WTO unlikely to discuss trade and environment rules during next round

“After Seattle, there is still considerable uncertainty regarding the prospects for the launching of a new round of trade negotiations in the WTO in respect of subjects beyond than those covered by the WTO’s ‘built-in’ agenda,” said Ablassé Ouedraogo. “The question of whether the negotiation of new rules on the relationship between trade and environment and trade and investment should be part of the agenda of negotiations remains contentious.”

Ouedraogo told delegates at a conference on Sustainability, Trade and Investment in London that most WTO members and commentators believe an agreement to launch comprehensive negotiations – negotiations that include subjects beyond the core agenda – is unlikely to be reached until 2001.

The importance of the framework of multilateral rules on foreign investment stems from the fact that developing countries account for only around one quarter of the total global flow of foreign direct investment (FDI) – estimated to have risen from an annual average of US$173 billion in the period 1987-1992 to US$827 billion in 1999.

The least developed countries (LDCs) receive less than one percent of the US$150 billion worth of FDI entering developing countries, according to Ouedraogo.

In addition, these FDI flows are concentrated on 20 countries, with five countries in -Nigeria, Egypt, Morocco, Tunisia and Angola – accounting for two-thirds of the total. Most damagingly from the environmental point of view, 50% of the FDI went to support the oil and petroleum industry and the rest went to extractive and mining activities.

The WTO’s Working Group on the Relationship between Trade and Investment has been discussing the possibility of a framework of multilateral rules on foreign investment since 1996.

The draft Ministerial Declaration discussed at Seattle contained two main options for a possible decision on investment. One was to launch negotiations on investment, while the other provided for the continuation of the Working Group’s analytical work on the subject. In the end, a compromise was explored to provide a detailed programme for further analytical work aimed at enabling WTO members to decide at their next Ministerial meeting whether or not to launch investment negotiations.

While it is largely the developing countries that oppose the idea of multilateral rules on investment, and a significant number of developed countries have supported the idea, some developed countries, notably the US, have adopted a sceptical position.

Supporters of the rules believe that a multilateral framework would increase flows of FDI to developing countries. It is claimed a multilateral framework would enhance the transparency of the legal environment facing foreign investors, improve coherence in international trade and investment relations and reduce the complexity of the existing framework of bilateral and regional investment arrangements.

Opponents of the rules say bilateral investment treaties are better for development because they can be tailored to the particular needs and priorities of individual countries and do not limit the ability of host countries to regulate the admission of foreign investment. Doubts have also been expressed as to whether multilateral investment rules would result in increased FDI or technology transfer.

Ouedraogo concluded that in order to get subjects other than those covered by the WTO’s ‘built-in’ agenda included in the next round of negotiations, the WTO will have to decide how to protect foreign investment while protecting the autonomy of national governments. “The recent discussions in the WTO have highlighted the need to develop a better understanding of how to achieve an appropriate balance between providing security for foreign investment, on the one hand, and preserving a necessary degree of regulatory autonomy for governments, on the other.”

He added that “attempts to incorporate rules on investment provisions into WTO that would commit Members to the observance of certain standards in areas like labour and environmental policies are bound to encounter strong resistance from developing countries.”