RESTRICTEDWORLD TRADE
ORGANIZATIONWT/GC/W/141
29 January 1999
(99-0349)
General Council Original:  English
PREPARATIONS FOR THE 1999 MINISTERIAL CONFERENCE
General Council Discussion on Paragraph 9(b) of the 1998 Ministerial Declaration
27 January 1999
Communication from India
The following statement made by India at the Informal Intersessional General Council
meeting on 27 January 1999, is being circulated at the request of that delegation.
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1. The work programme that we adopted at Singapore in December 1996 was a difficult
decision for India.  We were strongly of the view that WTO's agenda was already overloaded and thatany fresh or new work was unwarranted.  Yet, in a spirit of compromise India agreed at Singapore to
the establishment of two Working Groups: one on Tr ade and Investment and the other on Competition
Policy.
2. It is nevertheless pertinent to recall the terms of reference which govern the work of these two
Groups.  First, due regard would be given to existing WTO provisions on matters related to
investment and competition policy and to the built-in agenda in these two areas, including the TRIMS
Agreement.  But most importantly, it was made clear that the work undertaken shall not prejudgewhether negotiations will be initiated in the future. In other words, the process would be an educative
one, based on an information gathering exercise aimed at examination of the relationship between
trade and investment.
3. If there is one thing that is clear after the work done by the Group on Trade and Investment, it
is that the issue is complex, multifaceted and delicate.  It is complex because the relationship betweentrade and investment is not a straightforward one, as some would have us believe. Statements such as
more investment will necessarily lead to more trade or indeed vice versa have been shown to be
demonstrably inaccurate when tested by the experiences of several developing and least developed
countries.  The issue is also multifaceted because this is not just about trade and investment; it is also
about development.  Indeed, the development dimension is so important for countries such as Indiathat this, we believe, should form the core of the entire discussions in this Group.  Lastly, this issue is
also a delicate one for several developing countries.  It is difficult for countries such as India to
consider free movement of capital when the same yardstick is not applied to even temporary
movement of labour.  What is considered political sensitivity and a matter of national sovereignty
with regard to one issue (labour for developed countr ies) must be legitimately considered to be the
same for the other issue as well (capital for developing countries).
4. The discussions in the Working Group on Trade and Investment have brought out the
complexity as also the determinants of investment  flows, including the size of the domestic market,
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stability.  It is also clear, as highlighted by the 1998 World Investment Report of UNCTAD, that the
majority of FDI flows take place within or through TNCs.  The factors, which determine where TNCs
invest, include the presence of ownership specific competitive advantage in a Trans National
Corporation (TNC), the presence of locational advantage in a host country and the presence of
superior commercial benefits in an intra-firm as against arms length relationship between investor andrecipient.  One could draw some conclusions already, such as, that multilateral rules do not constitute
an important determinant of FDI flows, that TNCs act on considerations which may be inherent to an
economy rather than induced through public policy, and so on.  But further discussions are necessary
to fully comprehend the linkages between trade and investment, the benefits expected of domestic or
international policy on investments and the trend of existing arrangements. Most importantly, we must
also integrate into our discussions a full debate on liberalisation of the movement of all factors of
production, including labour, in particular.
5. The recent financial crisis in some parts of the world and, recession elsewhere, throws up new
issues.  Investor obligations is one such issue: management of local conflict is another.  The need for
putting in place appropriate regulatory mechanisms is increasingly being recognised.  These issues
would need to be discussed further.  But perhaps more than anything else, the global financial crisis and
the volatility of the capital markets has brought into sharp focus the extremely complex nature of thework in this Group on Trade and Investment.  It is not even clear  that any possible discipline on this issue
belongs to the subject matter of WTO.
6. Our concerns have been articulated sufficien tly in the working group. For now, we would like
to stress that the educative process in this Group should continue.   We are still a long way from
clarity and comprehension on this complex issue.  India, meanwhile, will continue to participateactively in this Group as it has up until now.
7. The Singapore Ministerial Declaration had also similarly agreed to establish a Working
Group to study issues raised by Members relating to the interaction between Trade and Competition
Policy. This Working Group in the course of the preceding two years has initiated an exploratory and
educative exercise in order to better understand the interaction between trade policy and competitionobjectives.  The work done by this Working Group so far has only reinforced the view that we have
held earlier, that is, the issues relating to the interaction between Trade and Competition Policy are
complex and that they would require further in-depth analysis.  While the benefits of having a
competition regime have no doubt emerged, It has also become clear that no single model, even if
found to be successful in a particular country, would necessarily produce the same effect in another
country, since Competition Policy, to a very large extent, depends upon local conditions, particularly
the ability of the domestic industry to withstand international competition.  It is therefore clear that theWorking Group needs to consider these issues in greater detail.
8. It is also clear that while trade policies and competition principles are generally
complementary, there are certain areas where the two can be in conflict with each other. For instance,
anti-dumping is one such area where there seems to be a clear dichotomy between the objectives of
trade and competition policies, since anti dumping action leads to the suppression of competition witha view to maximising national benefits.  Another area which we feel is important is the impact of anti
competitive practices of international enterprises a nd associations on international trade. The Working
Group needs to focus on international cartels, where multinational corporations in different countries
agree to fix prices and/or allocate territories amongst themselves.  It would be important to also
examine how national governments can best combat such  practices.
9. In the discussions held in the Working Group, inconsistencies between trade policy measures
and competition have also emerged in other areas, notably, the effect of anti-competitive practices
such as  quotas in textiles, tariff quotas  in agriculture, subsidies which distort competition, the setting
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internationally  have been some of the important concerns voiced in the Working Group.  Until and
unless there is effective implementation of existing WTO commitments, which entails fostering
competition, it would be premature to engage in discussions on how WTO provisions can be further
strengthened to support competition. It is our view that simply by improving the efficacy of the
implementation of many of the existing provisions, and perhaps by reviewing those provisions whichhave predominantly been used for protecting domestic industry, we would succeed in creating a more
competitive environment.
10. We accordingly feel, that although, a beginning has been made much work still remains to be
done.  The introduction of competition policy and law has to necessarily be a progressive activity,
specially since domestic industries in developing countries may find it difficult to adjust to
international competition laws if these are not introduced gradually.  Some Members have, in this
context, suggested the need to develop multilateral ru les in this regard. However, we feel that  it is
still too premature to talk of a multilateral frame work. What we need to do is to  continue this open-
ended educative and exploratory process till there is greater clarity in thinking, particularly in areas
where there is a dichotomy between the tenets of Trade and competition policies, and to only
thereafter consider this facet of work.
11. The other  SMC issue, namely Government Procurement, it would appear that sufficient
progress in the work programme  has to be made before any conclusion can be drawn about the need
for a multilateral discipline in this sphere. The Working Group has been engaged in an exercise to
understand the transparency-related provisions in existing international instruments on government
procurement and national procedures and  practices.  We find that the Working Group is still in an
educative mode. There have been divergence of views even in respect of the first basic issue, namely,definition and scope of government procurement keeping in view the fact that Members of the WTO
are in different levels of development. The Working Group has also not yet had the benefit of having
complete information on national practices and procedures. During the discussions, concerns have
also been raised regarding non-availability of tech nical assistance to developing country Members. In
this connection, we would stress that India had misgivings in Singapore about introduction of thissubject on a multilateral basis in the WTO. Keeping in view their development concerns, most of the
developing countries, including India, did not  join the Plurilateral Agreement on Government
Procurement. Hence, we feel that the Working Group should first understand fully the concerns of the
developing country Members before it can  arrive at a common ground for all Members to accept.  It
is therefore necessary to continue and intensify the educative process.
12. Coming now to the last of the new areas where work was initiated in pursuance of the
Singapore Ministerial Declaration, i.e., Trade Facilitation, we would like to place on record ourappreciation of the work done so far by the CTG, the deliberations of which have helped improve our
understanding of the problems in the area of trade facilitation.  However, what has also become clear
from these deliberations is that there are wide differences in interpretation and application of trade
procedures amongst various trading partners. While we support the need to work towards harmonized
documentation formats and procedures, we would caution in adopting too fast a pace.  This is aprocess in which Members have so far participated constructively.  We would not like this response to
be hampered by putting pressure of a non-existent deadline. We therefore support a continuation of
the exploratory and analytical work and hope that the CTG would continue to provide an opportunity
for Members to raise such issues as they deem important.
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