by M. Ulric Killion
On March 10, 2010, in Washington, D.C., Angel Gurría, Organisation for Economic Co-operation and Development (OECD) Secretary-General, presented a speech at “The United States Council for International Business (USCIB) Conference.” His speech may revive a seemingly forgotten idea of free and fair trade. This is because Gurria’s speech addressed the issue of a Multilateral Investment Treaty (Angel Gurria, The global economy and the global investment agenda - an OECD perspective, March 10, 2010).
During the fifth ministerial conference of the World Trade Organization (WTO) in Cancun, on September 10-14, 2003, the earlier beginnings of what could have been a Multilateral Investment Treaty seems to have suffered a certain death. The earlier Cancun-ministerial conference stands out for most WTO observers as the collapse of much-needed trade negotiations, and a conference that ends without a consensus. Many earlier perceived the Bretton Woods Institutions and there attendant development polices for developing countries and economies as one of several causes nearly bringing a collapse to progress on the Doha Development Agenda, though an agenda still struggling toward fruition (M. Ulric Killion, China and Neo-liberal Constitutionalism, Global Jurist Frontiers, Vol. 3 [2003], No. 2, Article 3).
During this period, or during the Cancun-ministerial conference, then Chairperson Luis Ernesto Derbez attributed the lack of consensus to members remaining entrenched on several trade-related issues. Derbez observed this to be especially true on what are described as the “Singapore issues,” which are issues addressing trade and investment, trade and competition policy, trade facilitation, and transparency of government procurement.
The namesake “Singapore issues’ stems from the fact that the first time these critical trade issues were set on a WTO agenda is doing the 1996 Singapore ministerial conference, which was also the first WTO ministerial meeting. The most vocal proponent of these issues has always been the European Union (EU) (Killion, 2003).
Before 1996, the European Commission (EC) strongly lobbied to introduce a foreign investment treaty or Multilateral Investment Agreement (MIA) into the WTO regime. Their lobbying efforts were strongly supported by Canada and some Northern countries. During the 1996-Singapore ministerial conference, the EC was seeking approval or at least a concerted interest in a WTO working group on the principle of a MIA. All of which was intended to promote their hope of fostering the first step toward actually negotiating an agreement or a MIA (Martin Khor, The WTO and the Proposed Multilateral Investment Agreement: Implications for Developing Countries and Proposed Position, 1996).
The EC initially envisioned a MIA granting rights to foreign companies to establish themselves with 100 percent equity across all sectors in any WTO-member state, without restrictions, and while enjoying national treatment (i.e., treatment equal to local firms). The only exception would be security sectors (Khor, 1996).
Earlier lobbying efforts and hopes of the EC and others, however, seem to have lost momentum immediately following the 1996-Singapore ministerial conference. As earlier mentioned, during this ministerial conference, this is when the new or Singapore issues first entered the WTO agenda and arguably suffered a demise, especially the issue of a MIA (Killion, 2003).
The Singapore issues did not die during the 1996-ministerial conference, however. This is because the EU continued to lobby for a MIA. For instance, in 2001, the agenda of the Doha round of trade talks include the Singapore issues, including a MIA, though only after tense negotiations between the EU and India. While the EU lobbied to include a MIA in the WTO regime, India presented itself as the leading vocal opponent against any expanding role of the WTO (Killion, 2003).
What actually occurred in 2001 is a compromise, which pushed a final decision to the Cancun-WTO conference. As reported in the Doha ministerial declaration, though the subject of differing legal interpretation, “negotiations will take place after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that Session on modalities of negotiations” (C. Rammanohar Reddy, Decision time on Singapore issues at WTO, The Hindu, July 28, 2003). Today, the then new or Singapore issues seem relegated to a forgotten past or history of the WTO conferences, while the WTO regime remains without a MIA.
Then there is Gurria’s speech, which, as earlier mentioned, serves as a reminder of the need for a multilateral investment treaty in the WTO regime. Gurria’s speech, admittedly, is not directly addressing the need for a MIA in the WTO. This is because, Gurria, as the OECD Secretary-General, and as previously mentioned, delivered his speech at a USCIB Conference.
Nonetheless, by mentioning the G20, some G20 counties, and that the OECD just delivered, with the WTO and UNCTAD, the second report to the G20 leaders on Trade and Investment Measures, Gurria was arguably, though indirectly, addressing the need for a MIA in the WTO. For instance, during his speech, Gurria said: “The OECD is becoming more inclusive in order to reflect these changes of the world economy. Twelve emerging countries, including Brazil, have now adhered to the OECD investment instruments. Accession discussions with Russia are underway. Chile signed the accession agreement with the OECD early this year. The OECD also engages with G20 emerging economies like China, India and Indonesia through investment policy peer reviews.”
Some may disagree and argue that Gerria was advocating a Multilateral Investment Treaty for OECD-members rather than WTO members. This is because, in 1998, there was a lack of consensus by OECD-members on a Multilateral Agreement on Investment (MAI), which was mostly due to critical public opinion and public protests (i.e., threat to national sovereignty, democracy, race-to-bottom, etc) (Sol Picciotto, Linkages in International Investment Regulation: The Antinomies of the Draft Multilateral Agreement on Investment, University of Pennsylvania Journal of International Economic Law, 19(3) 731-768 (1998); “The main part of the paper focuses on the proposed Multilateral Agreement on Investment (MAI), negotiations for which were formally initiated in 1995 by the OECD Council of Ministers, but had still failed to produce a final draft by May 1998.”).
Despite this earlier failure of OECD-members, however, Gurria’s speech presents new hope for a Multilateral Investment Treaty in the WTO regime and/or the OECD. As Gurria observed, “As emerging countries integrate into the world economy and increasingly invest in other countries, the time is right to improve international rules for investment protection.”
Gurria, more importantly, in his speech shows us the road to improving the international rules for investment protection, while also reviving the idea of a Multilateral Investment Treaty in the WTO and/or the OECD. The path and means to achieving these goals, as Gurria explained:
In practical terms, the OECD is considering the feasibility of a non-binding “Model Investment Treaty”, building on converging understandings in OECD and partner countries and invites other organisations to join these reflections. Such a “Model Investment Treaty” could reduce drafting and negotiation costs for negotiating parties, reduce transaction costs imposed on foreign investors and create the enabling conditions for equal competition among foreign investors. It could be used by governments to foster more consistency and predictability in their bilateral and regional treaties while allowing for flexibility in reflecting countries’ positions and adequate consideration of competing policy priorities.A non-binding Model Investment Treaty would reflect consensus on core provisions for inclusion in an investment agreement. It would provide interpretations and options with regard to the wording of specific clauses. It would record countries’ positions vis-à-vis the model’s provisions if necessary. A model treaty serves as a common reference point for the negotiating parties, which accelerates their discussions, facilitates a final agreement and increases mutual certainty about interpretations. This has been the positive experience with the OECD Model Tax Convention which serves as the basis for the more than 3000 bilateral tax treaties in force today around the globe.
There are, of course, other aspects of Gurria’s speech, such as the financial crisis, the state of the global economy, protectionism, and other issues. Although his speech or address was entitled, “The global economy and the global investment agenda - an OECD perspective,” his speech is especially compelling on the issue of the global investment agenda. This is because Gurria revived the hope, though implicitly, of a much-needed Multilateral Investment Treaty in the WTO, which is long over due as a means to improve international rules for investment protection.
Copyright © Protected - All Rights Reserved M. Ulric Killion, 2010.
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