries by enabling them to make commitments that were commensurate with their 
development needs, in practice this flexibility ha d not materialized as developing countries were 
under considerable pressure to make commitments. The provisions in Articles IV and XIX had been 
very difficult to operationalize. Moreover, the GATS did not contain any commitments on the part of 
developed countries to take action in favour of devel oping countries. She reiterated in this regard that 
in an investment context provision would need to be made for positive commitments by investors. If 
an investment agreement were negotiated,  she suggested that in order to more adequately 
accommodate the interests of developing countries, the most-favoured-nation rule should not always 
have to be applied unconditionall y and automatically. Consideration should also be given to how the 
                                                      
3 WT/WGTI/W/69. WT/WGTI/M/21 
Page 12  
 
GATS concept of "additional commitments" could be  used as the vehicle for developed countries and 
investors to make commitments in favour of develo ped countries. Finally, there would need to be a 
safeguard clause to address problems of short-term capital flows, especially if an agreement included portfolio investment in the definition of investment.  
42. The representative of Uruguay
, referring to the negotiations currently under way in the 
framework of the GATS, noted that requests and offe rs had been made concerning various modes of 
supply, including the "commercial presence" mode of supply, and that the GATS applied to both the 
pre-establishment and the post-establishment phases. He  asked in this regard whether the approach 
proposed by the European Communities would appl y to both goods and services or only to goods, 
and, if the former, whether this would not duplicate the ongoing services negotiations.  
43. The representative of the Philippines , referring to paragraph 2 of the EC submission, 
disagreed with the claim that a WTO multilate ral framework on investment containing pre-
establishment commitments would not limit the polic y space of developing countries. The essence of 
rule-making in the WTO was to enhance predicta bility and uniformity of conduct of Members by 
limiting the policy discretion enjoyed by individual Members. With regard to the statement in 
paragraph 9 of the submission that "each Member has to strike its own balance between providing 
certainty (thus increasing the possibilities of attract ing FDI) and retaining flexibility," he disagreed 
with the assumption underlying this statement that ther e was always  a trade-off between certainty and 
flexibility. Rather than being mutually exclusive,  certainty in investment policy and overall policy 
flexibility might be complementary, and a clear and predictable investment policy could evolve 
together with a special regard by authorities for flexibility, both driven by the unique economic and 
social objectives of individual countries. In respec t of the suggestion in paragraph 7 of the EC 
submission that performance requirements were in appropriate because "governments can maximize 
backward linkages and technology transfers by pr oviding better domestic skills, capabilities, supplier 
networks and infrastructure,"  his delegation cons idered that where public resources were severely 
limited, governments should be able to encourage, c onvince, and even require investors to contribute 
to building domestic absorption capacity.  Given the European Communities' opinion on performance 
requirements,  it could reasonably be predicted that any pre-establishment rules in a prospective multilateral framework would somehow constrain, if not remove, governments’ ability to extract such 
concessions from investors, which woul d be unacceptable to his delegation. 
44. Although from a purely technical point of vi ew the GATS-type positive list approach 
provided flexibility for developing countries in the scheduling of commitments, his delegation 
considered that this did not mean that such an a pproach was adequate to the concerns of developing 
countries. He wondered in this respect what woul d be the value to the European Communities of 
schedules of commitments offered by developing count ries that were extremely short and subject to 
comprehensive limitations. Even assuming that devel oping countries would be able to subject their 
commitments to comprehensive lim itations reflecting their current policy needs, it was doubtful that 
such limitations could accommodate future policy n eeds. In addition, the lack of progress in GATS 
negotiations on the development of an emergenc y safeguards mechanism, disciplines on domestic 
regulation, and other issues that developing countries had been pursuing for the last eight years did not bode well for the treatment of such issues in  any future WTO invest ment framework. The GATS 
experience also suggested that if MFN exemptions were allowed, the bulk of such exemptions would 
be maintained by developed countries and that de veloping countries would be asked to remove the 
few MFN exemptions they maintained. An even more important issue was whether the use of a 
GATS-type positive list approach in an investme nt agreement would be accompanied by provisions 
on successive negotiations to attain progressive liber alization, and whether, as was the case of the 
GATS, such negotiations on progressive liberalizat ion would take place without the benefit of an 
assessment of investment flows in overall terms and on a sectoral basis. His country's experience thus 
far with the present services negotiations contrasted  with the  relatively smooth experience when the 
GATS was first negotiated. If the Philippines were  to accede to the requests made by its trading 
partners in the current negotiations, it would inevitably either need to amend the Philippine  WT/WGTI/M/21 
 Page 13 
 
 
Constitution itself, enact new legislation that woul d be politically controvers ial, or amend recently-
enacted legislation the effects of  which had not been fully assessed. 
11.  Regarding the issue of the "crowding-out" effect on domestic investment, it seemed that the 
EC communication suggested that this effect occurr ed when an international investment framework 
would lead to increased FDI. However, since such  a framework would not lead to an increase FDI 
anyway, there could be no such "crowding-out" effect. An investment framework did not guarantee 
the inflow of FDI into developing countries as ther e were other critical determinants of investment 
flows. The "crowding-out" effect could transpir e because of FDI, and not necessarily because of an 
investment framework. While "crowding out" might not occur during a period of sustained economic 
expansion, there existed a real risk of "crowdi ng out" in less favourable economic circumstances. He 
concluded by saying that the Philippines welcomed FDI and actively attracted FDI but remained 
unconvinced of the need to establish an  investment framework in the WTO. 
 45. The representative of Indonesia
 welcomed the statement in paragraph 2 of the EC submission 
that "developing countries should maintain their right and their policy space to pursue their policies 
and that no international agreement should prevent th em from doing so." He noted that paragraph 9 of 
the EC submission stated that "[u]nder the GA TS-type approach, members first decide, for each 
sector, whether to take commitments or not. If a member decides not to take any commitment in a 
given sector, it remains free to be as open or as cl osed to foreign investment as it chooses, at any 
given time."  However, the experience with the GATS negotiations on specific commitments had 
shown that this positive list approach did not provide  adequate protection to developing countries. He 
agreed with the view that since developing countri es were responsible for de fining their development 
policies and strategies, it was important for them to retain the flexibility to take corrective action. In 
light of the considerable historical differences  between countries with regard to their economic 
development strategies, a GATS-type approach would not allow for the necessary flexibility. 
Although in theory individual countries were free to decide which sectors to include in their schedules 
of commitments, in practice such commitments w ould be the result of a series of bilateral and 
plurilateral negotiations with other countries, in particular the major developed countries. 
46. He agreed with the point made by Thailand that investment was more complex than 
international trade in services. Regarding the point made in paragraphs 10-12 of the submission of the 
European Communities that a GATS-type approach  would allow countries to pursue employment 
policies, he observed that while FDI could contri bute to employment generation, in most developing 
counties FDI only played a complementary role in this respect. Most employment was generated by 
domestic, small- and medium-sized enterprises. Co nsequently, the pursuit of the objective of full 
employment required policies to safeguard the viabili ty of such enterprises, including by ensuring that 
they maintained significant market shares, which would not be compatible with the principle of 
national treatment and market access commitments. The policies that were appropriate in this respect 
could not be identified at the outset on a sector-specific basis, especially given the difficulty of 
anticipating how policies would need to be adjust ed in light of changing economic conditions. His 
delegation agreed with the point made by India th at pressure was being exerted to start negotiations 
on investment even though the questions raised by developing countries had not yet been adequately answered. Therefore, binding pre-establishment commi tments should not be part of any multilateral 
investment agreement, even if based on a GATS-type positive list approach.  
47. The representative of Chile
 expressed doubts as to whether the recent UNDP publication 
mentioned by India provided a fair analysis of the GATS. In reality, little liberalization had occurred 
under the GATS as most commitments made by Members were of a status quo  nature, with the 
exception of commitments made by those Memb ers that had acceded to the WTO since 1995. 
Although it was true that there was no experience with the renegotiation of commitments under the 
GATS and that this might not prove an easy process, in view of the status quo  nature of most 
commitments it was difficult to imagine in what  circumstances such a renegotiation would be 
necessary.  Further liberalization under the GATS was hampered by the fact th at the architecture of WT/WGTI/M/21 
Page 14  
 
the GATS was incomplete, in particular with resp ect to safeguards. Whether or not negotiations on 
investment took place in the WTO, the reality was th at investment rules were being elaborated in 
bilateral, regional and plurilateral negotiations. Thus models of how to deal with investment were 
being evolved outside the WTO and, given the ec onomic weight of the countries involved, such 
models might be imposed upon developing countries  without their having had the opportunity to 
participate in the development of such rules. From this perspective, his delegation preferred 
multilateral rules to a vast network of bilateral and often discriminatory arrangements. He seconded 
the point made by Uruguay on the need to clarify whether an investment agreement would also apply to services. Finally, the problem for his country was the scarcity of foreign investment, and he therefore did not share the concern of several othe r countries regarding the issue of "crowding out."  
48. The representative of Brazil
 considered that the EC submission was helpful in identifying the 
problems faced by developing countries in terms of balancing flexibility and discipline as they 
contemplated the positive and negative effects of fore ign investments. He welcomed the fact that the 
European Communities fully supported the view th at "developing countries should maintain their 
rights and their policy space to pursue their own pol icies and that no international agreement should 
prevent them from doing so." It was clear that if  the case for a multilateral framework was to be 
convincingly made, decisive consideration must be  devoted to development provisions capable of 
responding to the real concerns that had been identif ied in this forum, and elsewhere, where trade and 
investment was discussed. This also implied a ne ed to arrive at a common understanding on how the 
concept of "policy space flexibility" was to be addressed. 
49. The EC asserted that many development objectives, whether universal or not, could be 
attained by using a GATS-type positive list approach . A set of sophisticated arguments was presented 
to demonstrate that generation of employment an d income growth, for instance, were in no way 
constrained by a framework agreement on investme nt based on the GATS architecture. However, in 
paragraphs 6 and 7, the EC submission suggested clearly that not all the essential policy tools for 
development were necessary. The submission men tioned performance requirements as an example of 
such unnecessary tools. There might perhaps be a c ontradiction in the EC statement in that, while 
trying to convince reticent Members by showing that their concerns in term of policy space could be 
attained, the EC at the same time made it clear  that developing countries' policy space had to be 
narrowed. In this connection, he requested the EC to  elaborate on its intentions with regard to the 
issue of performance requirements.  
50. The paramount question was whether a multilatera l framework on investment was compatible 
with the need to preserve the ability of developi ng countries to actively pursue development policies. 
Policy space would not be effective unless the devel opment dimension was an integral part of the 
design and structure of any agreement or multilate ral framework on investment, allowing developing 
countries to retain the necessary room of manoeuvr e for undertaking their development policies. It 
became difficult at this stage to understand how th e concept of "policy space flexibility" could be 
translated into legal texts so as not to compromi se development objectives. It was also difficult to 
imagine how, in the absence of substantial commitments, policy space for development could be 
satisfactorily addressed through preambular commitments, best endeavour clauses, technical assistance or transitional periods. He noted in th is respect that in due course the Working Group 
would need to review items such as performance requ irements, and that there might be linkages in this 
regard with the work carried out in the Council for Trade in Goods where the TRIMs Agreement was 
being reviewed.  
51. Although the GATS allowed governments to subj ect their commitments to limitations and 
exceptions of a general and sector-specific natu re, and a GATS-type, positive list approach was 
preferable to a negative list approach, this did not  mean that the GATS appr oach was sufficient. The 
complexity of the ongoing GATS negotiations suggested how difficult it might eventually be to 
negotiate an investment agreement in a "GATS-like"  manner.  Deciding exactly which sectors to open 
up and what types of limitations and exceptions  to put under each commitment required extensive  WT/WGTI/M/21 
 Page 15 
 
 
understanding of the various economic sectors. It also required an understanding of how certain 
commitments would impact constitutional and legisla tive mandates as well as domestic regulation in 
each country. Currently, many WTO Members were  struggling with these issues in the services 
negotiations and realizing that even a positive list approach was quite overwhelming for effective and 
informed negotiations. A related problem was th at the flexibility provided by the GATS-type 
approach was subject to a commitment to progressive liberalization. Some types of development 
policies, especially those related to FDI, might ta ke some years to produce their intended benefits. 
The regulatory exemptions that governments listed in  one round of negotiations were targeted for 
removal in the next round. However, the histor ical experiences of a number of today's developed 
countries showed that they had enjoyed regulat ory exemptions for decades regarding foreign 
investment, which had been an important el ement in their development strategies.   
52. The representative of Australia  stated that his delegation considered that the discussions in the 
Working Group had been valuable in fleshing out  the objectives and expectations of Members in 
negotiating a multilateral framework on investment, and that Australia favoured a positive outcome 
on investment at Cancún. His delegation saw be nefits for all Members – developed countries, 
developing countries and least-developed countries – in putting in place such a framework. In the time 
available before the Ministerial conference at Canc ún, it was necessary to adopt  a focused approach to 
the discussion. The contributions that were befo re the Working Group at the present meeting were 
very helpful in this respect. They highlighted th e importance of ensuring c onsistency and coherence 
between WTO agreements, including between a futu re investment agreement and the GATS. Such 
coherence and consistency were pa rticularly relevant to the discussion of the possible scope of a 
future multilateral investment framework WTO cohe rence and clearly would influence any definition 
that might eventually be adopted. Australia considered  that developing countries had to be at the heart 
of discussions on a future investment framework, as was acknowledged in the recently circulated 
submissions.  
53. The EC submission was useful in that it went some way in addressing some of the elements 
that might be encompassed in a multilateral invest ment framework. The submissions helped to move 
the discussion beyond the hypothetical and to fo cus discussion on the specific policies that might 
address the concerns of developing countries. Referri ng to the examples set out in the annex of the EC 
submission of pre-establishment commitments under a positive list approach, he stated that Australia 
supported this proposed GATS-type approach to pr e-establishment commitment s in an investment 
agreement.  Australia agreed with the contention in  paragraph 7 that there we re better alternatives to 
the imposition on foreign investors of mandatory performance requirements as a development policy 
tool. He agreed with the proposal that limitations  to national treatment and market access could be 
included in horizontal commitments of a GATS-type  approach and be applied across all sectors.  
54. On the relationship between an investment agreement and the GATS commercial presence 
mode of supply, his delegation noted that it ha d been argued that commercial presence was covered 
under the GATS only to the extent that it facilitated the delivery of services, and that, consequently, 
the inclusion of commercial presence in the GATS did not in any way justify the inclusion of 
investment under goods. Thus it was argued that the supply of a service under the GATS did not involve investment but commercial presence. Howeve r, in light of the detailed definition of the 
meaning of commercial presence in GATS, his dele gation was of the opinion that the GATS covered 
forms of investment that corresponded to the noti on of foreign investment. Moreover, a commercial 
presence necessarily involved some capital investment, which implied that under the GATS Members 
were regulating investment rather than merely restricting commercial presence. He concluded by 
saying that in Australia's view a GATS-type positive  list approach in a future investment agreement 
should provide the necessary flexibility to host-co untry governments to have the policy space they 
needed to meet development objectives and to regulate foreign investment. 
55. The representative of Cuba
 said that his delegation based its approach on the mandate given 
to the Working Group in Doha for the clarification of certain elements requiring an explicit consensus WT/WGTI/M/21 
Page 16  
 
among Members before an agreement could be r eached on the possible initiation of investment 
negotiations after the 5th Ministerial Conferen ce.  The developing countries were today better 
equipped to understand the implica tions of a possible multilateral investment agreement that might 
inherit the unbalanced principles and rules govern ing the WTO. Hence no one could accuse them of 
excessive caution.  Nor, though, should it be forgo tten that the Singapore issues had some weight in 
the overall balance of negotiations. His delegati on considered that paragraph 22 of the Doha 
Ministerial Declaration did not by any means cover all the issues requiring clarification, and that new 
elements and actors constantly came to light in the complicated regulatory structure implicit in a multilateral investment agreement.  The uncertainty  was made even greater by consideration of the 
implications this legal instrument woul d have for development in our countries. 
56. Cuba did not wish an agreement that protected  only the rights of transnational companies or 
foreign investors, who generally regarded developi ng countries as useful markets for the unrelenting 
growth of their capital assets. Those developing countri es that were primarily recipients of investment 
required protection to ensure that such investment al so served their basic priority which was to benefit 
from stable flows of financing for economic and soci al development. Questions  that required further 
examination were: how markets and domestic inv estment in developing countries were to be 
protected;  how capital flows were to be allocated  to the production or export sectors which generated 
the most income;  how countries could protect themselves from financial volatility, anti-competitive practices, negative socio-cultural repercussions an d the deterioration of the environment that 
accompanied unrestrained liberalization; how to ensu re that any multilateral framework on investment 
would leave sufficient room for the domestic polici es of developing countries and be flexible enough 
to ensure that the latter were able to give prio rity to investments that most benefitted their 
development; how developing countr ies were to benefit from the tran sfer of advanced technology and 
know-how;  how to make sure that obligations we re established for home countries and that they 
would comply with the legislation of recipient countries; how the WTO principles and rules governing trade in goods and services were to be ma de compatible with the domestic development 
policies in any multilateral investment agreement, wh en those principles and rules were incomplete;  
how to resolve disputes between private investors and recipient countries in the framework of an 
intergovernmental organization; and finally, wh ether the WTO was the appropriate forum for 
elaboration of a multilateral investment agreement. 
57. Referring to the joint communication submitte d by several Members in November 2002 
(WT/W/GTI/W152) concerning the obligations of in vestors and home governments, he associated his 
delegation with the many concerns and questions that had been raised at the previous meetings of the 
Working Group. No satisfactory answers had as ye t been received to these concerns and questions, 
despite the technical assistance provided by the WT O and UNCTAD and the contributions of certain 
Members. His delegation also shared the concerns expressed at the present meeting by India and other 
developing countries, which made it clear that th e issues had not been exhausted and that much 
remained to be done in the Working Group. It was important to reiterate that the Doha mandate did 
not prejudge the initiation of negotiations on the so-called Singapore issues but required an explicit 
consensus as a precondition for initiating negotiations , indicating a set of elements on which prior 
agreement was required.  Consequently, in accord ance with paragraph 20 of the Doha Ministerial 
Declaration, negotiations might be  initiated only after separate decisions had been taken on each of 
the modalities. 
58. The representative of Chinese Taipei
 concurred with the view th at future investment rules 
must be shaped in such a way as not to inhibit any country’s space for development, and that the 
GATS-type approach provided a good basis to achie ve this objective in that it allowed Members to 
decide in which sectors and to what extent they would permit foreign investment. However, it was 
important to adopt a focused approach to the issue of the flexibility and policy space under a GATS-
type approach, and not all aspects of future invest ment rules should be subject to flexibility to the 
same extent. Thus, for example, there should be no scope for Members to deviate from the principle 
of non-discrimination principle, and there should be limited scope to deviate from transparency. As to  WT/WGTI/M/21 
 Page 17 
 
 
whether there should be scope for Members to adopt performance requirements, this would need to be 
the subject of further discussion and debate. The fundamental consideration was that although there should be space for Members to design appropriate de velopment strategies, this "space" would need 
to be subject to some limitations. As to whet her GATS-type was "enough" to serve the development 
need, he observed that Thailand had raised several very relevant questions as to whether developing 
countries in practice had real opportunities to decide what to include in – and what to withdraw from 
– their positive lists, and whether there could be more positive commitments from developed 
countries to assist the development of developing countries. He considered that these were valid 
concerns, but that it was possible to address such concerns effectively. In  that regard, the main priority 
for work on future investment rules was to stri ke a satisfactory balance between the needs of 
developing countries and the needs of capital-exporting countries.  
59. The representative of Jamaica
 stated that his country was a capital-importing developing 
country, heavily dependent upon FDI and actively e ngaged in the promotion of FDI.  During the 
1990s, FDI had increased significantly, and Jamaica was also a party to a number of bilateral investment  treaties. Jamaica was interested in the matter of policy space for development. As the 
WTO focused increasingly on regulatory maters, the question was what policy choices successive 
governments in a country such as Jamaica would be  allowed. In evaluating the virtues of a GATS-
type positive list approach, an important issue was whet her such an approach might not lead to a more 
restrictive global investment environment than would otherwise be the case, as there was a risk that 
countries would want to preserve policy space by in troducing comprehensive limitations because they 
were not entirely certain what kind of policy flexibili ty they might need in the future. One could thus 
end up with a multilateral framework with so many li mitations and conditions that a more restrictive 
environment was created than what was provided by  the growing network of bilateral investment 
treaties. If countries made very few commitments, it became an open question as to what would be the 
value added of a multilateral framework. A second is sue was what assurances existed in a GATS-type 
approach that any flexibility that would be allo wed initially would not be subsequently eroded. He 
referred in this respect to the concerns raised by other delegations on the process of progressive 
liberalization under the GATS.  Jamaica was also in terested in the issue raised by Uruguay on the 
relationship between the GATS, particularly its co mmercial presence mode, and a future investment 
agreement. This was a particularly pertinent i ssue as services were now the dominant and fastest 
growing sector of FDI.  Like Chile, his delegati on saw no problem of "crowding out" and was more 
concerned about the lack of investment.  
60. The representative of Costa Rica
 considered that the EC submission adequately addressed the 
concerns expressed by other delegations in the past. It complemented previous debates on the topic of 
policy flexibility and placed the issue in the corr ect perspective.  His delegation agreed that a 
multilateral investment framework was conceivable that would respect national policies and would 
offer Members the required flexibility to enable them to deal with their own development needs.  In 
respect of the concerns that had been expressed  about the possible adverse effects of foreign 
investment on domestic sectors, he noted that Co sta Rica took a different view.  Generally speaking, 
foreign firms in Costa Rica were subject to the same legal framework as was applicable to domestic 
investors.  There were no restrictions on capital tran sfers or on the profits derived from foreign direct 
investment.  Nor were special authorizations require d because of the fact of their being foreign.  
Nevertheless, and contrary to the suggestion made by other Members, FDI in Costa Rica had 
contributed to the strengthening of domestic sect ors and the establishment of new Costa Rican 
corporate businesses, supported by national policies that promoted the establishment of FDI links.  This had not always been the case.  Until quite r ecently, there was no evidence of major links with 
local firms.  However, the necessary conditions were being established to increase links of this kind, 
which fostered growth in other domestic se ctors through measures designed to promote the 
transparency of the domestic legal framework and investment in infrastructure and education.   
61. As was pointed out in the EC submission, it was necessary to ensure that an investment 
framework in the WTO was sufficien tly flexible to preserve the right of governments to define their WT/WGTI/M/21 
Page 18  
 
own policies, even in cases where they might have discriminatory effects in respect of the treatment 
given to FDI compared with the treatment enjoyed by domestic investors. Costa Rica wished to 
preserve the necessary flexibility to define the me asures it considered appropriate for the purpose, 
inter alia , of attracting FDI, creating jobs and deve loping backward regions. The GATS model could 
be a reference point for the flexibility that would be  obtained within an investment framework, insofar 
as this model enabled each Member to decide the level of commitments it wished to undertake under 
the positive list approach.  In general terms, his de legation concurred with the point made by Chile 
about the modest role played by the GATS in the trade liberalization process. Costa Rica preferred to 
continue regarding the GATS as a flexible instru ment and would like all WTO Members to do the 
same, otherwise its room for manoeuvre would be su bstantially reduced. Of course, all Members must 
comply with the commitments undertaken, otherwise there would be no point in participating in the 
negotiations. The GATS was sufficiently flexible to en able each Member to decide on the sectors and 
the level of commitment it was prepared to accept.  As was stated in paragraph 9 of the EC submission, under this system each Member must make its own assessment and define the advantages 
or disadvantages of providing greater certainty, thereby increasing the possibilities of attracting FDI, 
on the one hand, and maintaining flexibility, on the other. In conclusion, Costa Rica considered that a 
multilateral investment framework would serve to  strengthen national capacities for defining and 
implementing national investment policies within a rules-based framework that would increase their 
predictability.  It would be up to each Member to ta ke advantage of this framework and to derive the 
maximum benefit therefrom.  Cooperation in the ar ea of technical assistance would also have a 
significant part to play in the achievement of these objectives.  
62. The representative of the United States
 agreed with the principal theme of the EC submission, 
which was that Members would be able to continue  to pursue development-oriented policies within 
the framework of a WTO investme nt agreement.  It also strongly agreed with the European 
Communities that the Working Group needed to m ove the discussion of the relationship between 
development policies and a potential WTO investment  agreement from abstract scenarios to concrete 
examples. At the same time, however, his delegati on took issue with several elements of the 
submission. First, its tone was more defensive than  was warranted.  The best argument that could be 
made on behalf of multilateral investment disciplines was not that they would do no harm to developing countries but that such disciplines would pr omote an increase in inv estment flows into the 
countries that adopted them.  
63. Second, the EC submission failed to offer a bala nced view of approaches to the scheduling of 
commitments in an investment agreement. It argue d that a GATS-type approach to the scheduling of 
pre-establishment commitments would accommodate a variety of development-oriented policies.  The United States agreed with this characterization, but  it firmly believed that a top-down approach to the 
scheduling of pre-establishment commitments woul d be equally accommodating of policies aimed at 
promoting development. Under a top-down approach , Members would have an opportunity to list in 
an annex any development-related or other measures th at were not consistent with the core obligations 
of an investment agreement.  In terms of the cont ent and scope of the policies they permitted, there 
would be absolutely no difference between a bottom- up and a top-down approach to the scheduling of 
investment commitments.  Thus, a top-down appro ach to pre-establishment offered no less "policy 
space for development" than a bottom-up approach . But a top-down approach had several advantages 
over a bottom-up approach.  Most importantly, a top- down list offered greater clarity and specificity 
with respect both to the scope of market ac cess commitments and to any exceptions to non-
discrimination and other obligations.  The scheduli ng of actual laws and regulations in an annex 
enabled foreign investors to determine with great cer tainty precisely what they could and could not do 
in a given foreign market.  Investors responded po sitively to this kind of transparency. Many WTO 
Members already had considerable experience with  the top-down approach in their bilateral 
investment treaties.  The vast majority of the more  than 2000 bilateral investment treaties now in force 
around the world employed a top-down approach. While many of these bilateral investment treaties did not cover pre-establishment commitments, the United States and Canada had concluded several 
dozen bilateral investment treaties with developi ng countries that did cover pre-establishment – and  WT/WGTI/M/21 
 Page 19 
 
 
did so through a top-down approach.  The investme nt chapters of NAFTA and of the recent free trade 
agreements of the United States with Chile and Singapore also covered pre-establishment and had 
top-down structures. 
64. The object of a WTO investment agreement would be to improve on the status quo , not to 
perpetuate it.  The question for developing countr ies should not be how the scope of international 
investment commitments could be limited but rather how they could attract additional investment that 
promoted growth and development. Finally, the lang uage in the Doha Declaration contained a work 
program, not a negotiating mandate, and it was too early for Members to assume, as the EC submission suggested in paragraph 8, that "a future multilateral framework would include pre-
establishment rules based on a GATS-type, positive lis t approach."  As Members moved closer to 
defining an investment negotiating mandate, the Unite d States would continue to emphasize the extent 
to which a top-down approach accommodate d domestic policymaking requirements. 
65. The third area of concern to the United States w ith the EC submission related to its discussion 
of the claim that FDI "crowded out" domestic i nvestment.  The submission noted, correctly in the 
view of the United States, that there was no credib le empirical evidence to support the "crowding out" 
theory but then went on to argue, in paragraph 24, that a bottom-up approach would enable countries 
to make pre-establishment commitments only in th ose sectors in which they did not perceive a 
"crowding-out" risk. This was a peculiar argument to make.  If there was no credible, real-world 
evidence of "crowding out", why seek to reinfor ce the case for a bottom-up approach on the grounds 
that it would help countries manage the risk of "crowding out"? But perhaps the most convincing rebuttal of the "crowding out" argument was offe red by the policies of the developing-country 
Members of the WTO, which were, almost without exception, actively recruiting additional direct 
investment for their economies. In conclusion, hi s delegation joined the European Communities in 
welcoming concrete discussions of specific deve lopment policies or programmes that countries 
believed might be threatened by a WTO investment  agreement.  The United States did not consider 
that an investment agreement posed any such th reat, but it was willing to consider proposals that 
would address these concerns. 
66. The representative of Peru
 agreed with the point that  the issue of policy space for 
development would have to be a central theme in  future negotiations on a multilateral investment 
framework. Peru had not experienced any problem s resulting from a "crowding out" effect of FDI 
and, indeed, was trying rather to attract FDI.  The EC submission was a useful contribution in that it 
illustrated how development policies could be accommodated through the use of a GATS-type 
approach, but such an approach was not entirely suffic ient.  In this respect Peru considered that an 
investment agreement would need to contain an emer gency safeguard clause, especially in relation to 
portfolio investment, and that a balanced approach  required that such an agreement also include 
obligations of home countries. It was also necessary to clarify the issue raised by Uruguay on how an investment agreement would relate to services that were already covered by the GATS under the 
commercial presence mode of supply. Finally, in light  of the reference to subsidies in the example on 
page 7 of the EC submission, the question arose as to whether, given the lack of progress on the establishment of subsidy disciplines under the GATS, there might not be an inconsistency in this 
respect between a future investment agreement and the GATS.  
67. The representative of Switzerland
 welcomed the EC submission as the first concrete 
illustration of how a GATS-type approach could be applied to national treatment and market-access 
commitments under an investment agreement. The submission also showed how incentives could be 
accommodated through such an approach. The issu e of performance requirements, addressed in 
paragraph 7 of the EC submission, was a complex ma tter, and in this respect he referred to recent 
work by Professor Balasubramanyam who had concl uded that the potential positive effect of such 
requirements on economic developmen t was subject to various conditi ons and constraints. First, 
performance requirements linked to equity more than to the efficiency of operations did not yield any 
results. Second, performance requirements must be applied in conjunction with policies facilitating WT/WGTI/M/21 
Page 20  
 
foreign investment. Third, the principle of non-di scrimination between domestic and foreign investors 
should be applied in the application of performance requirements. Finally, FDI could not initiate but 
only promote economic development, and the su ccess of performance requirements was linked to 
infrastructure, human capital, and macro-economic stability.  Thus performance requirements should 
be applied with great care and with due  regard to various constraints.  
68. In response to Thailand's comment on the comp lexity of investment, as compared with 
services, he noted that in sectors such as banki ng the international supply of services was as complex 
as investment, and that a multilateral framework for investment would only address certain basic 
questions and should not be seen as an instrument  that would comprehensively address all regulatory 
issues relating to foreign investment. With regard  to the concerns expressed on the problem of 
modifying commitments, he wondered how significant th is issue really was given that most countries 
were actively trying to attracting FDI.  
69. The representative of China
 recalled that in previous discussions on the issue of pre-
establishment commitments based on a GATS-type positive list approach, hi s delegation had taken 
the position that there was no need to include pre-establishment commitments in any possible 
multilateral framework on investment within the WT O. This position had not changed. As explained 
by Thailand and other delegations, the GATS-type po sitive list approach was not as simple and useful 
as suggested by the EC submission in addressing th e concerns of developing countries regarding the 
space and flexibility to realize their development policies and objectives. China therefore proposed 
that the issue of pre-establishment commitments  should be totally excluded from any multilateral 
framework on investment within the WTO, and that  this matter should be dealt with by Members 
unilaterally or on a bilateral basis.  
70. The representative of Colombia  noted that the EC submission linked the level of obligations 
with the space for regulation, and that as an example of this link it made the point that countries could 
apply fiscal incentives if this was reflected in thei r respective lists of commitments. The submission 
also pointed to the possibility of a modification of commitments.  Although it was appropriate to link 
flexibility with the level of commitments, her delega tion did not consider that this was sufficient, and 
in this regard she shared the views expressed by Thailand. In assessing the issues involved in a 
possible multilateral framework on investment, deve loping countries had to reconcile the need for 
foreign investment with the guarantee that in future they would be able to r eact to the changing needs 
of their economies. In addition to a positive list approach to commitments, flexibility required three 
additional ingredients. First, negotiations should be balanced between commitments and concessions 
of sufficient interest to developing countries. Thus a negotiation was possible only if Colombia's 
exporters could invest in the distribution services of its products or in the industries that processed its 
primary materials. Second, there had to be a framewo rk similar to Article XX of the GATT that would 
clearly preserve policy spaces for countries, adapted to  the particular needs in this area.  Third, it 
would be important to analyze the role of a temporary withdrawal of concessions either pursuant to a 
safeguard clause or on a permanent basis through the u se of an instrument similar to that contained in 
Article XXI of the GATS.  
71. The representative of Djibouti  stated that the EC submission properly acknowledged the right 
of individual counties to determine their developmen t objectives and policies, and that this submission 
would help enrich the debate in the Working Group . He underlined the importance of the issues raised 
by Thailand. Referring to the comments by Chile regarding counties that had acceded to the WTO 
since 1995, he pointed out that Djibouti had been urged to accede to the WTO as soon as possible and 
that this had made it difficult to properly evaluate  all the implications of their WTO accession. His 
delegation shared the view that further consider ation was necessary of the issue of transfer of 
technology.  
72. The representative of Egypt  noted that the EC submission argued that a GATS-type positive 
list approach would allow individual countries to  choose which sectors to liberalize and to what  WT/WGTI/M/21 
 Page 21 
 
 
extent. In the context of investment, this w ould perhaps imply that a country would undertake 
obligations on the entry of investment in areas speci fied by it, but would also be able to specify 
conditions for entry and operation. While superfici ally attractive, developing Members’ experience 
with the GATS negotiations on specific commitments had shown that this approach did not provide 
adequate protection.  Since the developing countries were in the process of defining their appropriate 
development policies and strategies, it was important  for them to retain flexibility and options for 
corrective measures, including retracting certain steps,  if necessary. The EC submission stressed that 
the GATS did not prevent developing countries from screening foreign investment in services. This 
argument was not valid for various reasons. First, no distinction had as yet been made between pre-
establishment commitments in the GATS and those in any prospective agreement on investment. 
Second, practical experience suggested that the GATS request-and-offer approach tended to favour 
the interests of developed-country Members over t hose of developing-country Members, as illustrated 
in the commitments made with respect to the moveme nt of natural persons. Third, it was hard to see 
how pre-establishment commitments would not limit the ability of developing countries to target 
specific FDI, or pursue their development objectives.  
73. The representative of Egypt noted the EC’s argum ent that there was no empirical evidence of 
a "crowding out" effect of FDI, and moreover that  a prospective multilateral framework on investment 
would not amplify any potential negative impact. In this respect, he referred to the contrary points 
made by India and the Philippines. He felt that by  not taking into account the effects of international 
competition on domestic entrepreneurship, previous studies might have produced biased results. Such 
studies had concentrated on the differential impact of incentives and barriers on the entry and exit of 
foreign and domestic investors, while disregarding  the effects of international competition. More 
recent studies had assessed the role of internatio nal competition in the formation of domestic 
entrepreneurs by linking domestic entry and exit to  import competition and FDI at the industry level. 
74. Regarding the impact of FDI on employment and wa ge levels in host de veloping countries, he 
pointed out that such levels hinged on a number of factors, including the skills of workers in host 
countries, the cost of production, the cost of produc ing a variety of intermediate products, the degree 
of competition, and the rate of growth of return on investment. In light of the manifold factors involved, he wondered how a prospective multilatera l framework could address this vital concern of 
developing-country Members – i.e., how it could lead to an increase in FDI to a level where it would 
stimulate wages and employment. An essential development provision was the right of each developing country to apply conditions to the entr y and operation of FDI in accordance with its own 
development priorities and decisions. At present, ma ny developing countries made use of a range of 
performance requirements in order to channel usefully foreign investments toward national 
development goals. Developing countries already fa ced problems meeting obligations in relation to 
certain trade-related investment measures proscrib ed by the TRIMs Agreement. This experience had 
demonstrated in a concrete manner how po licy space and flexibility could be reduced.  
75. The representative of Mexico
 suggested that the EC submission – and the ensuing debate – 
had underlined the importance of ensuring that  in any prospective multilateral framework on 
investment developing countries would need to ma intain "space" to achieve their development 
objectives. Mexico considered that the approach  mandated by Ministers in the Doha Declaration 
could satisfy the interests of all parties, and that  while the GATS certainly was an agreement with an 
incomplete structure, it should nevertheless be expl ored as a first step towards a common, balanced 
understanding.  With respect to the effects of FDI on development, her delega tion considered that it 
was incorrect to assert that FDI had general nega tive effects.  This was a question of national 
experience, and she highlighted the comments of Cost a Rica in this respect. Mexico's experience with 
FDI on the whole had been positive, as FDI had co mplemented domestic savings and had stimulated 
exports. The benefits of FDI had been achiev ed, not through the imposition of performance 
requirements or obligations on investors, but ra ther through the design of a transparent legal 
framework that provided security to domestic and fo reign investors alike. Empirical evidence showed 
that foreign investment had fostered domestic co mpetition and had thereby strengthened productivity.  WT/WGTI/M/21 
Page 22  
 
76.  The representative of Venezuela
 stated that his delegation attached great importance to the 
issue of "spaces for policies," on which subject Venezuela had submitted a communication to the 
General Council during the preparatory process for the Seattle Ministerial Conference.4  As reflected 
in that communication, his delegation's view on "spaces for policies" was somewhat different from 
that of the European Communities. In its submis sion to the General Council, Venezuela had pointed 
out that the concept of policy space was made up of two thematic dimensions:  first, the "trade 
dimension in a restricted sense", where the aim was to liberalize tr ade, to widen the possibilities of 
market access and to facilitate international fl ows of goods and services; and second, the dimension 
that it had named "spaces for policies", which incl uded a range of policy instruments that could be 
used by developing countries to modify their trade patterns in order to gain and sustain 
competitiveness.  The basic objective behind these inst ruments was not only to induce growth of the 
traditional trade flows of developing countries (b asically commodities), but also to promote the 
structural transformation of their economies, and th e possibility of enhancing the added value of their 
exports. 
77. Venezuela's position with respect to the "spaces for policies" dimension continued to be the 
same as in the above-mentioned 1999 do cument, and this had implications, mutatis mutandis , with 
respect to how Venezuela saw the development dimens ion in this area and in others, in particular 
those areas in which certain decisions could be take n in the future.  Conseq uently, it seemed to his 
delegation that the adoption of the approach put forward by the European Communities, although not 
entirely inconsistent with a vision of development in  that it implied an element of flexibility, needed 
to be supplemented if it were to have any sense,  since it only referred to the trade liberalization 
dimension and ruled out the use of any policy instru ment or measure on the supply side.  In short, it 
omitted what his delegation considered to constitute the "spaces for policies". 
78. For example, it was unclear how the mere use of a GATS-type positive list approach for the 
pre-establishment stage could help to achieve devel opment objectives, such as the diversification of 
production, without any supplementary tools to help  channel and maximize the benefits of FDI. 
Among the tasks that remained to be addressed before it was possible to consider any future decision 
on launching negotiations – in additio n to pursuing the exercise of clarifying the implications of the 
relevant elements in paragraph 22 of the Doha Ministerial Declarati on (and others which might not be 
mentioned therein), including the GATS-type  positive list approach to pre-establishment 
commitments in a possible multilateral investment framework and its relationship with other negotiations currently taking place – serious consid eration needed to be given to the regulatory 
provisions that would give meaning to the conc ept of spaces for policies.  Only then, in his 
delegation's view, would a possible agreement in this area be able to help to generate, on a mutually 
beneficial basis, relationships and new expe riences between the host countries and the home 
countries.  Otherwise, the concept of "sp aces for policies" risked being trivialised. 
79. The representative of Malaysia
 reiterated her delegation's view that developing countries 
should maintain their right and their policy space to  pursue their development policies, and that no 
proposal for an international agreement should prevent them from doing so. Host countries should have the right to regulate FDI – and to screen a nd channel it – in accordance with their domestic laws, 
policies and regulations. Development provisions should form an integral part of the overall 
architecture of any possible multilateral framework  structured with the principal objective of 
maintaining the development policy space needed by  developing countries. In this respect, her 
delegation had on previous occasions proposed that developing countries should be exempted from 
pre-establishment commitments and that they shoul d enjoy exceptions, including permanent carve-
outs, from certain obligations. 
80. The EC submission dealt with a number of the concerns that had been expressed by 
developing countries, including Malaysia, at previo us meetings of the Working Group. The concrete 
                                                     
 
4 WT/GC/W/279.  WT/WGTI/M/21 
 Page 23 
 
 
examples were useful in helping Members to unders tand how to deal with the various policy scenarios 
faced by Members. However, the submission onl y dealt with the question of how development 
concerns should be reflected in the GATS-type appr oach to pre-establishment commitments. This was 
merely one option. The submission did not addre ss the more pertinent i ssue of flexibility from 
progressive liberalization commitments and obligat ions, bearing in mind the relevance of policy 
space. Her delegation was not so much concer ned about how development objectives should be 
reflected in schedules of commitments but about the process and pace of liberalization under the multilateral investment framework. Specifically, he r delegation wished to know how long exceptions 
and limitations could be maintained, whethe r permanent carve-outs would be allowed for 
development reasons, and how the pace of liberali zation commitments and obligations would impinge 
upon developing countries’ policy space.  The GATS-type approach had the effect of straightjacketing  
the commitments originally made by Members.  The EC submission conveyed the false impression that a positive list approach was capable of addressi ng all present and future developmental concerns.  
However, how future policy needs could be accommodated under this approach was a critical 
question that remained unanswered.  
81. On the issue of "crowding out" of domestic industries, such an effect had not occurred in 
Malaysia, even though her country was an important recipient of FDI, because appropriate policies 
had been put in place to channel FDI in accordance  with Malaysia's priorities. Malaysia therefore 
wanted to maintain this policy fl exibility. The issue of "crowding out " could be an area of concern, 
especially to small- and medium-sized enterprises in ancillary and supporting industries where foreign 
investors could bring in foreign suppliers from their home countries that could displace domestic 
suppliers. In this regard, safeguards to address this  concern were necessary.  However, her delegation 
did not contest that FDI could lead to enhancem ent of competitiveness of domestic industries, for 
example, in terms of improvements of  technology and upgrading of skills.  
82. The representative of Kenya
 stated that past experience had shown that countries had adopted 
a wide range of approaches and measures in order to  ensure that FDI contributed positively to their 
development goals.  In this respect, even th e GATS-type commitment approach would entail a 
constraint on the policy space and flexibility, pa rticularly for developing countries. The EC 
submission pointed out that under the GATS-type approach a country was free to choose sectors for inclusion in its commitments. However, as stated  by other delegations, in practice developing 
countries would be subjected to intense bilatera l pressure to commit more sectors than would 
otherwise be the case. There were many linkages be tween sectors in any economy.  The binding of 
commitments in one sector was likely to constrai n policy space and flexibility in other sectors not 
under commitment.  He emphasized that the identifi cation of items for clarification under paragraph 
22 of the Doha Ministerial Declaration did not n ecessarily mean that they were appropriate subjects 
for inclusion in any future multilateral framework .  His delegation therefore saw the GATS-type 
positive list approach as not being compatible with its development concerns  and consequently not 
appropriate in any future mu ltilateral investment framework. 
83. The representative of Poland
 believed that multilateral rules for investment would provide 
better protection and predictability for investors,  and would complete the existing framework for 
investment. The proposed GATS-type positive list approach was a good starting point for further 
discussion on development policy issues, as it provided a considerable level of flexibility, even though the architecture of the GATS was not comple te.  Concerning the relationship of a multilateral 
investment framework to the GATS, Poland was of  the opinion that such a framework should cover 
only goods, excluding services. The exclusion of se rvices would avoid creating any overlap with 
GATS.  Regarding transparency, his delegation consid ered that the three most important transparency 
provisions contained in the GATS concerning publica tion, notification and administration should also 
be included in a multilateral framework for investment.  
84.   The representative of Canada
 stated that, as was evident from the Doha Declaration, all 
countries placed great importance on ensuring that th eir ability was preserved to govern and regulate WT/WGTI/M/21 
Page 24  
 
in key sectors or policy areas. In addition, ther e was a recognition that policy flexibility meant 
different things to different countries.  Not only did countries seek flexibility for differing objectives, 
they also sought to implement flexibility in ways ap propriate to their individual needs. Canada agreed 
with the European Communities that maintaining policy space to pursue national development 
objectives and the negotiation of a stable, predic table and transparent multilateral investment 
framework was not an either-or proposition. Policy flexibility should not be incompatible with basic 
principles such as transparency, predictability a nd accountability that would underlie any prospective 
agreement. The Doha Declaration specifically referred to the recognition of "the case for a multilateral framework to secure transparent, stable  and predictable conditions for long-term cross-
border investment." 
85. In Canada’s view, signing on to a transpar ent and non-discriminatory regulatory framework 
was more likely to attract long-term investment, from both domestic and foreign sources, than a 
regulatory environment that was non-transparent and discriminatory. Thus Canada saw value added to 
an investment agreement, whether it be bilatera l or regional or multilateral. The best way to 
accommodate policy flexibility in an agreement was to  do so explicitly. The view expressed in the 
Working Group that developing countries should be ab le to avoid commitment s aimed at encouraging 
FDI through a multilateral framework was somewhat of  a paradox in light of the general recognition 
of the desirability FDI. 
86. It was also beside the point, as all countries ultim ately agreed that no single standard applying 
to all signatories was appropriate for a multilateral framework. All countries need ed an agreement that 
was flexible enough to accommodate the priorities of  individual counties, and all countries recognized 
the existence of sensitivities in this  regard, which applied to both de veloped and developing countries, 
up to and including exceptions to MFN, retaining the right to discriminate in selected sectors and 
investment review. Like other countries, Canada  would need such accommodation in a multilateral 
framework. Thus it was necessary to keep a proper pe rspective on this debate on policy flexibility in 
relation to a multilateral framework. Such a fra mework was aimed simply at facilitating the 
negotiation of mutually beneficial rules to provide  a better legal framework for investment flows and 
would by no means entail the need for constituti onal amendments. He concurred with Chile that a 
multilateral framework could either be negotiated in the WTO or evol ve as a result of other inputs.  
87. The representative of Argentina
 stated that while the analys is of the individual elements 
contained in paragraph 22 of the Doha Ministerial Declaration was important, it was also necessary to 
take into account the fact that a multilateral frame work on investment would be constructed against 
the background of an existing framework of WT O rules. As a consequence, the objective of 
appropriately reflecting the devel opment dimension in an investment agreement involved not only the 
balance between the internal elements of such an agreement, but also the relationship between that 
agreement and other investment-related rules in the WTO. Apart from the GATS, consideration should be given in this respect to the TRIMs Agreement, the TRIPS Agreement and the Dispute 
Settlement Understanding. Whereas broadly speaki ng an investment agreement could encompass 
three main dimensions – liberalization, protecti on and dispute settlement – the EC submission only 
addressed the first dimension, and proposed a GATS-type approach to pre-establishment 
commitments. 
88. In this connection, he asked the European  Communities to explain whether its proposed 
positive list approach was intended to apply only to pre-establishment commitments or also to 
substantive disciplines, and what the nature of su ch disciplines would be. Thus, for example, it was 
important to know whether such disciplines would en compass rules on transfer s and payments similar 
to Article XI and footnote 8 to Article XVI of the GATS.  In the absence of clarity as to whether the 
positive list approach would apply to pre-establishmen t commitments only, or also to other aspects of 
the treatment and protection of investment, it wa s difficult to form an opinion as to whether an 
investment agreement would allow sufficient polic y flexibility for development purposes. While the 
positive list approach might perhaps result in too mu ch flexibility where countries had not made any  WT/WGTI/M/21 
 Page 25 
 
 
commitments, his delegation considered it importa nt to provide for an appropriate degree of 
flexibility, both with respect to the entry and the operation on investment, to accommodate possible 
future policy needs. The experience with regiona l investment agreements that contained broad 
definitions of investment combined with extensiv e definitions of the concept of expropriation and 
provisions on investor-state arbitration had demons trated that in order to safeguard the right to 
regulate of host countries, flexibility would need to be extended to the post-est ablishment treatment of 
investment.  With respect to the issue of performan ce requirements, account had to be taken of the 
experience gained with the operation of the TR IMs Agreement and the views of Members on the 
impact of this Agreement on the de velopment policies of developing c ountries.  Similarly, with regard 
to the issue of investment incentiv es, account need to be taken of the disciplines of the Agreement on 
Subsidies and Countervailing Measures and the di ffering views on their cost and benefits.  
89. In response to Costa Rica, the representative of Thailand  stated that she ag reed that the GATS 
was a flexible instrument, but that it also containe d features that were not entirely appropriate to the 
interests of developing countries.  Thus, the GATS di d not contain obligations on developed countries 
to take positive action in favour of developing countries.  Moreover,  developed countries had failed to 
offer commitments in areas of interest to deve loping counties, such as the movement of natural 
persons.  She agreed with Jamaica that the a doption of a GATS-type positive list approach might 
result in the introduction of additional restrictions on investment for tactical reasons.  In response to 
Switzerland, she said that an investment agreement with a general national treatment clause would be 
far-reaching in its implications and would, for exam ple, apply to regulations  governing ownership of 
land.  
90. The representative of Japan  suggested that it appeared that all Members agreed that FDI had 
positive effects on their economies, and that a set of rules to ensure a predictable investment 
environment was desirable.  The GATS approach had been referred to only as a possible model of a 
flexible structure that enabled Members to accommod ate the interests of host countries, investors and 
home countries.  Since work was under way to impr ove existing GATS rules, any proposal to use a 
GATS-type approach could not be criticized solely on  the grounds that its rules were in some respects 
deficient.  With respect to the view that the GA TS-type approach was inadequate because countries 
were facing pressure to make commitments, he c onsidered that it was inherent to a multilateral 
negotiation that countries faced demands of other countri es.  However, it remained true that under this 
approach no country could be forced to make commit ments that it had no capaci ty to enter into.  The 
issue of pre-establishment commitments was extr emely sensitive, and thus required a flexible 
approach.  However, given the importance of pre- establishment commitments from the perspective of 
ensuring predictability for investors, the omissi on of pre-establishment provisions from a multilateral 
framework would seriously diminish its value. On the issue of performance requirements, it was the 
view of his delegation that such measures were bur densome and generally ineffective.  Finally, he 
disagreed with the comment by India that there had been no adequate responses to the joint 
submission tabled in 2002 on the question of investors'  responsibilities.  As stated at that meeting, the 
position of his delegation was very clear in that it was important that multinational enterprises behave 
responsibly, but that there were legal obstacles to  the kind of approach advocated in the joint 
submission, and that a flexible, "gui deline-approach" was more appropriate. 
91. The representative of th e European Communities  stated that he was impressed by the level of 
engagement in the discussion.  His delegati on was very serious about the ongoing round of 
negotiations and its developmen t dimension. The European Co mmunities had also seriously 
considered what development objectives could be re ached through talks on investment.  It was well-
known that most FDI flowed between develope d countries in the absence of any investment 
agreement.   Thus, the European Communities did not need multilateral investment rules to cover 
investment relations with its main trading partners.  On the other hand, a theme consistently raised by 
developing countries in meetings with the European  Communities was the need for more investment 
in developing countries, and the Communities was of ten asked by developing countries to assist in 
investment promotion activities.  The Communities had thus carefully reflected on possibilities WT/WGTI/M/21 
Page 26  
 
available to stimulate investment in developing c ountries.  Contacts with investors had made it clear 
that, apart from business opportunities, the key issues were stability, predictability and transparency.  
As reported in a World Bank report published in 20 02, net FDI flows to developing countries had 
fallen sharply. The reasons for this decline were of course multiple, but it was clear that investment 
promotion was not enough, and that problems of lack  of transparency and predictability had to be 
addressed.  It was for this reason that his delega tion had proposed a multilateral framework based on a 
GATS-type approach. 
92. With respect to the concerns th at once a country had made a commitment to open a sector to 
investment, it no longer had the flexibility to rever se that commitment in the future, his understanding 
was that this was a rather theoreti cal scenario.  In any event, if this were the reason for refusing to 
enter into commitments, it would only undermine the confidence of investors. Given the concentration 
of FDI flows in several large, emerging markets in  Asia, the question arose as to why investors would 
invest in other developing-country markets if there were no assurance of legal security.  Consequently, it was necessary to send a strong signa l to investors through a multilateral investment 
framework that developing countries were comm itted to predictable and transparent rules. 
93. Referring to statements comparing the GATS and a future agreement on investment in 
manufacturing, he stated that in the context of the GATS countries with a strong services sector were 
trying to open up foreign markets and obtain access  for their service suppliers. In investment, 
however, the situation was completely different  as developing countries were desperately seeking 
more FDI.  Thus there was not the same ki nd of pressure upon developing countries, and a 
multilateral agreement provided them with a unique opportunity to reassure investors from developed 
countries regarding the transparency of their investment environments. 
94. On performance requirements and investment incen tives, he stressed that his delegation did 
not wish to include these issues within the scope of  a prospective investment framework.  The main 
aim of the EC submission was to show with conc rete examples that a GATS-type approach would 
preserve the policy space needed by countries, in pa rticular developing c ountries. Although concerns 
of a political nature – and unsubstantiated fears – had been expressed, he had not heard many concrete 
objections to the proposed approach.  His delegati on was aware that some countries were concerned 
that their policy flexibility would be limited, but  his delegation did not share this view and was 
prepared to continue a dialogue with these countries on this issue.  As to the more political concerns, 
these seemed to reflect the fact that some delega tions had already exhausted the technical arguments 
and were resorting to tactical approaches.  However,  it would be a big mistake to use the leverage of 
investment in the round to obtain more concessions in  other sectors.   The objective of this Working 
Group was not to trade-off investment against othe r subjects.  Rather, the objective was to promote 
development, and he urged the Gr oup not to miss this opportunity.   
95. He then addressed several points of a more technical  nature that had been raised in respect of 
the EC submission.  In response to a question po sed by Uruguay, he recalled that in previous 
submissions in WT/WGTI/W/121 and 122, his delega tion had proposed that a multilateral framework 
on investment should not reopen the GATS and should be limited to non-services FDI.  In response to 
the question raised by the Philippines on what woul d be the value of an agreement with limited 
commitments, he stated that while there might be a few Members that would want to make only 
limited commitments, his impression was that many Members were ready to make substantial commitments.  A multilateral framework had a clear value added as it would send a signal to investors 
about the extent to which various countries were re ady to make commitments.  On the question raised 
about the example of subsidies on page 7 of the EC  submission, he explained that this example was 
taken from an existing schedule. While the GATS did not contain specific subsidy disciplines 
comparable to those of the Agreement on Subsid ies and Countervailing Measures, the granting of 
subsidies was covered by the nati onal treatment obligation of Article  XVII, unless otherwise indicated 
in a country schedule.  Finally, his delegation agreed with the need fo r a balance-of-payments  WT/WGTI/M/21 
 Page 27 
 
 
safeguard clause in an investment agreement, but  found it difficult to understand in what other 
circumstances there would be a rationale for a temporary safeguard clause.  
96. The representative of Canada  introduced its submission on the issue of transparency 
(WT/WGTI/W/155), which aimed to build on the Working Group’s previous discussion of transparency and related submissions of the Secr etariat, the European Communities, Japan, and the 
Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu.  Transparency underpinned a 
stable and predictable economic environment th at enabled the flow of productive capital.  A 
government that was committed to transparency-enhan cing policies sent a positive signal to investors 
about its determination to create an investme nt-friendly business environment. As with non-
discrimination, transparency was a fundamental principle underlying the rules-based international 
trading system of the WTO.  However, as noted  in the 2002 Annual Report of the Working Group, 
transparency obligations did not figure prominen tly in most existing international investment 
Agreements. Canada, therefore, believed that a multil ateral framework on investment anchored in the 
WTO, with transparency as a core element, would maximize the benefits of foreign investment and 
fill an institutional gap. 
97. WTO Members had recognized the importance of tr ansparency to an effective trading system 
at a very early stage, most particularly in Artic le X of the GATT, which included provisions on the 
publication of a broad range of laws and other m easures affecting trade in goods.  This had been 
likewise reaffirmed with the negotiation of GA TS Article III. A commitment to transparency 
benefitted all countries, regardless of their level of development.  Investors, whether foreign or 
domestic, were more likely to invest where they could readily ascertain the laws that would govern 
their investments.  As noted by the World Bank in Global Economic Prospects 2003, "Case studies 
suggest companies may, for example, be willing to  invest in countries with legal and regulatory 
frameworks that would not otherwise be considered  "investor friendly" – provided the companies are 
able to obtain a reasonable degree of clarity about the environment in which they will be operating." 
In contrast, a non-transparent business environment raised information costs, diverted corporate 
energies toward rent-seeking activities, and might give rise to other inefficiencies and distortions.  
The heightened risk of operating in such a busin ess environment either translated into higher risk 
premiums or imposed additional informational cost s on enterprises.  Not surprisingly, a growing body 
of research had found an inverse relationship betw een country risk and the rate of return on an 
investment. Previous submissions by the Euro pean Community (WT/WGTI/W/110) and Japan 
(WT/WGTI/W/112) had confirmed that the absence of regulatory transparency was considered to be 
the most serious obstacle to investment as seen th rough the eyes of prospective investors.  This 
sentiment had been echoed by Canadian investors.  Hence, for countries hoping to attract FDI, 
initiatives to increase regulatory transparency were beneficial for both the country and the foreign 
investor.  Indeed, recent empirical evidence suggest ed that a government that took steps to increase 
the degree of transparency in its policies and institu tions could be rewarded with significant increases 
in the level of incoming foreign investment.   
98. The Secretariat background Note (WT/WGTI /W/109), specifically paragraph 5 of the 
executive summary, suggested that th e goal of transparency could be affected by the way in which 
other obligations, commitments, and exceptions were worded in an agreement.  With this mind, 
Canada believed that all Members needed to consid er how best to structure a prospective multilateral 
framework on investment that provided investors with a clear understanding of those sectors that 
would, and would not, be open to foreign investment . The structure of such a framework should also 
be development friendly, accommodate flexibility, a nd be fully consistent with a government’s right 
to regulate in the public interest.  Without prej udging the scope and structure of a prospective 
multilateral framework on investment, existing tr ansparency obligations found in various WTO 
Agreements could serve as useful models. The WTO's general transparency provisions – the 
obligation to publish, notify and im partially administer all relevant  rules and regulations – already 
applied to investment-related trade issues inso far as they were key provisions of the GATS 
(specifically mode 3), the TRIPS Agreement and the TRIMs Agreement. As had been noted by WT/WGTI/M/21 
Page 28  
 
several delegations, the GATS contained comprehe nsive transparency obligations that required 
Members to publish, or otherwise make publicly ava ilable, laws and all relevant measures of general 
application that affected the operation of the Agreem ent.  The most important of these were contained 
in Article III – Transparency, and Article VI – Domestic Regulation.  Under TRIPS Article 63, Members were required to publish, inter alia , relevant laws and regulations to enable governments 
and right holders to become acquainted with them .  TRIMs Article 6 reaffirmed commitments with 
respect to Article X of the GATT, as well as notif ication procedures, including the Ministerial 
Decision on Notification Procedures. Canada believed th at a useful benchmark, or reference point, for 
the initial development of transparency obligations  was Article X of the GATT and Article III of the 
GATS. 
99. Transparency provisions, such as those found in the GATT, GATS, TRIMs, and TRIPS 
Agreements had provided all Members with valuable "hands-on" experience that could be transferable 
to a prospective MFI. Canada nevertheless re cognized the necessity of providing developing and 
least-developed countries with technical expertise and capacity-building assistance to enable these 
Members to implement, and thereby benefit from, a ny prospective transparency obligations.    In 
conclusion, Canada viewed a commitment to tran sparency-enhancing policies as a strong signal of a 
government’s determination to foster a stable and predictable investment  climate.  In return for this 
commitment, a country raised its profile among fore ign and domestic investors alike, since the key 
policies to further both foreign and domestic invest ment were in many respects identical; in other 
words, a transparent investment envi ronment benefitted all investors.  
100. The representative of Canada then introduced its submission on "The interrelationship and 
emerging infrastructure of a prospective WTO mu ltilateral framework for investment based on 
elements identified in paragraph 22 of the Doha Declaration" (WT/WGTI/W/157). In examining the 
contents of the 2002 Report of the Working Group to  the General Council (WT/WGTI/6), as well as 
more detailed individual meeting reports, it was evid ent that the Group had explored many aspects of 
all the paragraph 22 issues in accordance with the D oha Ministerial Declaration.  Indeed, the Working 
Group had also had the opportunity to deliberate additional issues.  Based on progress by the Working 
Group, it was evident to Canada that discussion of the issues singled out for attention by Ministers, as well as additional issues, had facilitated the conc eptualisation of a realistic, meaningful, and 
integrated multilateral framework for investment unde r the WTO umbrella of agreements. Canada had 
been happy to make submissions on all elements id entified for further consideration by Ministers.  
Addressing a few basic precepts in each could point to directions that would be most usefully pursued 
in negotiations.  Some of these emerged more de finitively when the elements were considered 
holistically.  Few of the principles were entirely new to delegations at the Working Group who negotiated on investment in many other fora. Further progress on these issues in the WTO would similarly be best facilitated through the structure a nd parameters that were inherent in the negotiation 
of investment rules deemed mutually beneficial by all parties.  
101. Consideration of a prospective multilateral frame work for investment in the Working Group 
had properly commenced with a useful discussion of " scope and definition". Canada considered that a 
"scope" article itself would help to anchor a WT O investment agreement within the framework of 
international trade and investment relations more generally, including vis-à-vis  other WTO 
agreements.   Definitions also shaped the scope and reach of provisions in an investment agreement.  
Canada favoured starting with a broad definition of investment to better reflect business behaviour in 
the contemporary world economy.  Given the changing dynamics in the way business forms 
international linkages today, including between home and host entities, any agreement that ignored 
minority shareholdings and/or strategic alliances risked being an agreement already obsolete.  
Nonetheless, Canada did not believe that any or a ll types of investments should fall under the scope of 
an investment agreement, nor even that all assets th at did fall under the umbrella of such an agreement 
should be covered with respect to all provisions at  all times.  Many of the relevant issues requiring 
further attention in negotiations had already been  successfully identified in the discussions in the 
Working Group.  WT/WGTI/M/21 
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102. With regard to non-discrimination and modalities for pre-establishment commitments, the 
Canadian submission on these elements had discussed these issues together, principally to anchor the 
discussion of how commitments were made in an agreement to the substantive provisions of the 
agreement itself.  This was because Canada belie ved that the approach to commitments in an 
agreement, whether pre-establishment or otherwise, could in many respects determine the scope of the 
agreement itself.  This discussion did not take place in a vacuum.  Non-discrimination was a 
fundamental principle underlying international trad e and investment agreements.   At the WTO, 
investment in services industries encompassed one approach to scheduling commitments.  
Alternatively, in among over 2,000 bilateral and regi onal agreements other approaches were used.  In 
addition, this discussion also naturally led to a c onsideration of other issu es such as scope and 
transparency.   
103. In paragraph 20 of the Doha Ministerial Decl aration, along with stability and predictability, 
Ministers highlighted transparency as among the preconditions for a multilateral framework.  This 
fundamentally important underlying principle had th e potential to give real meaning to investment 
negotiations through enhanc ing prospects for qualitative and quantitative improvements in investment 
flows.  It also had echoes in other WTO agreemen ts – in the GATS, in particular in Article III 
pertaining to investment in services industries.  Ca nada had also pointed out that the approach to 
scheduling commitments would also have a beari ng on the inherent transparency embodied in the 
agreement.  An investment agreement predicated  on general applicability, with defined exceptions 
and reservations to selected obligations, was more  transparent than an agreement predicated on 
limited commitments, undertaken only with respect to  selected obligations.  Canada also believed that 
in the interests of transparency, consultations on this and other issues should continue with 
stakeholders, both domestically and through other avenues.   With resp ect to consultati ons and dispute 
settlement, Canada believed that any mechanism should lie firmly within well-established WTO 
norms.   Exceptions and balance-of-payments safe guards were among the issues that would also have 
to be addressed in a comprehensive agreement.  Fortunately, this was a relatively uncontroversial 
topic when discussed by the Working Group since it was accepted that an accommodation of both 
subjects should be part of any negotiatio ns of an investment agreement.  
104. Technical assistance and capacity building were crucial for developing and particularly least-
developed country participation in any negotiations  on investment in the WTO.  Canada strongly 
believed that this assistance would reap more pr oductive rewards for host countries when it could be 
allocated in a more focused manner towards the negotiating requirements of developing and least- 
developed countries.  Canada looke d forward to hearing from these countries on how this could best 
be facilitated, including with respect to complemen ting domestic efforts in this regard. In addition, 
Canada noted the importance of the principle of "f lexibility", including with respect to developing 
countries, in a WTO investment agreement.  This wa s a principle of such great importance to all WTO 
Members that Canada would work to ensure that – consistent with a proper balance of rights and 
obligations – the flexibility inherent in every economy’ s right to regulate in the public interest also be 
captured in a WTO investment agreement.  
105. In summarising basic tenets on paragraph 22 issu es singled out for attention by Ministers at 
Doha, it was apparent how cross-cutting and indeed mu tually reinforcing they were.  It was Canada's 
belief that the nascent structure of an agreement w as already evident from this  interplay.  This was 
perhaps not surprising.  Most Members had a bilatera l if not regional approach to agreements on these 
issues. Canada believed that all Members could benefit from a negotiation of a framework that 
Ministers specifically noted when they mandated clarification by the Working Group on specific 
issues.  This would be most productive through a more focused discussion and could be facilitated 
under the terms of reference and mandate of a fu lly-fledged negotiating group. This was a workable 
aim that should be pursued not only because it could be done, but because it was in Members' 
collective interests to do so.  Canada looked forward to  working on how this could best be achieved in 
the coming months. WT/WGTI/M/21 
Page 30  
 
106. The representative of Japan
 introduced its submission (WT/WGTI/W/158) on "Consideration 
on the necessity of multilateral investment rules fro m diversified viewpoints". In previous Working 
Group meetings, questions had been raised by de veloping countries concerning the relationship 
between development policies and prospective multilate ral investment rules, an d the necessity of such 
investment rules. The objective of this paper was to  respond to such concerns and sort out the points 
of issues regarding investment rules. The first pa rt of the submission considered the relationship 
between development policies and investment rul es, and the second part explained the needs and 
benefits of investment rules. 
107. First, from paragraphs 1 to 8, the submission illustrated the large contribution made by FDI   
to developing-country economies. For example, ac cording to an UNCTAD report, half of China's 
exports and one-quarter of its manufacturing production was accounted  for by foreign affiliates. 
Accordingly, from the aspect of the developmen t policies in developing countries, FDI was an 
extremely important activity. Therefore, bearing in mind that each country was at a different stage of 
development and had different deve lopment policies, discussion to date had focused on the flexible 
structure of rules to avoid conflict between i nvestment rules and such development policies. 
108. Secondly, changes in FDl patterns were also im portant. He highlighted two points in this 
regard. Paragraph 10 illustrated th e high investment ratio by small- and medium-sized enterprises 
(SMEs). Looking at FDI from Japan's perspective, approximately 50 per cent of total investment was 
accounted for by SMEs which had limited resources. Such FDI in various types of corporations was 
important for the development of supporting industries in host countries. However, there remained the 
problem that SMEs did not have sufficient informat ion concerning the investment environment. This 
was an argument for creating a more predictable i nvestment environment through investment rules. A 
second important change in the patte rns of FDI was that capital impor ters would likely become capital 
exporters at some future date. Taking into account th is point, investment rules would be important and 
useful for host countries not only for promoting inward FD I, but also as a tool for future outward FDI.   
In certain sectors many developing coun tries were already exporting capital.  
109. The second part of Japan's submission discussed th e necessity of investment rules within the 
WTO system. The first point was the relationship with existing rules, in particular with GATS. Taking 
into account that GATS already covered investment in  services sectors under mode 3, the fact that no 
disciplines existed to cover investment in goods was a source of imbalance. The structure of rules in 
the WTO system regarding investment should be reconsidered, since there was a great amount of FDI in the manufacturing sector, directed especially towa rds developing countries. This was also discussed 
in detail in another paper on "The relationship between the future i nvestment multilateral rules and the 
GATS" (WT/WGTI/W/156).  Second, investment rules were important in order also to maximize the 
benefits of liberalization that had been achieve d to date in GATT/WTO negotiating rounds. In other 
words, in order to sufficiently utilize the benefits of  trade liberalization, investment liberalization was 
also essential. For example, as was stated in paragraph 20, each country would be able to enjoy the 
results of trade liberalization, with new capital a nd technologies and global ne tworks brought about by 
FDI. The impact of investment liberalization had b een shown with a model analysis. For example, an 
analysis conducted by Japan and Korea in APEC in  2000 indicated that investment liberalization in 
the APEC region would increase GDP by 0.3% in the region. The same points had also been made in 
a report by the World Bank;  i.e. that if negotia tions on prospective multilateral investment rules and 
negotiations on liberalization in other sectors were mu tually advanced, they would bring about merits 
for developing countries. Finally, he emphasized  the importance of investment rules for both 
developing countries and developed countries from th e perspective of their impact on the economy 
and utilizing the results of trade liberaliza tion achieved in previous negotiation rounds. 
110.
  The representative of Japan  introduced its submission on "The relationship between the 
future multilateral investment  rules and the GATS" (WT/WGTI/W/159).  Since GATS had been 
referred to frequently in past discussions of the Wo rking Group, his delegation felt it would be useful 
to explore how the GATS related to investment, a nd how future multilateral investment rules might  WT/WGTI/M/21 
 Page 31 
 
 
deal with FDI in the services sector (as already cove red by the GATS).  The paper also discussed the 
development dimension of the GATS. 
111. On the question of how the GATS related to FDI,  it was Japan’s understanding that FDI in the 
services sector was already clearly covered by th e GATS, through mode 3.  It was sometimes argued 
that GATS did not deal with FDI per se , but rather with the "commercial presence" necessary for 
trade in services – i.e., that FDI was covered by the GATS only as a result of the GATS covering 
certain modes of services supply.  However, the im portant point was that FDI in the services sector 
enjoyed a more predictable and secure status than  FDI in the goods sector as a result of the GATS 
provisions. 
112. From the standpoint of an investor, and more importantly, from the standpoint of the local 
economy, there was no reason to differentiate betw een GATS mode 3 in the services sector and FDI 
in the goods sector.  From the investors' standpoint, investors invest in the services sector or the goods 
sector for the same economic reason – to produce and supply their services or goods in the local 
market.  From the standpoint of the local economy, FDI in either sector brought benefits to local consumers in the form of goods and services at more attractive costs and in more variety.  FDI also 
contributed to the growth of the local economy through increased local employment, export capacity, 
and technology transfer, among others.  Based on th ese observations, Japan believed that "commercial 
presence" in the services sector or a "production b ase" in the manufacturing sector held the same 
meaning in economic terms, that GATS was indeed rele vant to the consideration of future investment 
rules. 
113. As to how future investment rules should deal  with FDI in the services sector, Japan believed 
that there could be two basic approaches:  (i) the services sector could be excluded from any 
prospective agreement, as it was already covered by the GATS; or (ii) the services sector could be included under one set of investment rules applicab le to all sectors.  If the first approach were 
adopted, it might be desirable for a future invest ment framework to be similar in structure and 
provisions to the GATS, insofar as this was possi ble, so that there would be no unjustifiable 
differences in the treatment of FDI in the services sector and non-services sector.  If the second 
approach were adopted, it would be important to en sure that there was no conflict or inconsistencies 
between broad-based investment rules and the GATS,  as both rules would apply to FDI in the services 
sector. 
114. On page 3 of Japan’s paper, the developmen t dimension of the GATS was discussed.  Japan 
believed that the flexible structure of the GATS wa s indeed an important feature of the Agreement, 
and had important implications for the design of an y future investment rules.  Although this was an 
extremely important issue, since the EC had also contributed a well thought out paper on it, his delegation would refrain from going into details. 
115. In conclusion, he pointed out that the GATS wa s extremely relevant to the Working Group’s 
discussion – especially if Members believed that FD I in the goods sector should enjoy as predictable 
and secure an environment as FDI in the services sector .  In particular, the Working Group needed to 
take the GATS into account when cons idering numerous issues such as, inter alia : whether a future 
investment framework should cover the services sector; whether it should include commitments 
related to the pre-establishment phase of inv estment; and whether it should adopt a positive list 
approach.  More importantly, the GATS’s flexible  structure needed to be taken fully into 
consideration in the discussion of the Working Group. 
116.  The representative of China
, in introducing a written contri bution on "Scope and Definition" 
(WT/WGTI/W/159), stated that any possible multilate ral framework on invest ment should enable 
developing countries to attract FDI effectively while avoiding financial risks.   The forms and structure of international capital flows had continua lly evolved, and foreign portfolio investment had 
recently increased in relative importance. Although such portfolio investment had contributed to WT/WGTI/M/21 
Page 32  
 
economic growth and development, it was far more complex than FDI and, as demonstrated by the 
experiences with regional financial crises, there we re significant differences between countries with 
respect to their capacity to supervise capital markets.   Foreign portfolio investment should therefore in 
China's view not be included in the definition of i nvestment of a multilateral framework.  The issue of 
scope and definition was the foremost issue that s hould be resolved if Members would like to have a 
multilateral investment framework negotiated within the WTO.  China considered that agreement on 
the definition of investment was a perquisite to any negotiation on investment in the WTO and that 
this matter required further detailed discussion in the Working Group.  
117. In introducing a written contribution on "Transparency" (WT/WGTI/W/160), the 
representative of China  stated that the concept s hould be applied to home countries, host countries as 
well as foreign investors. The establishment of an open and transparent environment in host countries 
would help reduce investment risks and enhance predictability and stability for investment and 
thereby build up and enhance confidence for investor s. Transparency on the part of the governments 
of home countries and investors with regard to their investments in host countries would help host countries, especially developing countries, to attain  their development policies and objectives.  China 
therefore favoured the inclusion of transparency provisions included in any possible multilateral 
framework on investment within the WTO.  The submission in WT/WGTI/W/160 offered preliminary suggestions with regard to the content of such pr ovisions.  In the formulation and implementation of 
transparency provisions, account should be taken of  the disparities of levels of development among 
different categories of Members, and special a nd differential treatment should be accorded to 
developing countries in this regard.   To incr ease the capabilities of developing-country Members to 
implement provisions on transparency, developed countries should be required to commit themselves 
to provide technical and capacity-buildi ng assistance to the developing Members.  
118. The representative of India
 agreed with the view expressed by China in its submission 
(WT/WGTI/W/160) that transparency should be limite d to the publication and notification of policies, 
laws and regulations. He disagreed in this resp ect with the position of Canada in WT/WGTI/W/155 
that transparency requirements should not only appl y to the publication and notification of laws and 
regulations but also to their administration.  In dia also concurred with China’s view that the 
investment relationship involved the host country, th e home country and the foreign investor and that 
the notion of transparency should therefore not only apply to host countries but also to the operations of foreign investors and measures taken by home count ries with regard to outward investment flows,  
including general and sectoral restrictions, if any, and transfer of technology provisions.  
119. The representative of India then commented on Japan's submission on "The relationship 
between the future multilateral inv estment rules and the GATS" (WT/WGTI/W/156).  With respect to 
the point that the GATS already covered invest ment through the commercial presence mode of 
supply, it was India's view, as explained in its submission circulated in WT/WGTI/W/150, that the GATS did not deal with investment in services and that commercial presence was only a mode of 
service delivery.  Mistaking this as a commitment for investment per se  in that sector was mistaking 
the medium for the message.  In fact, the Jap anese submission itself mentioned that "the GATS 
...covers FDI in effect". Economists had once cons idered services to be non- tradable because the 
conventional notion of trade, define d as cross-border flow, was not f ound to be applicable to most 
services.  Thus the definition of trade in services in terms of different modes of supply and the architecture of the GATS had to be evolved to make the GATS  possible.  It would be illogical if this 
mode-based definition were now app lied back to the goods sector.   
120. Japan's submission also argued in effect that trade and investments were one and the same.  
This argument was pregnant with implications as regards the pursuit of the developmental goals by 
the Members.  For example, whereas in the case of trade in goods contingency protection provisions were available in the form of rules on anti-dum ping, safeguards and subs idies and countervailing 
measures, there were no equivalent provisions in respect of trade in services. The mandated 
negotiations on 'emergency safeguards' in services trade were lingering on and had missed a number  WT/WGTI/M/21 
 Page 33 
 
 
of deadlines.  Nor was there movement on the i ssue of disciplines on subsidies under the GATS.  
Another important difference was that the GATS provided for conditional national treatment and 
conditional market access, whereas the GATT did not  provide for such cond itional national treatment. 
This made the issue of the applicability of the mode-b ased definition of trade in 'services' to trade in 
'goods' more complex. The GATS model did allow sector-specific national treatment exemptions, 
whereas such limitations, including that relating to local content, were already prohibited for goods 
under the TRIMs Agreement.  For foreign investment in  goods such limitations could take the form of 
performance requirements to be fulfilled by the fo reign investor in a manner decided by the host 
country.  Moreover, commercial presence, which was a key mode for the delivery of services, did not have the same relevance for trade in goods.  Referring to a question posed by the European 
Communities on the relevance of safeguards in the cont ext of investment, India observed that to admit 
foreign investment essentially meant allowing fore ign firms to compete with domestic producers in 
the domestic market.  As in the case of the impor t of goods, foreign firms could cause injury to 
domestic industries – which, in the case of developi ng countries, were very likely to be infant 
industries.  In the negotiations on emergency safe guards under the GATS, Members had not been able 
to even define the concept of domestic industry.  All this showed that one was trying to build 
investment rules on the platform of an organizati on that was meant to deal with trade that was 
essentially of a cross-border nature.  Finally, with regard to the ar gument in Japan's submission that 
the use of a GATS-type approach would make a multilateral investment framework development-
friendly, India's position was that the developmenta l goals of Members would be better served in the 
absence of any binding multilateral agreement on investme nt.  He referred in this respect to the points 
made by his delegation on the EC subm ission on "Policy space for development". 
121. With reference to the submissions of Canada and Japan in WT/WGTI/W/157 and 
WT/WGTI/W/158,  the representative of India then commented on a number of specific elements that 
were the subject of discussion in the Working Group.  On the issue of definition, India agreed with the 
point made by China in WT/WGTI/W/160 that any further analysis of this issue should be limited to 
FDI that should contribute to the expansion of  trade, and should not include other forms of 
investment, such as portfolio investment, loans or credit, and other funds or assets. Further clarification was needed, however, of the important issue of the need to make a distinction between 
different types of FDI, given their differential im pacts and implications for development and of the 
development policy implications of FDI for fi nancial stability, macro-economic management and 
regulatory policy.   
122. India's views on non-discrimination and pre-establishment commitments based on a GATS-
type approach were contained in documents WT /WGTI/W/149 and 150.  As had been stressed by a 
number of delegations, the granting of national treatment at the pre-establishment phase was a very sensitive matter.  National treatment at the pre-est ablishment phase had differential effects in respect 
of investment and investors. While some countries were presently according pre-establishment 
national treatment in respect of i nvestment, they had left undefined the issue of such treatment to 
investors.  The issue of how to apply national treatment at a sub-national level in countries with federal structures of government was another area that remained to be clarified. The fact that national 
treatment was particularly sensitive with respect to  the pre-establishment phase should not be taken to 
mean that binding post-establishment national treatment had no implications.  Although most 
countries accorded post-establishment national treatment  to foreign investment, in most cases this was 
subject to the laws and regulati ons of the host countries. National treatment in the context of goods 
trade and national treatment at the post-establishm ent phase of investment were not equivalent.  
National treatment of an imported good was relevant only until it reached the hands of the consumer.  
National treatment to investment, on the other hand,  involved treatment not less favourable than what 
was accorded to like investment during the life of th e investment, which could be perennial.   Foreign 
investment stayed and influenced  the development of the host-country economy in an undefined and 
unpredictable manner, as against im ported goods, the impact of which c ould be defined.  The issue of 
applying the principle of non-discrimination in th e context of investment was made even more 
complex by the fact that it was almost impossible to evolve safeguard mechanisms in respect of WT/WGTI/M/21 
Page 34  
 
investment similar to the safegua rd mechanisms that existed in  the area of trade in goods. The 
prolonged and inconclusive efforts under GATS to evol ve 'emergency safeguards'  was a case in point.  
The concept of non-discrimination as understood in the case of goods and services could not be 
applied automatically to the movement of capital.   
123. India noted that it had been argued in the Wo rking Group that balance-of-payment safeguards 
should be applied in a non-discriminatory" manne r, for a limited period of time, and should be 
consistent with the IMF Agreement.  Past experi ence with the application of GATT Articles XII and 
XVIII suggested that not much could be expected fro m any provisions related to balance-of-payment 
safeguards in the context of an investment agreem ent.   The definition of a balance-of-payments 
requirement linked mechanically to the value of certain months of imports did not reflect the 
developmental perspective.  As India had pointed  out in its earlier interventions in the Working 
Group, it would be naïve to assume that all FDI would add to balance-of-payment stability. Empirical analysis indicated that the import propensity of fore ign invested firms was much higher than those of 
domestic firms.  Coupled with this, the tendency of  multinational enterprises to resort to procurement 
from their parent and sister firms and the possibilit y of transfer pricing would tend to expose the host 
country to balance-of-payment difficulties. This was one of the contexts in which a number of 
Members had stressed in the Working Group the need  to provide for investors' and home government 
obligations.  Besides, a balance-of-payments cris is was better avoided than resolved after its 
occurrence.  This would be possible only if  host countries reserved their right to control entry and 
outflows of funds of all types. The whole issue of  balance-of-payment safeguards was linked to the 
need for guaranteeing current and capital transfers in cidental to foreign investment. However, there 
were different ways in which this  could be guaranteed.  Of this a multilateral framework was one, but 
a very cumbersome option. The scheme administ ered by the Multilateral Investment Guarantee 
Agency (MIGA) covering non-commercial risk was a nother and  much more convenient option. With 
the advancement in the discipline of finance, sophis ticated means of risk cover and risk sharing had 
evolved. Risk insurance and sharing would serve  the purpose of reducing the burden on the host 
country while providing necessary guarantee on transfers to the investor.  The issue of safeguards on 
grounds other than balance-of-payments, especia lly on developmental grounds, required further 
discussion. 
124. As regards dispute settlement, India consider ed that conventionally foreign investment 
contracts did not fall under the purview of internati onal law and that policies related to the entry and 
establishment of foreign investment belonged to th e sovereign domain of hos t countries and could not 
be subject to external dispute settlement. The act of investment was not equivalent to cross-border 
trade transaction and multilateral rules evolved for trad e could not simply be transplanted to address 
investment issues.  Paragraph 22 of the Doha Ministerial Declaration had identified certain elements for clarification.  It also noted that any framewor k should reflect in a balanced manner the interests of 
home and host countries.  It was in this context that India had raised the issue of investors' obligations 
and home government measures (WT/WGTI/W/152). This  subject warranted deeper examination in 
the Working Group.  No convincing argument had b een adduced that multilateral rules would lead to 
increased investment flow to developing and least-d eveloped countries, and recent studies had found 
that a multilateral framework might not have any si gnificant effect in terms of reducing transaction 
costs for investors.  Another argument in favour of a multilateral framework was that the multiplicity 
of bilateral investment treaties made it difficult for countries to administer them.  However, since 
there was much commonality among such treaties, administering them was not as difficult as was 
being made out by the proponents. Almost every c ountry had a model bilateral investment treaty that 
formed the basis for its bilateral investment treaties with other countries. It was very rare that the 
bilateral treaties deviated.  Any multilateral frame work with a complex system of commitments, 
positive list, exceptions etc. might turn out to be more difficult for smaller countries to administer. 
This was why India had argued that the bilateral investment treaties provided the necessary flexibility 
to the host countries while at the same time accord ing necessary protection to the investment.  A clear 
distinction needed to be drawn between autonom ous liberalization and binding commitments in a  WT/WGTI/M/21 
 Page 35 
 
 
multilateral forum.  Countries such as India had und ertaken substantial and fa r-reaching liberalization 
measures in the area of foreign investment on an autonomous basis. 
125. Finally, the core competence of the WTO lay in trade in goods and services. This should 
remain so.  Investment was a financial flow and in no way resembled trade in goods and services. To the extent trade and investment were related and investment measures distorted trade, the relevant 
issues had been addressed in the TRIMs Agreem ent and certain other agreements. The TRIMs 
Agreement was presently under review.  Article 9 of this Agreement provided for consideration being 
given to whether the existing provisions should be  complemented with investment policy provisions 
and competition policy provisions.  Discussion in the Working Group in the last four meetings had been useful in the sense that it ha d revealed the complexities of i ssues involved and the divergence of 
Members’ views.  A number of issues had been rais ed in the course of the discussions in the Working 
Group that would require deeper examination and cl arification so that developing and least-developed 
Members could better understand and evaluate the possible implications of any closer multilateral 
cooperation on their development policies. 
126. The representative of Chinese Taipei
 agreed with the point made in Canada's submission on 
"Transparency" (WT/WGTI/W/155) that a commitmen t to transparency could benefit all countries 
regardless of their level of development. In additio n to helping foreign investors, transparency also 
helped host countries in administering investment matters in a more effi cient and cost-effective 
manner and in attracting both domestic and foreign i nvestment.  If some flexibility were provided for 
developing countries, the topic of transparency was less sensitive and could be treated as a core element in future investment rules. 
127. With regard to Canada's submission on "The interrelationship and emerging infrastructure of 
a prospective WTO multilateral framework for i nvestment based on elements identified in 
Paragraph 22 of the Doha Declaration" (WT/WGTI/W/157), Chinese Taipei agreed that not all 
investments should be within the scope of application of all provisions at all times.  This was similar 
to GATS, Article I which broadly included "any service in any sector excep t services supplied in the 
exercise of governmental authority," but which only obliged Members to open up their markets in 
relation to those sectors listed in their respective schedules of specific commitments.  Thus the scope 
and definition of investment c ould be broad, while the rules could still provide flexibility for 
Members to determine the level of sectoral commitments in their respective schedules of 
commitment. 
128. Japan's submission on "The relationship between  the future investment multilateral rules and 
the GATS" pointed to the potential tension between th e GATS and the future investment rules, and to 
possible approaches to deal with th is issue. If service sectors were included in the scope of future 
investment rules,  there could be a need to revise the GATS, while even if one excluded services from such rules, the GATS would still need to be modifi ed so as to harmonize rights and obligations under 
GATS with rights and obligations under the investme nt rules.  However, Chinese Taipei considered 
that there existed a third approach to deal w ith the relationship between the GATS and a possible 
multilateral framework on investment, which wa s to keep the GATS unchanged and to include 
services within the scope of the investment framework  but only with respect to investment protection 
provisions.  In this way, investment in services would be covered by the general disciplines and specific commitments of the GATS, on the one hand, and by the investment protection provisions of 
the investment framework, on the other.  
129. The basic idea of China's submission on "Scope  and definition" (WT/WGTI/W/159) was that 
the investment should be defined in a manner that took into account the need to attract FDI and to 
avoid financial risks. In the view of Chinese Taip ei, a broader definition of investment would better 
serve the purpose of attracting foreign investment , while the objective of avoiding possible negative 
effects of foreign investment could be accommodated through flexibility in the form of exceptions or 
other schemes designed to that purpose. The definitio n of investment should be as neutral as possible, WT/WGTI/M/21 
Page 36  
 
without putting too much policy burden on the definition, leaving the policy needs to be dealt with by the schedules of commitments and exceptions.  Thus  Chinese Taipei  preferred a broader definition on 
the understanding that not all investments would be with in the scope of applica tion of all provisions at 
all times, as indicated in Canada's submission.  
130. China's on "Transparency" (WT/WGTI/W/160) argued that account should be taken of 
different levels of development and that special  and differential treatment should be accorded to 
developing Members. While Chinese Taipei always  agreed with the basic idea that developing 
countries should be accorded better treatment than ot her Members, it also cons idered that  because 
transparency was essential to a stable and predicta ble investment environment it was more appropriate 
to provide transition periods and technical assist ance to developing Members than to provide for 
permanent departures from transparency requirements. 
131. Referring to a comment by China that pre-establishment commitments should be completely 
excluded from a future investment framework, Chin ese Taipei considered that a certain level of 
commitment with respect to pre-establishment was necessary in order to provide a stable and 
predictable environment for investors. Helping i nvestors to gain confidence through a stable and 
predictable investment environment would in turn he lp host countries to attract foreign investors. A  
future multilateral investment framework should not onl y contribute to developm ent in general terms, 
but should also avoid competition between different  countries to enter into bilateral investment 
agreements and take advantage of their own comp aratively advantageous positions to obtain better 
deals.  In this respect, leaving pre-establishment issues at the discretion of host countries to make 
unilateral decisions or to enter into bilateral ag reements would undermine the goal of providing a 
predictable investment environment. 
132. Chinese Taipei considered that the written subm issions and discussions in the Working Group 
thus far had been very useful and practical in clarifying the issues and  had provided a very good basis 
towards building a future consensus among Members on ways of dealing with trade and investment 
issues. His delegation believed that a win-win scen ario for both developed and developing countries, 
was possible and that to achieve such a scenario, the Working Group should focus more on identifying those elements with a higher degree of c onsensus so as to find a common basis for future 
discussions or negotiations, and those elements wh ere there was less consen sus so as to examine 
whether they arose from misunderstandings and whether there were ways to deal with them.  Chinese 
Taipei also considered that the Working Group coul d enter into discussions on a more concrete level. 
In addition to clarifying the seven topics identif ied in paragraph 22 of the Doha Ministerial 
Declaration, the ultimate task of the Working Group prior to the 5th Session of the Ministerial Conference was to explore a framework, that would "reflect in a balanced manner the interests of 
home and host countries, and take due account of th e development policies and objectives of host 
governments as well as their right to regulate in the p ublic interest." This  indicated that the Ministers 
had not excluded the possibility that there would be a multilateral investme nt framework under the 
WTO.  Since Ministers had agreed "that negotiations would take place after the 5
th  Session of the 
Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that Session on 
modalities of negotiations," it would be very help ful for the Working Group to start considering 
elements of modalities of negotiation so as to enab le Ministers to make their decision at the 5th  
Session of the Ministerial Conference on a sound basis. 
133. Chinese Taipei considered that in addition to the three existing pillars under the WTO 
Agreement of trade in goods, trade in services and tr ade-related aspects of intellectual property rights, 
a fourth pillar could be established to cover invest ment. The WTO Agreement set forth its goal in the 
preamble, to the effect that relations of the Me mbers "in the field of trade and economic endeavour 
should be conducted with a view to  raising standards of living, ensuring full employment and a large 
and steadily growing volume of real income an d effective demand…" A broader coverage of 
investment matters under a future multilateral investment framework would certainly enhance 
international economic activities and thus contribute to raising standa rds of living, fuller employment,  WT/WGTI/M/21 
 Page 37 
 
 
growth of real income, and expansion of the prod uction of goods and services.  Similar views had 
been expressed throughout the discussi ons in the Working Group.  Such benefits need not be obtained 
at the cost of harming the development of devel oping countries. With proper arrangements under the 
multilateral framework, the preservation of the environment and the special needs of developing 
countries could be well taken care of. This was also the view of Ministers, as shown in the Doha 
Declaration, which recognized "the case for a multilate ral framework to secure tr ansparent, stable and 
predictable conditions for long-term  cross-border investment, particul arly foreign direct investment, 
that will contribute to the expansion of trade, and the need for enhanced technical assistance and 
capacity-building in this area…"  
134. The representative of Indonesia  noted that in the concluding part of Canada's submission on 
"Transparency"  (WT/WGTI/W/155) Canada stated th at it was a proponent of a trading system with 
transparency as a core principle and that this applied to the multilateral, regional and bilateral 
investment contexts. The submission went on to explain that the WTO's general transparency 
provisions, the obligation to publish, notify and im partially administer all relevant rules and 
regulations, already applied to investment-related tr ade issues insofar as they were key provisions of 
the GATS, the TRIPS Agreement and the TRIMs Agre ement. In this regard, Indonesia was of the 
opinion that in the context of the proposed invest ment agreement transparency should be limited to 
the provision of information on FDI policy, which mi ght include information on the relevant laws and 
regulations. By contrast, transparency provisions should not apply to substantive decision-making 
processes and judicial and administrative procedures.   
135. With reference to China's submission on "Tra nsparency" in WT/WGTI/W/160,  he stressed 
the importance of addressing the issue of transparen cy in relation to the main players involved in 
investment host countries, investors, and home c ountries. Foreign investors shou1d be subject to 
transparency obligations in matters such as th eir resources, the sale and purchase of products and 
services, the distribution and use of profits, etc. They  should also be obliged not to act in manner that 
was prejudicial to the social norms and economic inte rests of the host countries;  to respect the rights 
of consumers in host countries;  and to adhere to environmental and safety practices and requirements 
to ensure health, safety and environmental protec tion.  Foreign investors should also have an 
obligation to ensure transparency in undertaking technology transfer (including to domestic firms), 
train domestic personnel, allow dom estic firms/persons participati on in equity, bring specified 
amounts of capital, retain certain levels of profit in the country, undertake liability for costs incurred 
by the host country or its citizens resulting fro m its operations, for example from any industrial 
accidents).  With respect to the issue of tran sparency in relation to home countries, Indonesia 
considered that home governments had authority and influence over the behaviour of corporations 
originating in their territories in relation to thei r overseas operations, which could be used to help 
promote the interests of host countries. Home gove rnments of foreign investors should thus be under 
an obligation to ensure that the obligations of th e foreign investors were fully discharged.  Home 
governments should undertake obligations to refra in from policies or measures that influenced 
multinational corporations originatin g in their territories to undertake ope rations in host countries that 
were adverse to the interests of such countries and to institute measures that  influenced and obliged 
foreign investors originating in their territories w ith full corporate responsibility and accountability in 
their operations in host countries and fulfil their obligations to the host countries.  
136. With regard to Canada's submission on "The interrelationship and emerging infrastructure of 
a prospective WTO multilateral framework for i nvestment based on elements identified in 
paragraph 22 of the Doha Declaration" (WT/ WGTI/W/157),  Indonesia failed to see how this 
submission facilitated the conceptualisation of a re alistic, meaningful, and integrated multilateral 
framework for investment under the WTO umbrella. Pa ragraph 7 of the submission reiterated that the 
definition of investment to a large degree shaped th e scope and reach of provisions in an investment 
accord and that Canada favoured starting with a broad definition of investment to better  reflect 
behaviour in the contemporary economy.  Indonesia considered that the issue of scope and definition 
was a most important issue that was closely related to  the clarification of all other issues. Any further WT/WGTI/M/21 
Page 38  
 
discussion and clarification of this issue should be limited to FDI and should not include other forms 
of investment, such as portfolio investment, loan s or credit, deposits, speculative funds and other 
funds or assets.  In this regard, his delegation supported China's submission in WT/WGTI/W/159.  
The definition of FDI  had to be clear and unamb iguous. Further clarification was needed in the 
important area of making a distinction between diffe rent types of foreign investment and different 
types of FDI.  The whole issue of the flow of fu nds would also need a careful examination in the 
Working Group. The availability of appropriate data  and statistics on the elements included in the 
proper definition of FDI also merited further study.  For example, the re-investment of profits of FDI 
could be partially made in non-FDI assets such as portf olio investments or loans, and this distinction 
was not clearly made in currently available statis tics. These further clarifications would be necessary 
to bring out the development policy implications  of foreign investment for financial stability, 
macroeconomic management, and regulatory policy.  
137. Referring to statements in paragraph 10 of  WT/WGTI/W/157 on the necessity of non- 
discrimination and its nature as a  fundamental principle underlying international trade and investment 
agreements, the representative of Indonesia stated  that Indonesia was not questioning the importance 
of the non-discrimination principle but that this princi ple had to be put it in appropriate context.  The 
mandatory application of the WTO rules of MFN an d national treatment was in appropriate in the area 
of investment policy in that it could have negativ e consequences for development interests. The flow 
of investments was different from the movement of goods. Principles such as MFN and national treatment that might have useful applications in  relation to trade in goods could not be applied 
automatically to the movement of capital/investment  as this might lead to harmful consequences.  
Developing countries should have the right to u se measures that managed the volume, composition 
and allocation of investment and that involved rest rictions to investor entrance and exit opportunities 
as these were vital to ensure that  foreign investment could contribute positively to economic growth 
and development.  Full flexibility as to the dynami c application of these me asures was essential in 
order for them to be used and to be adjusted as circumstances warranted.  
138. Finally, with respect to the observations made in Canada's submission on technical 
cooperation, the representative of Indonesia agreed with Canada that additional technical assistance 
and capacity building should be allocated in a more  focused manner towards specific requirements of 
developing and least-developed countries. Technical assistance was an integral component of any cooperation in international and b ilateral fora and was essential for the developing countries to 
achieve the appropriate level of know ledge and institutional capabilities.  
139. The representative of th e European Communities
 agreed with Chinese Taipei that the  
Working Group should proceed to a more concrete de bate rather than engage in a repetition of well-
known positions.  He expressed surprise in this respect  about statements made at the present meeting 
by certain countries that were consistently loosi ng FDI and that were actively seeking FDI which they 
needed for their internal development.  While claimi ng to the rest of the world that they were adopting 
new laws that guaranteed non-discrimination and national treatment, in this Working Group these 
countries argued against the application of the princi ple of non-discrimination on the grounds that it  
limited their ability to pursue their development objectives.  His delegation was not convinced by 
these statements which, it seemed, were motivated by tactical considerations.   
140. Referring to the recent submissions on transp arency, he underlined the importance of 
transparency as policy transpar ency sent positive signals to investors about a government's 
determination to create an investor-friendly business e nvironment.  As stated  by Canada and China, 
in order to maximize the benefits of foreign i nvestment, transparency was a necessary element not 
only of internal policies but also of a prosp ective multilateral framework.  Since international 
investment agreements typically did not address tr ansparency, this was an area where a multilateral 
framework could fill a clear institutional gap. As  shown by several empirical studies, lack of 
transparency deterred FDI, in particular in developi ng countries that badly needed FDI.  Interestingly, 
the World Bank's Global Economic Prospects 2003  made the point that companies were willing to  WT/WGTI/M/21 
 Page 39 
 
 
invest in countries that did not have a particul arly investment-friendly c limate provided they were 
able to obtain a reasonable degree of clarity about th e environment  in which th ey would be operating.  
Transparency benefited both foreign and domestic  investors.  While different views had been 
expressed on the precise nature of transparency prov isions in a prospective multilateral framework on 
investment, this was an issue that could be addr essed in the course of negotiations, bearing in mind 
that Members could build on transparency provisions that existed in the WTO and elsewhere.  As the 
European Communities had acknowledged in a submission on this subject,5  transparency obligations 
in a multilateral framework on investment would n eed to be accompanied by adequate technical 
assistance, and it was for developing countries in the fi rst instance to identify the areas in which such 
assistance was most needed.  As also  stated in that submission, transparency should not only be seen 
in terms of a burden placed on host countries but also as a tool to promote investment opportunities.  
141. With respect to Canada's submission in WT /WGTI/W/157, the European Communities fully 
shared the view that the Working Group was fulfill ing the mandate laid down in paragraph 22 of the 
Doha Ministerial Declaration by holding an in-dep th discussion of the specific subjects mentioned in 
that paragraph as well of other subjects, and that th is had facilitated a conceptu alisation of a realistic, 
meaningful and integrated multilateral framework on investment. The level of understanding in the 
Working Group was now much higher than a year ago.  Few of the principles under discussion in the 
Working Group were entirely new to delegations.  Most Members of the WTO had concluded many 
bilateral and regional arrangements that included many of the investment principles that were being 
discussed in the Working Group.  As observed by  Canada, negotiating such principles in the 
multilateral framework of the WTO was overdue. The European Communities agreed with Canada 
that an agreement that ignored minority shareholding and strategic alliances would already be obsolete and considered that it was possible to design  a definition of investment, based on FDI,  that 
would include those forms of investment, as was explained in the EC submission on the issue of 
definition.
6 The precise dividing line between covered a nd non-covered investments could be made 
clearer in the course of negotiations.  The European  Communities also agreed with Canada's comment 
that technical assistance to developing countries shoul d be provided in a more focused manner and 
that such assistance should not only aim at assisting the participation of developing countries in negotiations on rules but also at strengthening their capacity to attract, and maximize the benefits of, 
FDI.  
142. With regard to Japan's submission on "Cons ideration of the necessity of multilateral 
investment rules from diversified viewpoints" (W T/WGTI/W/158), the European Communities shared 
Japan's view that empirical evidence confirmed the im portance of lack of transparency as a key factor 
influencing investment decisions. Securing a more transparent investment climate would be particularly beneficial in light of the potential th at existed for increased FDI by small- and medium-
sized enterprises, which often did not have the capacity to collect information on the business 
environment in potential host countries.  Regard ing the point made by Japan on the imbalance 
between services and non-services sect ors in the current WTO architect ure, it was notable that 70 per 
cent of FDI to developing countries was in the non-service sector.   As a consequence, developing countries had a strong interest in filling the institutio nal gap that existed in the WTO's coverage of 
FDI in non-services sectors.  
143. On the issue of the relationship between a fu ture multilateral framework on investment and 
the GATS,  the view of the European Communities was that the simplest solution was to limit the 
scope of application of the framework to FDI in sectors not already covered by the GATS.  However, 
the idea suggested by Ch inese Taipei that any investment pr otection rules contained in such a 
framework should also apply to services, merited further consideration.  
                                                     
 
5 WT/WGTI/W/110. 
6 WT/WGTI/W/115. WT/WGTI/M/21 
Page 40  
 
144. The representative of Korea
  noted that the submissions that were before the Working Group 
at the present meeting dealt with all the key elemen ts and architectural issues relating to investment 
rules and then offered the views of his delegation on  the issues of scope and definition, transparency, 
non-discrimination, modalities for pre-establishm ent commitments based on a GATS-type, positive 
list approach, and development provisions.  
145. The scope and definition of investment was one core element of an international investment 
framework.  The question of which type of investme nt should be covered by an investment agreement 
might be more important than the issue of the defi nition of investment itself. In that sense, Korea 
supported the position that there should be substa ntive discussions on the scope and definition of 
investment after a consensus was reached by countries on the main direction of a possible multilateral 
framework on investment at the WTO.  Howeve r, there could be prior discussions on possible 
approaches to the scope and definition of investment  in the framework. As the Secretariat had noted 
(WT/WGTI/W/108), there were two ways of defining investment in existing in ternational investment 
agreements: the broad, asset-based definition and the narrow, enterprise-based definition.  Based on 
the assumption that the aim of the possible framewo rk on investment at the WTO was to facilitate 
both liberalization and the protection of intern ational investment, Korea had suggested in 
WT/WGTI/W/114 a combination of those two appr oaches: an enterprise -based definition for 
investment liberalization, and an asset-based definiti on for investment protection. This approach could 
enhance the usefulness of a multilateral framework  on investment, while protecting developing 
countries from the negative effects of vola tile short-term portfolio investment.  
146. The need for transparency might be one of the most important reasons for establishing a 
multilateral framework on investment, and Korea thus  shared the view of Canada, China and other 
delegations on transparency being a core elemen t of a multilateral investment framework.  A 
multilateral framework on investment could enhance the transparency of investment regimes and 
procedures in host countries and thus give investors a clear picture of the situation in host countries.  
Transparency was not only useful for foreign investor s but also for host countries, since the efforts to 
improve transparency could enhance the capability of  host countries to attract foreign investment. 
However, transparency provisions in a multilatera l framework on investment might impose great 
administrative burdens on developing countries.  Korea had suggested in a submission presented in 
19997 that a technical assistance provision should be included in the transparency provisions of the 
framework, to aid developing countries in complying with the transparency ru les. The detailed range 
of application of transparency provisions could be di scussed at a later stage  in light of the substantive 
provisions of a possible WTO framework on investment.  
147. Non-discrimination, comprising national treat ment and MFN treatment, was another core 
element of an international investment agreement. Two main questions arose in this respect.  First, 
whether to apply the obligation of non-discrim ination to both the pre-establishment and post-
establishment stages of investment; and second, how  to formulate exceptions and reservations to non-
discrimination obligations.  As a realistic approach , Korea had suggested the general application of 
non-discrimination for both pre- and post-establis hment stages, but with a bottom-up (positive list) 
approach for the pre-establishment stage, and a top-down (negative list) approach for the post-
establishment stage.8 This concept offered a possible way of devising a multilateral framework on 
investment that reconciled the development needs of  developing countries with the need to create a 
more favourable environment for international investment.  
148. Regarding the issue of pre-establishment commit ments, Korea considered that the GATS-type 
positive list approach, whereby certain principles a nd requirements were app lied only to those sectors 
committed by individual Members, could serve as a good starting point for a possible multilateral framework on investment.  As indicated in the recent EC submission on "Policy space for 
                                                     
 
7 WT WGTI/W/70 . 
8 WT/WGTI/W/79.  WT/WGTI/M/21 
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development," this approach could reflect to a gr eat extent the development needs of countries at 
different development stages.  Apart from the issu e of the GATS-type approach as a modality for pre-
establishment commitments, a more fundamental issu e to deal with at this point concerned the 
relationship between the existing GATS and a possi ble multilateral framework on investment.  Under 
the GATS, investment in the services sector was in cluded through mode 3, which was defined as "the 
supply of a service by a service supplier of one Member through commercial presence in the territory 
of any other Member."  This commercial presence re presented investment in the service sector.  Since 
the investment aspect of the services sector was already covered by the GATS, it was necessary to 
reflect on how to harmonize the relationship betwee n the multilateral investment framework and the 
GATS.  Thus, for example, if a foreign firm pur chased a domestic motor vehicle producer, it acquired 
that producer's productive assets as well as its assets re lated to the provision of distribution services. 
To protect such an investment, there had to be clarity as to whether it would be covered by the 
prospective multilateral investment framework or by th e GATS.  Korea agreed with the point made by 
Japan in WT/WGTI/W/156 that in considering wh ether FDI in services should be covered by a 
multilateral framework one should focus on ways to reduce conflicting elements between the two 
areas to maintain the integrity and consistency of the WTO rules. 
149.  Korea considered that in designing the development provisions in the multilateral investment 
framework there could be two different approach es: (i) enhancing the flexibility of substantive 
provisions in the framework, or (ii) formulating new special provisions for developmental purposes. As examples of the latter, some developing count ries might suggest that a Member country should 
have the right to impose performance requirements a nd to screen investments case-by-case.  However, 
to allow screening could be excessive, if the GATS- type, positive list approach were adopted as the 
modality of pre-establishment commitments in the framework.  Performance requirements could 
basically impeach the non-discrimination principles of international investment agreements. Korea therefore supported the position that, in line with development provisions in existing WTO agreements, the development needs should be me t by enhancing the flexibility of substantive 
provisions in the multilateral framework on investment.  
150. Finally, Korea considered that Japan's submission in WT/WGTI/W/158 offered clear 
evidence that a multilateral framewo rk on investment would be beneficial not only for multinational 
enterprises but also for small- and medium-sized en terprises.  In a global economy, FDI played an 
increasingly important role in the business strategi es of firms from both developed and developing 
countries.  
151. The representative of Hong Kong, China
 stated that Japan’s submission in WT/WGTI/W/156 
raised a complex, systemic issue of the possible overlap between a multilateral framework on investment and the GATS, which required close scrutiny and thorough discussion by Members.  Some of the key elements laid down in paragraph 22 of  the Doha Ministerial Declaration, such as non-
discrimination and transparency, seemed to have been covered by the GATS insofar as FDI in 
services was concerned.  Consequently, if a multila teral framework on investment was established, 
the question of the overlap and consistency with the GATS would have to be addressed.  Hong Kong, 
China was still considering the relevant issues a nd had an open mind on whether services should be 
included in a possible multilateral framework on invest ment.  He then raised several questions to 
stimulate discussion on this issue.  First, should new commitments in the services sector be made in 
the context of the multilateral framework on invest ment or should commitmen ts be enhanced under 
GATS mode 3 in the light of the multilateral framewor k?  If the latter, would this be considered as 
changing the balance of rights and obligations achie ved under the GATS?   In this respect, he noted 
that some Members had argued that GATS mode 3 did not cover investment per se , but  commercial 
presence, which was only a mode of service delivery.  Second, if any possible horizontal commitments under the multilateral fra mework were equally applicable  to investment in goods and 
services sectors, how could Members ensure the consistent application of those commitments if 
Members should choose to leave services commi tments to the GATS and if the horizontal WT/WGTI/M/21 
Page 42  
 
commitments should go beyond the existing commitm ents in the GATS? Chinese Taipei's proposal 
represented an interesting approach to deal with this issue.  
152. With respect to Japan's submission in WT/WGTI/W/158 on the necessity of investment rules, 
Hong Kong, China shared the view that, given the di fferent stages of development among Members,   
prospective multilateral investment rules should be flexible enough to respond to the specific 
development policies of each country.  In paragraph 12 of this submission, Japan pointed out that 
multilateral investment rules would provide an important tool for future outward FDI activities for developing Members.  In paragraph 10 it appeared  that the focus was also on the benefits of 
multilateral rules for outward FDI by small- and medium-sized enterprises that did not necessarily have advanced information gathering capacities c oncerning the investment environment in the host 
countries.   Since many Members, including Hong K ong, China, were often both capital importer and 
capital exporter, he asked Japan to elaborate on the implications of multilateral investment rules for a 
capital importer. He wondered in this respect whethe r the benefits of multilateral investment rules for 
a capital exporter would apply equally to a capital importer. 
153. Members generally recognised the importance of transparency and were supportive of 
ensuring a transparent environment fo r investment in principle.  In this connection, Hong Kong, China 
generally supported the views e xpressed in Canada’s submission (WT/WGTI/W/155).  On the three-
pronged transparency requirement proposed in China’s submission (WT/WGTI/W/160), Hong Kong, China could understand the case for rules on transparency of host governments, but was of the view that a more cautious examination was necessary of the need for, and practicality of, developing and 
enforcing rules on transparency in relation to home governments and especially investors in the 
context of the multilateral framework.  He requested China to further explain its ideas on the extent of 
transparency obligations of investors. 
154. Regarding China’s submission on scope a nd definition (WT/WGTI/W/159), Hong Kong, 
China could support a narrow definition of investment   as a starting-point, which should be able to 
command greater support among the wider membership.  It was imperative, however, to maintain 
flexibility in incorporating the interests of all Memb ers, while leaving room for future development of 
investment rules in light of, for example, th e experience of implementation as well as economic 
development. 
155. The representative of Brazil
 agreed with the point made by Canada in its submission 
(WT/WGTI/W/155) that transparency constituted an im portant element in any further consideration of 
the issue of investment within the framework of th e WTO to the extent that it would contribute to 
achieving greater predictability and stability.  As Brazil had stated in the discussion on this topic at 
the Group's meeting in April 2002, it was necessary to be realistic in re gard to transparency 
requirements in a multilateral framework on investment, and transparency should not be viewed as an 
end in itself but as a means to improve the invest ment environment with a view to maximizing the 
benefits countries could obtain from increased FD I flows.  Specific obligations that were unduly 
burdensome, particularly for developing countr ies should therefore be avoided.  Technical 
cooperation and capacity building played an important  role in the implementation of transparency 
commitments,  but this too should be approached with realism.  Thus, although many initiatives had 
been taken with regard to technical cooperation,  many developing-country Members had not been 
able to comply fully with existing WTO transpar ency obligations, as illustra ted by the experiences 
with the TBT and SPS Agreements.  In discussing the issue of transparency in this Working Group, 
account should be taken of developments in the c ontext of the GATS, especially the  work under way 
in the Working Party on Domestic Regulation.  Many developing-country Members had repeatedly 
asserted that across the board prior comment provisi ons were not acceptable.  On this point Brazil 
tended to agree with the China.  Transparency pr ovisions in a multilateral framework on investment 
should take into account the needs of developing co untries. Like China, India and Indonesia, Brazil 
was of the opinion that the possibility of applying the concept of transparency to home countries and 
transnational corporations requi red further consideration.   WT/WGTI/M/21 
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156. In paragraph 12 of its submi ssion on "Transparency", Canada, referring to the Secretariat 
Note on transparency, made the point that the goal of  transparency could be affected by the way in 
which other obligations, commitments, and exceptions  were worded in an agreement and that "a 
‘positive list’ approach to reservations would in pr inciple result in a less ‘transparent’ investment 
regime, inasmuch as it would not oblige parties to li st all the non-conforming measures that they wish 
to exclude from certain obligations".  Although Brazil shared the view that the scope of transparency 
depended also on the amplitude of the substantive oblig ations undertaken in an agreement,  it was not 
convinced that a positive list approach would "in pr inciple" result in a less transparent investment 
regime.  A Member's schedule containing a comp rehensive sectoral cove rage would be more 
transparent than a negative list that did not show which sectors were open and what regulatory regime 
applied in those sectors.  Moreover, a negative lis t approach would result in lack of clarity and 
transparency if reservations and exceptions were expressed in very general and vague terms.  In 
paragraph 7 of its submission, Canada quoted a statement in a World Bank report that companies 
might invest in countries with regimes that were  not investor-friendly "provided the companies are 
able to obtain a reasonable degree of clarity about the environment in which they will be operating." 
In quoting this statement Canada was trying to highlight the importance of transparency, a point on 
which Brazil agreed with Canada. However, this statement also seemed to corroborate what some 
countries had been saying in the Working Group about the diversity of factors influencing FDI flows.  Thus, even in countries that did not have the desi red regulatory regime, investment could take place 
based on other factors such as the size of the host-country market, the macro-economic conditions in the host country, the availability of skilled personne l and inputs, and transparency of the regulatory 
environment.  
157. The representative of Brazil then referred to the statements in paragraph 20 of Japan's 
submission in WT/WGTI/W/158 ("Consideration of the necessity of multilateral investment rules from diversified viewpoints") that "developing econo mies can receive much greater benefit attained 
by trade liberalization, through their improvement  of export competitiveness and market expansion 
arisen from inward FDI" and that "investment libera lization is also important in order to maximize the 
outcome of trade liberalization."  Brazil agreed that FDI was an important element in helping  developing countries to diversify away from de pendence on a few primary-commodity exports and 
move up the skills and technology ladder, thereby raising income and permitting greater economies of 
scale and scope in production.  As for the importanc e of investment liberalization, the experience of 
developing countries had been that liberalized tr ade and FDI, had not, on their own, guaranteed 
economic growth and development.  Without a ppropriate micro-level policies to strengthen 
productive capacity, FDI liberalization policies were insufficient and sometimes might produce 
adverse effects.  If developing countries were to derive the full benefits from the multilateral trading 
system, specific efforts and polici es were needed to strengthen the productive sector.  The experience 
of all developed countries demonstrated that perform ance requirements had a positive role to play in 
this respect.   
158. Finally, with respect to China's submission on "Scope and definition," (WT/WGTI/W/159),  
Brazil considered that in view of the volatility of cap ital flows and its effects in crisis situations any 
further consideration of investment within the fra mework of the WTO should be confined to FDI and 
should exclude portfolio investment.  
159. The representative of Switzerland
 made three observations on China's submission in 
WT/WGTI/W/160 on "Transparency."   First, home-c ountry laws and regulati ons relevant to FDI 
were mainly limited to capital movements, which were free in most industrialized countries, the 
restriction on exports of sensitive technology, and outward processing arrangements.  Second, the 
suggestion to apply transparency obligations to mu ltinational enterprises raised an important question 
of the availability of data.  Issues such as the sale and purchase of products and services and the 
allocation of resources and profits mostly involved business confidential information.  To some extent 
such data might be available to tax authorities.  Third, contrary to the view expressed by China, WT/WGTI/M/21 
Page 44  
 
Switzerland considered that, in order to show how  substantive rules were applied, transparency 
obligations should apply to procedures relating to domestic legislation and judicial decisions.  
160. Switzerland agreed with the Japan's arguments in WT/WGTI/W/158 on the rationale of 
multilateral investment rules and considered that th is submission was also useful in indicating the 
flexibility to be expected in a future multilateral fra mework on investment.  On the issue of scope and 
definition, as discussed in Canada's submission in WT/WGTI/W/157, Switzerland agreed with the 
point that this question would be clarified in the c ourse of negotiations and that this was closely linked 
to the issue of the nature of any pre-establishmen t commitments.  In respect of Canada's submission 
on "Transparency" (WT/WGTI/W/155), Switzerland was in favour of including in a multilateral 
framework provisions on publication, notification an d administration of laws and regulations as well 
as prior comment procedures. While strong reserva tions had been expressed by India and other 
delegations on the incorporation of investment ru les into the WTO, it was necessary to take into 
account the fact  that there existed no WTO rules on FDI in manufacturing despite the fact that such 
FD was becoming an integral part of the business strategies of both large and small- and medium-sized firms.  FDI was a key complement to trade in all cases where a local presence was warranted to 
produce for local markets or for exports.  Given that investment had become such an important 
dimension of manufacture-related trade, the WTO should address the challenge of multilateral rule-
making in this area.  
161. The representative of Chile
, referring to Japan's submission (WT/WGTI/W/156) on the 
"Relationship between the future multilateral invest ment rules and the GATS," considered that the 
Working Group should explore in greater detail the question of how to harmonize a prospective 
multilateral framework on investment with the GATS.  Chile shared Canada's view in 
WT/WGTI/W/155 that transparency was a necessar y element in the creation of a stable and 
predictable investment environment.   Chile a ttached importance to this issue not only from the 
perspective of a recipient of FDI but also from the perspective of a country engaged in outward FDI. 
In designing transparency provisions, account should be taken of existing WTO transparency 
provisions in agreements such as the GATS, th e TRIMs Agreement, the TRIPS Agreement and the 
GATT, as well as of transparency provisions containe d in relevant bilateral and regional agreements 
concluded outside of the WTO framework.  Chile agr eed with the need for an y transparency rules to 
accommodate different levels of development.  
162. The representative of Australia agreed that transparency was a key element in attracting 
quality investment.  It was very important to ensure a common understanding on a Member's policy 
objectives, not only domestically but also overseas.  Many Members had acknowledged that existing 
WTO agreements reflected a fairly broad and co mmon understanding of transparency objectives and 
obligations.   Existing  WTO transparency provisions thus provided a useful starting-point for examining the scope of transparency provisions in a multilateral investment framework.  On the issue 
of scope and definition,  Australia agreed that th is would be a key determ inant of any prospective 
multilateral investment framework.  There were many approaches to the definition of investment, as 
reflected in the various bilateral and regional ag reements, and there were good arguments for both  
broad-based and narrow-based approaches.   Australia  agreed with Canada that any agreement that 
would ignore minority shareholdings  and strategic alliances would be obsolete but it should also be 
kept in mind that the enterprise-based definiti on in the GATS was narrower than the asset-based 
definition found in many regional agreements.  As stated by Canada, the precise dividing line between 
covered and non-covered investment could be made much clearer in the course of negotiations.  With 
reference to Japan's communication on the relations hip between multilateral investment rules and the 
GATS (WT/WGTI/W/156), Australia agreed that commercial presence in the services sectors and in 
the production base of manufacturing industries held  the same meaning in economic terms.  This 
reduced the significance of discussing whether mode 3 of the GATS were different.  The GATS 
covered forms of establishment that corresponded to the notion of FDI.   WT/WGTI/M/21 
 Page 45 
 
 
163. The representative of Thailand , referring to a comment made by the European Communities, 
considered that while there obviously was disagre ement on the desirability of negotiations on 
investment in the WTO, this did not detract from th e fact that the debate in the Working Group was 
very productive and that delegations  were showing an active interest in important technical issues.  In 
response to the surprise expressed by the Europ ean Communities on the view s expressed by some 
developing countries, she stressed that foreign investors derived significant economic benefits from 
their investments in developing countries and that  it was therefore incorrect to portray developing 
countries as always being at the receiving end of the investment relationship.  She agreed with the 
importance of transparency and considered that, as a result of the competition to attract investment, 
countries were now generally making efforts to enhance the transparency of their laws and 
regulations.  As noted by other delegations, however, transparency was only one of several factors 
affecting investment decisions.  As a mater of principle, Thailand supported the principle of 
transparency, and if there ever were to be an  agreement on investment, transparency should be 
included as a  key element.  Transparency obliga tions should not be too burdensome on developing 
countries and should take into account the situation of  countries with different levels of government.  
Referring to the suggestion made by Chinese Taip ei on the relationship between the GATS and a 
possible investment framework, she considered that  investors were already adequately protected 
under the GATS mode 3 but that there was no protection of the interests of host countries, as demonstrated by the ease with which investment co uld be pulled out of host countries.  Any future 
investment rules should thus be accompanied by pr ovisions on investors' obligations.  Finally, in 
respect of the idea that the investment in ser vices covered by mode 3 of the GATS could be 
incorporated into a multilateral fr amework, she stressed that Memb ers had undertaken commitments 
in relation to mode 3 within the overall context of  the GATS and that if that context changed such 
commitments would need to be adjusted. 
164.  The representative of Morocco
 stated that the starting-point in considering the issue of a 
possible multilateral framework on investment had to be the need to preserve domestic  development 
objectives.  The GATS could provide a model for su ch a framework but only if certain adjustments 
were made.  Further study was necessary of th e complementarity between national development 
policies and a possible multilateral framework on i nvestment.   His delegation favoured a narrow 
definition of investment as being the only approach that was consistent with the terms of the Doha 
Ministerial Declaration.  Transparency was a co re WTO principle and a key element of Morocco's 
investment policy, and Morocco could support th e inclusion of transparency provisions in a 
multilateral framework, subject to special and di fferential treatment of developing countries and 
appropriate exceptions and safeguards.  Technical assi stance had a crucial role to play in this regard. 
165. The representative of Costa Rica  shared the views of Canada  and others concerning the 
importance of transparency and the need to fill th e gaps frequently left by bilateral investment 
agreements.  Transparency benefitted foreign as well as domestic investors.  Thus, transparency went 
a long way towards reducing the effects of discriminatory conditions.  If an investor, whether 
domestic or foreign, had a clear understanding of th e rules with which it must comply, even where 
they established differences of treatment, the inve stment climate and the possibility of attracting 
investments were substantially improved.  Hence,  this issue should not be seen as an additional 
burden for Members.  Any costs of transparency would be far outweighed by the benefits.  His 
delegation also shared Chile's opinion that the is sue of transparency should not be looked at 
exclusively from the standpoint of the interests of countries as host countries to foreign investment 
and that consideration should also be given to the viewpoint of domestic enterprises wishing to invest 
abroad.  In the case of Costa Rica such enterprises were for the most part small- and medium-sized 
enterprises that would most benefit from a much more transparent environment.  
166. Regarding the question of the definition of inv estment, Costa Rica  agreed with Canada on the 
idea of starting from a broad definition that adequately reflected the behaviour of investors, and that 
one should not run the risk of negotiating an agreem ent based on an obsolete definition.  Naturally, no 
investment of a speculative nature should be protected.  WT/WGTI/M/21 
Page 46  
 
167. Costa Rica shared many of the views expressed  in Japan's submission on the need for 
multilateral investment rules (WT/WGTI/W/158) . The UNCTAD World Investment Report 2002 
showed how the slowdown in the world economy in recent years had increased the competitive 
pressures on industries, which were now looking for cheaper places to set up business.  Despite the 
liberalization measures promoted by developing count ries in recent years, and the situation of the 
global economy, developing countries continued to a ttract less than one-third of FDI, and these 
investment flows continued to be highly concentrat ed.  Nevertheless, FDI directed to the developing 
countries was ten times higher than official devel opment assistance in the year 2000.  There was no 
doubting the importance of FDI for developing countri es, but it could be much more substantial.  A 
multilateral framework for investment would doubtl ess contribute to a more stable and predictable 
environment for investment, in particular by incr easing the capacity of developing countries to attract 
FDI. 
168. The representative of Malaysia
 concurred with the views expressed in the submissions of 
Canada and China on the importance of transparen cy in creating a business-friendly environment to 
enhance the flow of investments.  In an envir onment in which attracting investment was becoming 
increasingly competitive, many countries had already placed much emphasis on increasing 
transparency so as to facilitate inv estment  activities.   Malaysia had unilaterally taken steps to make 
its investment regime more transp arent in order to increase the aw areness of investment opportunities 
that existed in Malaysia as well as to correct false perceptions and to facilitate investment inflows.  A 
transparent investment environment was of equal importance for both home and host countries, given 
that FDI flows were now becoming two-way flows and that many traditional recipients of FDI, 
including Malaysia, were beginning to engage in  outward FDI.  While supporting the principle of 
transparency, her delegation also considered that transparency provisions in a multilateral framework 
should not be too prescriptive so as to become oner ous and burdensome for Members, particularly 
developing-country Members.  Hence, the implica tions of obligations regarding notification and 
procedural transparency required further examination.  
169.  On the submission of Japan on the neces sity of multilateral investment rules 
(WT/WGTI/W/158), Malaysia was of the opinion that  several questions remained unanswered. Thus 
she wondered whether a multilateral framework c ould sufficiently address all the concerns of 
investors relating to transparency and predictab ility; whether it could provide sufficient investment 
protection; whether the GATS-type positive list a pproach could make a difference in enhancing 
investor confidence, given the generous levels of flexibility that would be allowed to host countries; 
and whether investor concerns could not be addr essed more effectively by other means, including 
unilateral, bilateral and regional approaches, invest ment insurance, technical cooperation, as well as 
investment promotion and facilitation, such as the estab lishment of "one-stop" centres.  In short, there 
were many approaches to attain the objective of ma ximizing investment flows, and rules alone were 
not a determining factor.  
170. The representative of Mexico  welcomed the fact that there was a common understanding on 
the theme of transparency as an important element th at contributed to a better functioning of markets 
and a better combination of risk and return on inv estment.  At previous meetings her delegation had 
already expressed its views on the specific elements  addressed in the various submissions that were 
before the Working Group. Japan's and Canada's s ubmissions on the structure of an agreement were 
useful in providing a more structured approach to the discussions of the Working Group.  Mexico 
agreed that technical assistance was of funda mental importance to accommodate the needs and 
concerns of developing countries, and Members should perhaps start to consider how to reduce the possible costs of transparency  to developing countries.  
171. The representative of the United States
 strongly agreed with the principal argument of 
Canada's submission on "Transparenc y," namely that regulatory transparency was an essential feature 
of an economic environment that stimulated forei gn and domestic investment, as well as international 
trade. This was not the conviction of just a handful  of WTO Members nor was it a new idea. As noted  WT/WGTI/M/21 
 Page 47 
 
 
in Canada's submission, commitments to transpar ency were enshrined in several of the pillar 
agreements of the multilateral trading system: Artic le X of the GATT, Article III of the GATS, and 
the prior notification and comment provisions of th e SPS and TBT Agreements. As also noted in the 
submission of Canada, elements of each of these agreements could serve as useful models for the transparency obligations in a WTO investment agreement.  
172. He then highlighted two points in the Canadian  submission that were especially relevant to 
the subject matter of the Working Group. First,  WTO Members had already embraced strong, 
investment-related transparency obligations in sev eral agreements.  These included the notification 
provisions of TRIMs Article 6, the GATS transp arency obligations relating to services provided 
through mode 3, and transparency obligations in Article 63 of the TRIPS Agreement that applied to 
the intellectual property rights of investors. Comm itments to regulatory transparency in areas of 
interest to investors were already quite familia r to WTO Members.  Indeed, the transparency 
obligations of the GATS Agreement already applied to  all direct investors that supplied services, and 
service suppliers already accounted for a significant share of all direct investment.   Extending to 
manufacturing investors transparency standards at  least as comprehensive as those in the GATS 
should be a logical next step for this organizati on.  Second, it was worth underscoring a more subtle 
point in the Canadian paper, which was that the sc ope of the transparency offered by a particular 
agreement could be significantly influenced by the character of obligations and exceptions that were 
not directly related to transparency. This valuable poi nt had originally been made by the Secretariat in 
its background Note on transparency issues.
9  The Secretariat had noted that a bottom-up approach to 
the scheduling of reservations in an investment agreement "would, in principle, result in a less 
‘transparent’ investment regime."  This was so b ecause, in contrast to a top-down approach, a bottom-
up approach would not require parties to list all of the measures that do not conform to various 
obligations. In the view of the United States, clarity  and transparency about the scope of a country’s 
commitments was one of the most important advant ages that a top-down approach to scheduling had 
over a bottom-up approach.  Host countries as well as foreign investors would benefit from this 
additional certainty and predictab ility. He concluded by saying that it was difficult not to overstate 
how important transparency was to foreign invest ors.  There was growing empirical evidence that 
increased transparency promoted increased investment.  The Canadian submission cited one recent 
study from the World Bank. 
173. With regard to Canada's submission in WT /WGTI/W/157, the United States had observed 
that one useful contribution of the submission w as to highlight the linkages among paragraph 22 and 
other issues the Working Group had considered in th e period since the Doha Ministerial Conference.  
The United States agreed with Canada, for example,  that it would not be productive to discuss the 
application of the principle of non-discrimination to investment independently of a discussion of 
different approaches to the scheduling of commitmen ts, and that one of the advantages of a top-down 
approach to the scheduling of commitments was that it would produce a more transparent outcome 
than would an agreement based upon bottom-up schedu ling. His delegation also agreed with Canada 
that a multilateral framework for investment, which would cover investment in the manufacturing and 
goods sectors, should include standards of transparen cy at least as strong as the GATS transparency 
obligations that already applied to investors in ser vice industries. As Members were aware, the United 
States also shared Canada’s preference for a broad definition of investment, which, as Canada noted, would "better reflect business behaviour in the contemporary world economy."  The submission 
offered a useful warning in this regard, pointing out that, "given the cha nging dynamics in the way 
business forms international linkages today…any ag reement that ignored minority shareholdings 
and/or strategic alliances risks being an agreement already obsolete."  Put differently, by employing 
too narrow a definition of investment, one would exclude a wide range of current business activity 
from coverage under an agreement, and thereby miss a promising
 opportunity to promote increased 
capital flows into all economies. The United Stat es supported Canada’s positi on on the negotiation of 
an investment framework agreement, as describ ed in paragraph 20 of the Doha Ministerial 
                                                      
9 WT/WGTI/W/109. WT/WGTI/M/21 
Page 48  
 
Declaration but was not currently in a position to support simply translating the seven elements in paragraph 22 of that Declara tion into a negotiating mandate. 
174. His delegation had noted that Japan's submission in WT/WGTI/W/156 highlighted a peculiar 
reality in the WTO, namely that investors who s upplied services in foreign markets enjoyed stronger 
and more comprehensive protections under the GATS than investors in the goods and manufacturing 
sectors enjoyed under the GATT and other agreemen ts.  As the submission suggested, from the 
perspective of the host country, there was simply no  economic or other reason why this should be the 
case,  and why investment for the provision of servi ces deserved protection superior to that enjoyed 
by investment for the provision of goods.  When th ey were liberalized, both kinds of investment could 
make valuable contributions to host economi es – increasing employment, expanding consumer 
opportunities, reducing prices, and promoting the diffusi on of technology.  Paragraphs 8-10 of Japan's 
submission offered a useful analysis of some of th e technical issues that would need to be addressed 
when trying to reconcile a potential investment ag reement with the GATS.  One key question would 
be whether to include or exclude services-related i nvestment from the coverage  of a new investment 
agreement.  These technical matters should not become an obstacle to a future investment agreement.  
Each multilateral trade round had produced new provisi ons and agreements that had needed to be 
integrated into the existing family of agreemen ts.  The United States was confident that Members 
would be able to solve the problem of reconcili ng a new investment agreement with the GATS, the 
TRIMs Agreement, the TRIPS Agreement and other provisions.  
175. Section IV of Japan’s submission, which addressed development issues, observed in 
paragraph 11 that under a GATS-style approach to  the scheduling of commitments, "each Member 
may take full consideration of its own national priorities and deve lopment policies."  Paragraph 12 
concluded that "the GATS approach should serve as a certain reference when designing the future 
investment rules," because it would ensure "com patibility between a multilateral framework and each 
country’s development policies and right to regulate. "  The United States continued to believe that a 
top-down approach to the scheduling of commitmen ts would offer Members equal opportunity to 
pursue their "national priorities and development policies."  Indeed, one had yet to hear a compelling, 
concrete argument why a top-down structure would be any less accommodating of countries’ development policies and right to regulate than w ould a bottom-up approach.  What was it that a top-
down approach to the scheduling of commitments would not allow Members to do?  Which current 
policies could not be maintained?  Members might  not be prepared to respond to these questions 
immediately but it would be critical to address them before making decisions on a negotiating 
mandate.    
176. The representative of Argentina 
concurred with Canada's view s on the important role of 
transparency and with China's views on the defin ition of investment.  Concerning Japan's submission 
in WT/WGTI/W/158 on the necessity of  multilateral investment rules, he noted the point made in Section B that a multilateral framework on inv estment was warranted to correct the existing 
imbalance between the treatment of investment in services and the treatment of investment in 
manufacturing, especially in view of the importance of FDI in manufacturing.  In this respect, he 
wondered how this argument related to a point made in the World Bank Global Economic Prospects 
2003  (p. 125): "Most countries now permit liberal access to foreign investors in manufacturing.  The 
same holds true – if to a lesser extent – in mining and agriculture.  Indeed, as a result of various investment incentive schemes that are not availa ble to domestic firms, foreign investors in 
manufacturing often enjoy treatment that is better than that available to domestic investors."  
Furthermore, with regard to the point made in paragraph 17 of Japan's submission on the call by 
Japanese industries for multilateral investment rules, he highlighted the fact that, as mentioned in 
Annex 2 of the submission, Japan had concluded only ten bilateral investment treaties. This raised the 
question as to what extent it was possible to draw  general conclusions on the need for multilateral 
investment rules from a particular situation.  Finally, with respect to the point made in the same 
submission on the role of small- and medium-sized enterprises, he wondered how this was relevant to  WT/WGTI/M/21 
 Page 49 
 
 
the issue of the possible need for multilateral inve stment rules, given that investments by such 
enterprises were covered by existing bilateral and regional agreements. 
177.  The representative of Japan , referring to Canada's submissi on on "Transparency," shared the 
view that transparency, along with non-discrimination, was a fundamental WTO principle and an essential factor for future investment rules. Jap an had also emphasized in its own submission 
(WT/WGTI/W/158) that a lack of transparency w as one of the major problems for good investment 
environment.  Canada's submission was very informa tive with the analysis relating to transparency in 
existing WTO rules, including the GATT, the GATS, the TRIMs Agreement and the TRIPS 
Agreement.  With regard to the c oncrete disciplines of transparency,  he referred to a submission that 
had been presented by Japan in April 2002.  Japan  considered that it was necessary to discuss the 
details of transparency provisions in the negotiation process after the 5
th Session of the Ministerial 
Conference.  He agreed with Canada that transpar ency should apply not only to the rules themselves 
but also to their administration as the arbitrary application of rules and regulations was a significant problem for investors. As Canada indicated, t echnical and capacity-building assistance was very 
important. It was essential to reflect the needs of developing countries in this respect, which required 
close cooperation between devel oping and developed countries. 
178. Japan disagreed in several resp ects with the views expressed by China in its submission on 
"Transparency."  First,  Japan di d not consider that it was appropr iate to include in a multilateral 
framework on investment transparency provisions addressed to home countries and investors.  Although international investors should be expected to  behave in a socially responsible manner, trade-
related rules were not the proper framework with in which to require the disclosure of business 
information on items such as financing, sales, profits and transactions between parents and 
subsidiaries.  Second,  unlike what China suggested at the end of paragraph 2 of its submission, Japan 
considered that transparency shou ld apply to the procedural aspects  of laws and regulations.  Japan 
was sympathetic to the need for technical assistance and capacity building in the area of transparency 
although some further clarification was necessary of  the expression used in paragraph 5 of China's 
submission "the provision of necessary infrastructure."  
179. Regarding Canada's submission on "The Inte rrelationship and emerging infrastructure of a 
prospective WTO multilateral framework  for investment based on elements identified in paragraph 22 
of the Doha Declaration" (WT/WGTI/W/157), Japan made the following comments.  First, Japan had 
proposed using FDI as a starting point for discussions in  the Working Group.  It was important that all 
countries continued discussing  this issue with greater  flexibility so as to arri ve at a consensus. As 
stated in paragraph 8 of the Canadian submi ssion, further detailed discussion on the question of 
definition would need to take place during the cour se of negotiations rather than in this working 
Group. Second, concerning the section entitled "Non-discrimination and modalities for pre- establishment commitments,"  Japan  shared the view that non-discrimination was a fundamental 
principle underlying WTO rules and should be an important principle of future investment rules but it 
was essential to allow host countries flexibilit y to pursue their development policies.  
180. In respect of China's submission on "Scope and definition" (WT/WGTI/W/159), while Japan 
shared the view that one should proceed strictly in  accordance with the Doha Ministerial Declaration, 
paragraph 20 of the submission referred to "long-te rm cross-border investment, particularly foreign 
direct investment" and thus evidently did not comple tely rule out considera tion of foreign portfolio 
investment.  Japan agreed that it was necessary to address the concerns expressed by many developing 
countries on the volatility of short-term capital flow s but this should be done  through further detailed 
discussions in the context of negotiations.  Japan di sagreed in this regard with China's view that 
agreement on a definition was a necessary pr econdition to the launch of negotiations.  
181. With reference to the comments that had been  made on Japan's submission on the relationship 
between the GATS and a multilateral framework on invest ment, he reiterated that it was clear that the 
GATS covered investment in services and that  the GATS provided a good model for future WT/WGTI/M/21 
Page 50  
 
negotiations on a multilateral framework on investment.  The coverage of the fr amework in relation to 
that of the GATS  warranted further discussion in the course of negotiations.  Japan remained of the 
view that the GATS-type positive list approach  offered sufficient flexibility to accommodate 
development objectives and policies.  In response to the question raised by Malaysia as to whether a 
multilateral framework would adequately address the con cerns of foreign investors, he stated that the 
kind of initiatives and arrangements mentioned by Malays ia had a useful role to play but that these 
needed to be complemented by a multilateral framework to address the concerns of investors about 
the lack of transparency and lack of guarantees of non-discriminatory treatment.  
182. The representative of Canada
, commenting on Japan's submission in WT/WGTI/W/158, 
agreed with Japan’s assertion that  services-related investment currently enjoyed a more predictable 
and secure status multilaterally than investment in non-services sectors.  Canada also supported 
Japan’s argument that, from a host country’s perspec tive, there was no reason to differentiate between 
benefits generated by investments in services ve rsus non-services sectors. In the Punta Del Este 
Declaration launching the Uruguay Round, Members ha d agreed to negotiations on services with a 
view to expanding trade "...under conditions of tr ansparency and progressive liberalization and as a 
means of promoting economic growth of all tradi ng partners and the development of developing 
countries."  At Doha, Ministers had taken this manda te a step further with the recognition of the case 
for "a multilateral framework to secu re transparent, stable and predictable conditions for long-term 
cross-border investment, particularly foreign direct  investment, that will contribute to the expansion 
of trade." An important point was to ensure that investment in non-services sectors benefitted from clear and predictable disciplines, at  least to the same extent that services-related investment did under 
the GATS.  Canada agreed with Japan, the Europ ean Communities and others that the GATS was an 
important reference point in deliberations on a prospective multilateral framework on investment. 
However, the approach should not necessarily be limited to the question of including or excluding 
services sectors already covered under GATS in a pr ospective multilateral framework on investment.  
One should bear in mind that Ministers had also di rected Members to take due regard, as appropriate, 
of existing bilateral and regional a rrangements on investment.  There was a rich universe of structures 
and approaches that Members could look to in  designing the architecture of the multilateral 
framework in order to ensure coherence or complementarity be tween services-related and non-
services-related investment, in addition to striking an appropriate balance between the interests of 
home and host countries, taking into account the development (and other) policies and objectives of 
host governments, as well as their right to regulate in the public interest.  Canada also believed that 
the precise interaction of a prospective multilateral framework on investment with other agreements, 
particularly the GATS, would become more clearly defined in the negotiating process.   
183. In response to a point made by Brazil on Canada's submission on "Transparency," the 
representative of Canada stated that Canada had neve r denied that a host of factors played a role in 
creating an investment-friendly environment but a ke y factor was the existence of a transparent and 
stable and predictable legal environment that a mu ltilateral framework would seek to establish.   It 
was also more important for investors to know in  which areas they might face discrimination and 
which kind of barriers were involved than to know in  which areas they would not face discrimination. 
He noted that there was a convergence of views on th e principle of transparency and its fundamental 
importance but that views diverged on the potential  transparency obligations that a prospective 
multilateral agreement would cover.  These views shoul d be reconciled in the context of negotiations 
on a multilateral framework on investment.  
184. The representative of China
 noted that Japan in its submission on the need for multilateral 
investment rules (WT/WGTI/W/158) had made refere nce to China's experience with FDI.  In this 
connection, he stressed that his country had benefitted from FDI in the absence of a multilateral 
framework on investment and that Ch ina's achievements in this respect  had been the result of China's 
own policies, the unilateral provision of a s ound legal environment, the existence of a sound 
infrastructure, the size of its market and the exis tence of a very stable social, political and economic 
system.  China's experience could thus not be mentioned as an argument in favour of the conclusion  WT/WGTI/M/21 
 Page 51 
 
 
of multilateral rules on investment.   This did not  mean that China was opposed to negotiations on a 
multilateral framework on investment, if Members could reach a consensus on modalities, as provided 
in the Doha Ministerial Declaration.  In reaction to Japan's comments on transparency, he considered 
that the fact that WTO rules provided guidance to governments with regard to international trade, 
which was conducted by private parties, demonstrat ed that governments had the capacity to lay down 
rules for the conduct of private investors.  On th e question of definition, he emphasized that the 
conditions in most developi ng countries were not ripe for the inclus ion of foreign portfolio investment 
in a multilateral framework.  
185. The representative of the European Communities,  referring to the comments made by 
Argentina, stated that the concern of Japanese i ndustries regarding the lack of transparency and 
predictability of foreign investment regimes wa s best addressed by a single multilateral framework 
rather than by the conclusion of a large number  of additional bilateral investment treaties. 
International investment agreements obviously did not exclude small- and medium-sized enterprises 
but the point made by the European Communities on th is issue was a different one, namely, first, that 
bilateral investment treaties generally did not include  transparency provisions and, second, that small- 
and medium-sized enterprises only had limited resources to inform themselves of the business 
climates in foreign countries.  A multilateral fram ework on investment would thus be especially 
beneficial to such enterprises.  
186. The representative of Egypt  did not share the view in paragr aph 4 of Canada's submission in 
WT/WGTI/W/157 that many Members had consider able experience in negotiating investment 
agreements and that few of the principles of a multil ateral investment framework were entirely new.  
Most developing countries still lack ed the necessary level of experi ence that would enable them to 
better evaluate the implications of closer mu ltilateral cooperation for their development policy 
objectives and human and institutional development.  This had been emphasized in paragraph 21 of 
the Doha Ministerial Declaration. The Working Gr oup had not yet accomplished its task and achieved 
a holistic view of the interrelationship among the elements contained in paragraph 22 of the 
Declaration.  There was a need to further c onsider the issues of non-discrimination and pre-
establishment commitments from the perspective of  how the development dimension of the Doha 
Round could be reflected in appropriate flexibility for developing countries to regulate investment. 
Technical assistance and capacity building in respect of WTO agreements had not met the 
expectations of  developing countries, which we re now facing severe implementation problems. Any 
new agreements would exacerbate these problems a nd lead to a situation where developing countries 
would have signed on to an agreement that would likely be subject to dispute settlement without a 
proper understanding of its implicati ons.  Egypt agreed with China that  any transparency provisions in 
a multilateral framework on investment should in clude commitments by host countries, home 
countries and investors.  
187. The representative of Canada  stated that his country's e xperience was that investment 
agreements contributed to the creation of an envi ronment conducive to investment.  While developing 
countries did not have the same capacity to partic ipate in negotiations as developed countries, it was 
also true that many countries were currently ne gotiating investment treaties and that they were 
familiar with many of the concepts involved.  He  reiterated that Canada saw the need for more 
focused technical assistance in the contex t of a WTO negotiation on investment.  
188. The representative of Djibouti  underscored the point by Egypt on the need to take into 
account the particular circumstances of developing  countries and doubted whether in this respect the 
work of the Group adequately reflected the instruc tions contained in the Doha Declaration.  He 
emphasized the need for a more targeted appro ach to technical assistance and capacity building 
efforts, especially vis-à-vis  the least-developed and African countries, and the need for regular follow-
up and evaluation of technical cooperation activities.  WT/WGTI/M/21 
Page 52  
 
189. The representative of Venezuela
 considered that the process of study and enquiry in the 
Working Group had been most useful, since it ha d raised new and future-oriented questions and 
concerns deserving the attention of Members if th ey were to achieve a better understanding of the 
implications of a multilateral investment framework.  Although not all questions could be answered at 
the preliminary stage of any negotiating process,  Venezuela considered that certain questions and 
concerns could not be left without being answered to the satisfaction of  all parties, as a prelude to any 
decision that might be taken in the future, and i rrespective of the package of negotiating topics that 
could be developed in the run-up to the 5th Session of the Ministerial Conference.  Assuming that 
agreement would be reached on the desirability of such a framework within the WTO, and 
irrespective of Venezuela's future position on general or specific decisions in this area, his delegation 
considered that any blueprint for a multilateral i nvestment framework should contain rules that fully 
reflected the interests and needs of developing countr ies, as stated in paragraph 22 of the Ministerial 
Declaration.  No delegation should require others, particularly those that did not seek an agreement of 
this kind, to support positions of principle, for ex ample on the development dimension for this and 
other negotiating topics.  Venezuela attached great importance to the additional investments that could 
be attracted to its territory but any regulatory framework that restricted the State's room for 
manoeuvre in this respect would need to be examined  with particular care.  The developing countries, 
more than any other Members, were fully qualifie d to identify and define their requirements and the 
best way of achieving their objectives.  Venezuela shared the view expressed on various occasions by 
numerous delegations that any multilateral investment  agreement should contain differentiated rules, 
regardless of technical cooperation and transition periods.  While he did not wish to question the 
benefits of FDI for development, it was a notable f act that an alarmingly high percentage of global 
investment was intended for speculative purposes.  In this connection, Venezuel a was of the view that 
a very clear idea should be obtained of the scope and definition of investment, as a prerequisite to any 
future decision. Venezuela favoured a clear defin ition of FDI, excluding other concepts such as 
portfolio investments. Any definition of investment that might be developed in the future should be 
consistent with rules making it possible, for ex ample, to maximize returns on FDI through the 
application of certain policies and measures, as well as to apply anti-cyclical policies and measures so 
as to prevent investments becoming a factor conducive to financial crisis, especially in periods of economic growth.  Accordingly, a clear understanding  on the definition and scope of investment, in 
conjunction with other elements of the kind referred to above, should be a key issue for consideration 
at future meetings, and one requiring clarifi cation before any future decision was taken. 
190. The Working Group took note
 of the statements.  
C. OTHER RELATED ISSUES  
191. The representative of India recalled that at the Group's meeting in December 2002 various 
points had been raised regarding the joint submission circulated in WT/WGTI/W/152 on obligations of investors and home countries.  The main points made at that meeting related to the alleged 
limitations facing home governments in market economies;  the extraterritorial application of law; the 
need for domestic regulation of enterprises;  the importance of voluntary guidelines and the difficulty 
of imposing binding obligations on enterprises; the co mplexity of the issues raised in the submission; 
and the lack of competence and resources in the WTO to tackle issues relating to corporate activities 
and home country measures.   
192. It was important to clarify that many existing WTO agreements already had a direct impact on 
private business activities.  The TRIPS Agreement,  for example, contained a set of provisions 
enforced through domestic law by countries which im pinged upon private parties.  The agreements on 
anti-dumping and subsidies and c ountervailing measures similarly re lated to multilateral provisions 
impinging upon private business-sector activity in an ex traterritorial manner.  As regards the view that 
the issues raised in WT/WGTI/W/152 were comp lex and sensitive and that the WTO lacked the 
competence and resources to address them, India considered that the entire subject of trade and 
investment was complex and sensitive.  However,  having decided to address this subject, Members  WT/WGTI/M/21 
 Page 53 
 
 
could not avoid dealing with what was an intrinsic aspect of it.  Voluntary approaches to corporate responsibility had not proved effective, as demons trated by the recent scandals involving misconduct 
by leading multinational enterprises.  Regarding th e argument that enterprise behaviour was a matter 
for domestic regulation, he pointed out that as early as the 1970s the international community had 
recognized the limitations of domestic laws in dealing with multinational enterprises by launching 
negotiations on the UN Code of Conduct for Transn ational Corporations and the OECD Guidelines 
for Multinational Enterprises. The issue of restric tive business practices was discussed in the Working 
Group on the Interaction between Trade and Compet ition Policy but there was a close relationship 
between the subjects of trade and investment, on the one hand, and trade and competition policy, on 
the other.  This had been recognized in the Singa pore Ministerial Declaration which had required the 
two Working Groups to draw on each other's work if necessary.  There could be no discussion on a 
multilateral framework on investment without cons ideration of restrictive business practices.  
Paragraph 20 of the Doha Ministerial Declarati on very clearly provided that any framework should 
reflect in a balanced manner the interests of host and home countries and take due account of the 
development policies and objectives of  host countries as well as their right to regulate in the public 
interest. The suggestions made in the joint subm ission were therefore well within the mandate 
provided in the Doha Declaration.  India consid ered that investor obligations and home-country 
obligations had to permeate all aspects of the discussi ons as determined by Ministers. He stressed that 
the discussions in the Working Group were not about FDI per se  but about the need for a multilateral 
framework.  India had been consistently liberalizi ng its foreign investment policy on an autonomous 
basis and there was no question of a possible reversal of this policy. Many comments made at the 
present meeting had pointed to the need for further debate on the question of obligations of investors 
and home countries.  
193. Referring to the statement by the European Co mmunities that the positions taken by certain 
delegations appeared to be tactical in nature, th e representative of India recalled that the mandate of 
the Working Group was to clarify issues and reach a better understanding of the implications of closer 
multilateral cooperation in the area of investment.  A ccordingly, India had made its best efforts to 
understand the issues and it was clear that this Work ing Group was not a forum for tactical posturing.  
194. The representative of the United States
  considered that the Working Group had fulfilled its 
mandate and that discussions had been conducted at an impressively high level of sophistication.  By 
improving  the understanding of Members’ views on key issues, the Working Group had done much 
of the preparation necessary to help Ministers reach  consensus on a negotiatin g mandate in Cancún.  
Members had agreed at Doha to start investment negotiations after the 5th Session of the Ministerial 
Conference and had also agreed that an explicit  consensus would need to be reached at that 
Ministerial on modalities for the negotiations.  Members had to remind themselves in the coming months that they need not agree at this stage on an  ideal outcome with respect to any potential item on 
the negotiating agenda but that they only needed to  agree on negotiating modalities. The United States 
was committed to working with other Members to  reach agreement on key overarching principles. 
Like other Members, it had strong views on severa l issues on the Doha list .  The United States 
expected that Members would agree that some of th e Doha issues should be a part of the post-Cancún 
negotiating agenda but the United States was not curren tly in a position to support simply translating 
the seven elements in Doha paragraph 22 into a negotiating mandate. Through internal government 
consultations and external consu ltations with key stakeholders, the United States was developing a 
more detailed position on the modalities it w ould propose to emerge from Cancún. 
195. The Working Group took note
 of the statements. 
D. OTHER BUSINESS  
196. The Chairman  stated that the next meeting of the Working Group would take place on 10-
12 June 2003 and that one of the items on the age nda of that meeting woul d be the adoption of a 
report to be submitted to the General Council before the 5th Session of the Ministerial Conference.  In WT/WGTI/M/21 
Page 54  
 
the latter regard, he drew attention to the deci sion taken by the General Council at a meeting in 
February to submit to the Cancún meeting a comp ilation of the 2002 annual reports of all WTO 
bodies, together with an update repor t concerning developments in 2003.
10   The Working Group 
would therefore need to present to the General Council an update to the Group's 2002 Annual Report.  
At the informal meeting held on 17 March, wi despread support had been expressed that the Group 
should submit a factual report to which a list of written contributions coul d be appended.  He 
proposed that the Group confirm this understanding and that the Secretariat be instructed to prepare a 
draft for consideration at the next meeting.  The dr aft might need to be update d subsequently to reflect 
any substantive discussion at that meeting.  
197. It was so agreed .  
198. The Chairman  informed the Working Group that the Secretariat would hold its fourth – and 
final – technical workshop for English-speaking Geneva-based delegations and officials on 13-
14 June.  
 
__________ 
  
                                                     
 
10 WT/WGC/M/78, paras. 155-156.