A4-0276/95

Resolution on the communication from the Commission entitled: 'A level playing field for direct investment world-wide' (COM(95)0042 - C4-0118/95)

The European Parliament,

- having regard to the communication from the Commission entitled: 'A level playing field for direct investment world-wide' (COM(95)0042 - C4- 0118/95),

- having regard to the results of the Uruguay Round, particularly in the areas of trade-related investment measures (TRIMs), the protection of intellectual property rights (TRIPs) and trade in services (GATS),

- having regard to the decision of the OECD Council of Ministers of 24 May 1995 to enter without delay into negotiations on the conclusion of a Multilateral Investment Agreement between the 25 OECD states, with the objective of working out a comprehensive framework agreement, with high standards of liberalization, in time for the 1997 Ministerial Conference,

- having regard to the report of the Committee on External Economic Relations and the opinions of the Committee on Economic and Monetary Affairs and Industrial Policy and the Committee on Development and Cooperation (A4-0276/95),

A. whereas the volume of international trade has expanded, as a result of the elimination of barriers over eight rounds of multilateral GATT negotiations, to more than 13 times what it was in 1950, bringing an increasing internationalization of economic activities, with positive consequences for growth and employment, whilst sectoral and regional disparities have grown,

B. whereas an increasingly important role in this process of internationalization has been played not only by trade flows, but by international direct investment aimed at securing competitive positions abroad and gaining new markets,

C. whereas, while direct investment was initially made almost exclusively between western industrialized countries, the dynamic economies of Asia and Latin America have, for a number of years, been gaining importance both as sources of capital and as recipients of direct investment,

D. whereas in many developing countries and countries on the verge of industrialization, as well as in some industrialized countries, there are numerous forms of discriminatory restrictions on foreign direct investment, capital and profit transfers,

E. whereas there are also numerous and differing restrictions in many countries on other forms of investment, and capital and profit transfers, which may be affected by precedents set for direct investment,

F. whereas the European Union, as one of the world's leading trading powers, has a special responsibility to establish fairer world trade structures,

1. Recognizes the need of companies which are active internationally for a harmonized regulatory framework for investment, and the right of each and every state, in particular if it is economically less developed, to pursue an independent economic policy, of which laws and other provisions governing foreign investment are an integral part;

2. Notes the need to provide these internationally active companies with such a harmonized and competitively neutral regulatory framework for investment decision-making, which will secure for their operations a level of protection comparable to that in their home country and equal access to markets;

3. Is convinced that harmonizing and liberalizing international investment flows in this way, with a suitable legal framework and monitoring by a multilateral institution, can contribute to better use of economic resources, increased employment and economic growth in the developing countries too;

4. Points out, at the same time, that liberalizing direct investment without creating an accompanying, multilateral legislative framework could lead to the misdirection of international investment flows and consequently to social and/or environmental dumping;

5. Believes, on the other hand, that fears of the permanent export of jobs, as a result of direct investment abroad, and particularly of company relocations in so-called cheap-labour countries, are exaggerated, because experience to date has shown that differences in labour costs are only one of many factors in foreign investment;

6. Points out, in this regard, that direct investment involves not only outflows but inflows of capital, and that investment often produces increased demand for capital goods and upstream products in the source country, thus securing jobs in export-dependent sectors in the long term;

7. Emphasizes that the far-reaching liberalization of investment flows makes the multilateral harmonization of further framework conditions, particularly in the field of social and environmental legislation, take on an increasing degree of urgency;

8. Calls, therefore, for the inclusion of environmental protection in the multilateral trade regulations and calls on the Member States of the WTO, and particularly the EU Member States, to open discussions, in which trade unions are involved, on minimum social requirements, without the inclusion of social and environmental aspects resulting in covert protectionism;

9. Points out that improved opportunities for foreign investment will not necessarily lead to increased competition, but could be used by large multinational undertakings to build dominant market positions, make international cartel arrangements to secure their foreign investment or conclude mergers which would restrict competition;

10. Calls, therefore, for similar harmonization in the field of competition policy and asks the Members of the WTO, as part of the TRIMs Agreement, to include competition policy rules in the world trade regulations within five years;

11. Regards the following as the most important elements of a multilateral agreement on direct investment:

- the granting of most favoured nation status, under which recipient countries undertake not to discriminate between investments from different signatory states;

- the granting of national treatment, under which recipient countries undertake not to discriminate between national and foreign investments;

- the obligation to enact legislation guaranteeing the freedom to transfer capital and profits, and protection against undemocratic expropriation;

- provisions for mobility of workers for a limited period to implement foreign investment and operate plants abroad, with attention to labour market conditions in the recipient country;

- an effective procedure for settling disputes;

12. Points out in this context the vital importance of effective protection of intellectual property ensuring that technical know-how or manufacturing processes transferred abroad by direct investment cannot be exposed to unfair competition, and calls in consequence for all contracting parties to the WTO to comply fully and within the prescribed deadlines with their contractual obligations under the agreement on trade-related intellectual property rights (TRIPs);

13. Considers that the parties to the agreement should have different deadlines, according to their state of economic development, for incorporating these obligations into national law, in order to give developing countries the possibility of acceding to the agreement;

14. Regards the negotiations at OECD level as a useful basis for the conclusion of a Multilateral Investment Agreement within the framework of the WTO, and therefore considers that, given the growing investment flows into South-East Asia, Latin America and Central and Eastern Europe, such negotiations must involve non-OECD States;

15. Is aware, however, of the pressing need to take the economic interests of developing countries into account to a greater extent than has hitherto been the case;

16. Points, in this connection, to the fact that Western investment capital is needed to assist the economic transformation process in the countries of Central and Eastern Europe and the CIS and hopes that the conclusion of a Multilateral Investment Agreement, to which those countries must be parties, will improve the investment climate there;

17. Is therefore in favour of such negotiations being conducted within the framework of the WTO and calls on the Commission, as a member of the WTO and spokesman for the EU Member States within the WTO, to work towards a decision by the WTO Ministerial Conference, which is planned for December 1996, on the opening of such negotiations;

18. Points out that the close link between trade and investment flows, the elements of a multilateral investment agreement already present in the TRIMs, TRIPs and trade in services agreements and the possibility of using the WTO arbitration procedure provide grounds for conducting the negotiations within the framework of the WTO;

19. Points out that decisions on investment for long-term commitment abroad and many other aspects of international economic development are impeded and undermined by exchange rate fluctuations arising from speculative pressure, and therefore calls on international and national monetary institutions to work together to limit the scope for such disruptive elements in the currency markets;

20. Welcomes the Commission's initiative in lending its support at WTO level to the negotiation of a multilateral agreement on direct investment, and calls on the Council to give the Commission an appropriate, negotiating mandate at the appropriate juncture;

21. Reiterates, in this connection, its call for the transparency and democratic supervision of the WTO to be improved, and calls on the Council and Commission, therefore, to submit any draft negotiating mandate to its committee responsible for trade policy prior to its adoption;

22. Considers that, given the internationalization of markets, it is incumbent upon Member States to address the diminution of their powers in respect of investment and other related policy issues, and to ensure that any growth of Union competence in this area is matched by increased accountability to the democratic institutions of the Union, with full regard to the principle of subsidiarity;

23. Is convinced that existing bilateral investment agreements between Member States of the European Union and third countries can be replaced by a multilateral investment agreement, which would help to make the Union's external economic policy more consistent;

24. Instructs its President to forward this resolution to the Council and Commission, the governments and parliaments of the Member States, the OECD and the WTO.