What now for the plurilateral WTO Investment Facilitation for Development (IFD) Agreement?
UPDATE (FEB 29): THE OFFICIAL VERSION OF THE STATEMENT REPRODUCED BELOW IS FROM INDIA ALONE (WITHOUT SOUTH AFRICA). THANKS TO PETER UNGPHAKORN FOR POINTING THIS OUT.
On the opening day of the WTO MC13 Ministerial, Feb 25, the participants in the plurilateral Facilitation for Development Agreement finalized and made public the text, as well as requesting that the agreement be included in Annex 4 of the WTO Agreement, which lists other plurilateral accords such as the Government Procurement Agreement. Inclusion in Annex 4 allows recourse to the WTO dispute settlement system as set out in the Dispute Settlement Understanding-it also arguably fully legitimizes the involvement of the WTO Secretariat in the administration and implementation of the IFD Agreement. India and South Africa have long expressed their opposition to the incorporation of the Agreement into the WTO institutional and legal architecture. In another TradeTakes post I explain the core issue in this way: “given that the IFD Agreement has not emerged from a multilateral agreed negotiating mandate, it is illegal-not compatible with the WTO’s constitution, as it were.” Indeed, at the Cancun Ministerial, investment was explicitly taken off the negotiating agenda.
Today (Wednesday February 28) South Africa and India have filed a statement that purports to block any consideration at MC13 of the status or fate of the IFD Agreement. I’m transcribing here the document in (almost) its entirety, since it is not available on the WTO MC13 website (so far):
This statement is being circulated on behalf of the delegations of South Africa and India.
We note the request from Chile and the Republic of Korea (WT/MIN (24)/W/5) dated 16 February 2024 which provides that “as informed to all WTO Members at the Special Meeting of the General Council held on 14 February 2024, 119 WTO Members co-sponsoring the Joint Ministerial Declaration will submit, for Ministers’ consideration at the 13th WTO Ministerial Conference (MC13) a request to add the IFD Agreement to Annex 4 of the Marrakesh Agreement Establishing the WTO (“WTO Agreement”) pursuant to Article X.9 of the WTO Agreement. The request for incorporation is submitted in the form of a ‘Draft Ministerial decision.’…
Article X.9 states that “The Ministerial Conference upon the request of the Members Parties to a trade agreement may decide exclusively by consensus to add that Agreement to Annex 4.”
The delegations presenting the statement state that no exclusive consensus exists to add the proposed Agreement as an Annex 4 Agreement. We underscore that given the lack of exclusive consensus, this is not a matter for the MC13 agenda.
Further discussions and consultations on this matter can take place in the General Council including on concerns as reflected in WT/GC/W/819/Rev. 1.
This joint statement is a formal objection by South Africa and India within the meaning of footnote 1 of Article IX:1 of the Marrakesh Agreement establishing the WTO to any proposal to include the adoption of the Investment Facilitation for Development Agreement as an issue for consideration and action within the agenda of, or as an agenda or sub-agenda item for the 13th Session of the WTO Ministerial Conference.
So what does this mean in plain language? Simply that South Africa and India won’t be pushed and shoved at MC13 into agreeing to Annex 4 treatment of the IFD Agreement. On the other hand, it does not shut the door to such treatment, provided that the concerns of South Africa and India can be addressed in an appropriate deliberative exercise. The statement is also, arguably, an implicit rebuke to the Director-General and the Secretariat, who seem to have assumed that, without a prior meaningful engagement with South Africa’s and India’s specific concerns, this might be pushed through at MC13.
The pressure on the DG from various quarters to show results or outcomes at MC13 is enormous-all those old-time neoliberal pro-trade folks who judge the WTO by the ability to bring into fruition new liberalizing pacts, neutralizing hold outs through high-pressure bargaining to the deadline of a Ministerial Conference. I only fault the DG for internalizing those kinds of expectations. The post-neoliberal WTO sketched by Joanne Langille and me operates very differently, emphasizing inclusive deliberation rather than brinksmanship diplomacy that deploys hardball tactics to isolate objectors. The post-neoliberal WTO is about incremental change, selective experimentation, building on the existing strengths of the Organization, and viewing diversity and inclusiveness as among these strengths, rather than lamentable stumbling blocks to globalization through multilateralism.
So what happens now? As I noted in my earlier post, the IFD Agreement provides for it coming into force after 75 ratifications by participating Members. Since the Agreement has only been public for a handful of days, the process of public and parliamentary debate is but at its very beginning. Including the Agreement in Annex 4 before it is in force doesn’t produce any tangible legal effects; indeed it is rather presumptuous, from a democratic legitimacy point of view. As can be seen from reading Article X.9 and X.10 of the WTO Agreement together with XIV:4 of the same treaty, whether or not a plurilateral agreement is entered into Annex 4, it is binding upon the states parties based on the provisions of that agreement itself, and the WTO DG has the role of treaty depositary.
Plurilateral accords such as the Information Technology Agreement, the Agreement on Basic Telecommunications, and the Financial Services Understanding are not found in Annex 4. The commitments in these instruments are connected to Members’ schedules for goods and services, which are justiciable as an integral part of the main covered agreements in question-GATT and GATS. The same would apply to the recent accord on services domestic regulation, implemented through revised schedules (this is something of an simplification of complex legal technicalities, I hope not too distorting). The bottom line is that the participating Members in the case of the IFD Agreement seem to have fastened on to Annex 4 as the route to making the commitment sin the Agreement subject to the general WTO dispute procedures. The main longer-term impact of blocking the inclusion of the IFD Agreement in Annex IV is that such procedures would not be available. The IFD Agreement itself would nonetheless be fully binding as among the participating Members.
How important is having DSU procedures available? Some might say that their absence is a blessing in disguise given the current question marks concerning the future shape of WTO dispute settlement. Why couldn’t the IFD participating Members have an additional protocol with a sui generis dispute mechanism, at least an interim one until the Agreement is put into Annex 4? Most of the obligations in the IFD Agreement consist in commitments progressively to improve domestic governance mechanisms for foreign direct investment. Like the multilateral Trade Facilitation Agreement (TFA), in the case of developing countries the pace is linked to capacity and in some cases availability of technical assistance. These kinds of norms seem more suited to regular peer reporting on implementation rather than adversarial dispute settlement around legal interpretation of “rules.”
The substantive content of the IFD Agreement overlaps considerably with what has been negotiated and now finalized at MC13 on domestic services regulation (after all, Mode 3 supply of services is really FDI). There is further overlap with Pillar II of the US led IPEF, on supply chain resilience, which has just come into force; there, notably, India is a full party. China, which has led the IFD initiative in the WTO, has grasped through its Belt and Road Initiative (BRI) that investment for trade infrastructure is an important aspect of trade facilitation. This is also a theme of a report that the UAE, the host of MC13, has just released. The supply chain resilience focus in IPEF suggests that investment facilitation and trade facilitation exist on a kind of continuum of measures to support resilient, sustainable supply chains.
If there is a respectful dialogue with South Africa and India going forward, I believe pro-IFD WTO Members could make a strong case that, in today’s circumstances, the IFD initiative should not really be seen an end run around the conscious decision at Cancun to take a neoliberal agenda of investors’ rights off the WTO negotiating table. The IFD focuses on domestic governance not special international rights & courts for corporations. It complements the TFA in answering the imperative of supply chain fortification in a post-neoliberal and post-pandemic world. Still, procedurally, India and South Africa are right that the participants should have sought multilateral buy in for this priority in the first place. But here we are.