./.WORLD TRADE
ORGANIZATIONWT/GC/W/245
9 July 1999
(99-2849)
General Council Original:  English
PREPARATIONS FOR THE 1999 MINISTERIAL CONFERENCE
EC Approach to Trade and Investment
Communication from the European Communities
The following communication, dated 8 July 1999, has been received from the Permanent
Delegation of the European Commission.
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Introduction
1. The European Community and its member States believe that the time has come for the WTO
to establish a multilateral framework of rules governing international investment, with the objective of
securing a stable and predictable climate for foreign direct investment world-wide.  Notwithstanding
the difficulty of drawing precise distinctions in this area, such a framework should focus on FDI, to
the exclusion of short-term capital movements.  Moreover, it should preserve the ability of host
countries to regulate the activity of investors (whether foreign or domestic) on their respective
territories, taking also into account the concerns expressed by civil society in many WTO Members,
including those regarding investors’ responsibilities.
The WTO as a negotiating forum and the application of WTO principles
2. International investment flows take place in a variety of different situations.  Traditionally,
developed countries have been home and host countries in comparable proportions, whereas
developing countries have been mostly in th e role of host countrie s, but FDI flows between
developing countries, as well as those from developing to developed countries, have been growing.
Thus, the WTO appears as the only multilateral forum that can fully take into account the interests of
both developed and developing countries in their position as home and/or host countries to
international investors.
3. The WTO also has the undeniable advantage of a well-established institutional framework
(including the Dispute Settlement Understanding) and of tried and tested basic non-discrimination
principles.  Indeed, the EC and its member States consider that non-discrimination is the linchpin of
an open and efficient investment regime.  In this respect, it should not be forgotten that existing WTO
agreements, e.g. GATS, contai n provisions on investment.
Access to investment opportunities and non-discrimination
4. The present situation as to the openness of countries’ domestic markets to foreign direct
investment differs greatly among WTO Members.  In the member States of the EC the policy of
welcoming foreign investment is actively pursued, generally on the basis of the national treatmentWT/GC/W/245
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principle (with some justified exceptions).  The European experience of openness towards foreign
investors is positive.  Thus, an approach along the lines of the GATS model, based on commitments
undertaken by each Member, is the way to allow for the flexibility that many WTO Members require.
Protection of investment and right to regulate5. International rules on foreign direct investment protection contribute to create a favourable
investment climate that benefits both international investors and host countries.
6. Further reflection is needed on the question of in vestment protection rules.  Rules of this kind
are enshrined in many bilateral or regional investment treaties, but in some cases they have been
subject to unexpected and controversial interpretation s.  Thus, international rules on FDI, while aimed
at encouraging FDI flows, should preserve the ability of all host countries to regulate, in accordance
with basic WTO principles, the exercise of economic activity on their territory.
7. These rules must respond to the concerns expressed by civil society concerning their impact
on the environment and labour conditions.
8. Developing WTO Members have the additional concern of ensuring the compatibility of the
activities of foreign investors with their developmental policies and objectives.
Sustainable development
9. The potential of FDI to contribute significantly to economic growth in both home and host
countries is being increasingly recognized.  This is not necessarily the case, however, of any
investment under any circumstances.  A framework of multilateral rules for FDI should ensure the
right conditions for international investment to be conducive to sustainable development.  Quitenaturally, this aspect is of even greater importance for developing WTO Members.
10. In this respect, traditional provisions on special and differential treatment for developing
countries may no longer suffice.  Rather, the dime nsion of sustainable development should be built
into the basic rules themselves, which should be such that they can be implemented by all WTO
Members.
Stable and transparent business climate
11. One of the keys to attracting long term FDI is to ensure that the treatment of established
investors is predictable.  Accordingly, changes in applicable domestic laws and regulations should be
brought about in as transparent a manner as possible.  Difficulties in establishing knowledge of the
laws and regulations of the host country have been identified by international investors as an
important brake to their propensity to invest abroad.
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