RESTRICTED
WORLD TRADE WT/WGTI/W/3
17June1997
ORGANIZATION(97-2479)
Original: English Working Group ontheRelationship
between Trade andInvestment
COMMUNICATION FROM INDIA
Thefollowing communication, based onastatement made bytherepresentative ofIndia at
thefirstmeeting oftheWorking Group, hasbeenreceived fromthePermanent Mission ofIndia with
therequest thatitbecirculated toMembers.
_______________
ThisWorking Group hasbeenestablished bytheSingapore Ministerial Declaration anditis
obvious thatitistheresponsibility ofthisGroup toimplement, inletter andspirit, themandate given
toitbytheMinisters. Itiswellknown thatintherun-up totheSingapore Ministerial Conference,
India hadexpressed ageneral concern about theover-burdening oftheWTO agenda withnewsubjects
when Members arestruggling withtheimplementation ofthecommitments already embodied inthe
various WTO Agreements.
However, atSingapore, inlightofthecollective wisdom oftheMembership oftheWTO,
India agreed totheproposal toinitiate astudy process intheWTO inrespect ofcertain subjects. On
thespecific topicofinvestment, Indiahasconsistently pointed outthatthisisanextremely complicated
subject andthatthere isaneedtostudy thesubject carefully without anypredetermined conclusions
andthatonlyaftertheeducational process wascompleted cananinformed viewbetaken onthematter.
Itisworthwhile recalling inthiscontext thateventhedeveloped countries, whowereanxious tohave
thissubject brought intotheWTO quickly, hadstated onmore thanoneoccasion during therun-up
totheSingapore Ministerial Conference, thattheyalsodonothaveadequate knowledge about allthe
aspects ofthetrade andinvestment issue andthatitisintheinterest ofallWTO Members tohave
aneducational process.
TheSingapore Ministerial Declaration hasbeencarefully drafted withaviewtoclearly define
theparameters ofwork inthisGroup. ThisWorking Group hasbeencharged withtheresponsibility
ofexamining therelationship between trade andinvestment. TheDeclaration specifically mandates
theGroup toensure thatthedevelopment dimension isfullytaken intoaccount. TheDeclaration also
links theeducational process onthesubject oftherelationship between trade andinvestment tothe
existing WTO provisions onmatters related toinvestment ingeneral andtotheTRIMs Agreement
inparticular. TheDeclaration alsorecognizes explicitly therelationship between theworkinthisGroup
andthework intheGroup onTrade andCompetition Policy andspecifically states thatthetwoGroups
should draw upon eachother’swork.
Inlightofthefactthattheprimary roleofthisWorking Group istofacilitate aneducational
process aimed towards studying therelationship between trade andinvestment, itisnecessary forthe
Group toensure thatthere isaclearly defined syllabus which should bestudied. Thissyllabus should
becomprehensive, withallthetopics tobecovered bythesyllabus carefully sequenced. TheaimshouldWT/WGTI/W/3
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betoensure thatallWTO Members arebetter informed, attheendofthiseducational process, about
thevarious aspects oftherelationship between trade andinvestment andother related matters.
Firstphase
1. Thefirstandforemost element ofourstudy, which India would liketodescribe asthecore
element, should betherelationship between trade, investment anddevelopment. While signing the
Agreement Establishing theWTO, Members recognized thattheirrelations inthefieldoftrade and
economic endeavour should beconducted withaview toraising standards ofliving, ensuring full
employment andalargeandsteadily growing volume ofrealincome andeffective demand. They also
recognized theneedtokeepinfocus theneeds ofeconomic development ofdeveloping countries.
Therefore itisobvious thatanywork intheWTO, whether ontrade orinvestment, orwhether on
trade andinvestment, cannot bedivorced fromtheneeds ofeconomic development ofthedeveloping
countries.Theunderlyingobjective,fromIndia’sperspective,ofanyliberalizationshouldbedevelopment
ofunder-developed economies and,asfarasIndia isconcerned, whether itistrade orinvestment,
these issues arerelevant toitonlytotheextent theyserve theobjectives ofdevelopment. Therefore,
thedevelopment dimension should notbeviewed asan"add-on" forthevarious elements ofthework
programme butshould beviewed astheverybasisandrationale fortheGroup 'swork. Thedevelopment
perspectiveshouldpervadeeveryelementofourworkprogramme.Inshort,thedevelopmentperspective
should betheall-pervasive element ofourstudy.
2. InIndia'sview, aftergetting some initial insight intotherelationship between trade, investment
anddevelopment, theGroup should trytounderstand theeffect oftrade andinvestment onavariety
ofeconomicvariablessuchasimports,exports,intra-firmtrade,domesticsavings,fiscalbalance,balance
ofpayments, etc.
3. ThethirdareaoftheGroup 'sstudy should relate totheimplications offoreign direct investment
fortechnology transfer anddomestic capacity building, which areofcritical importance fromthepoint
ofviewofdeveloping countries.
4. Thefourth areaoftheGroup 'sstudy should relate totherelationship between foreign direct
investment andpolicies ofnational governments withregard toindustrialization. Oneimportant aspect
ofthisexamination would betheimpact offoreign direct investment onthefreedom enjoyed bythe
nationalgovernmentsinpursuingtheirownnationalindustrializationpolicies,especiallypoliciesdesigned
towards specific regions andspecific sectors.
Thefourelements ofthework programme outlined sofar,which canbedescribed asthefirst
phase oftheGroup 'swork, essentially amount toaninitial examination oftherelationship between
tradeandinvestment andalsotherelationship between trade, investment andcertain other parameters.
Second phase
5. Inthesecond phase ofthework ofthisGroup, theinitial examination carried outinphase
oneshould befollowed upbydrawing upon thedeliberations intheWorking Group onTrade and
Competition withaviewtounderstanding therelationship between investment andcompetition policy
atthenational andinternational levels. Thiscould betreated asthefifthelement oftheGroup 'swork
programme. Inthelightofthemandate given tousbytheMinisters, India proposes thattheWorking
Groups should, atanappropriate time, havejointsessions toexamine theissue.
6. Thesixth element oftheGroup 'swork programme should relate toanexamination ofhow
trade andinvestment have been dealt withintheexisting WTO Agreements, suchastheTRIMs
Agreement andtheGATS. Thepaper bytheSecretariat could beastarting point inthisprogramme.WT/WGTI/W/3
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Asapartofthis,there should beanopportunity toexamine experiences inrelation totheTRIMs
Agreement.
7. Astheseventh element oftheGroup 'swork programme, theGroup should turnitsattention
tohowtheissue oftrade andinvestment hasbeenexamined inother fora,withtheawareness thatno
other international forum hastheunique character oftheWTO. Therefore themanner ofhandling
thisissue inother foracanbeconsidered byMembers onlyasaninput forfacilitating discussions in
thisGroup, andnotasamodel tobeemulated.
8. Theeighth element oftheGroup 'sworkprogramme should relate totheexperiences ofanumber
ofcountries withdifferent levels ofindustrial development andincome intheareaoftrade and
investment. Thisshould include thestrategies adopted bythese countries toreconcile thenational
development needs andtheinterest ofinvestors.
Third phase
9. Inthethirdphase oftheprogramme, theGroup should trytodealwithsome ofthebroader
aspects oftherelationship between trade andinvestment. Theninth element initswork programme
could betheimplications, fordeveloping countries, ofthebusiness practices andcorporate strategies
oftransnational corporations whoareprimarily responsible fortheflowofforeign direct investment.
10. Thetenthelement oftheGroup 'swork programme should dealwiththedeterminants offlow
offoreign direct investment. Itmaybeworthwhile toexamine theinterrelationship between various
kinds offoreign investment, especially because, aspointed outbyaneminent expert, 90% ofthe
transnational corporations 'financial transactions donotserve whateconomists would normally consider
aneconomic function.
11. Besides, itwould beworthwhile having anideaabout thetruenature ofthecurrent globalization
bylooking atmobility ofthedifferent factors ofproduction. Therefore Indiasuggests thattheeleventh
element ofthework programme should beanexamination oftheinterrelationship between various
kinds offoreign investment aswellastheinterrelationship between mobility ofcapital andmobility
oflabour.
12. Thetwelfth element ofthework programme could dealwiththerights andobligations ofhome
andhoststates andinvestors.
Themostimportant point tobekeptinmind isthattheGroup should embark upon itsstudy
process ontherelationship between trade andinvestment in“anopenandnon-prejudicial manner ”.