Investment Facilitation for Development (IFD): WTO’s investment facilitation negotiations are not illegal

Source: The post Investment Facilitation for Development (IFD) has been created, based on the article “WTO’s investment facilitation negotiations are not illegal” published in “The Hindu” on 28th March 2024.

UPSC Syllabus Topic: GS Paper 2-International Relations-Important International institutions, agencies and fora, their structure, mandate.

News: The article discusses India’s opposition to the Investment Facilitation for Development (IFD) Agreement at the WTO’s 13th Ministerial Conference in Abu Dhabi. India is concerned about including investment in WTO agreements and the process of making IFD a part of WTO rules.

What is Investment Facilitation for Development (IFD)?

IFD is a proposed agreement within the World Trade Organization (WTO), aimed at making it easier for investments to flow globally.

It intends to enhance regulatory transparency and streamline administrative procedures, fostering a more conducive environment for foreign investments.

Notably, the IFD does not include provisions on market access, investment protection, and investor-state dispute settlement (ISDS).

Over 70% of WTO members, about 120 of 166 countries, support the IFD agreement.

The agreement was to be included as a plurilateral agreement (PA) within Annex 4 of the WTO Agreement, as allowed by Article II.3 of the WTO Agreement.

PAs are binding for WTO members that accept them and do not impose obligations on others.

The IFD agreement, finalized in November 2023, was launched under the Joint Statement Initiative in 2017, indicating a shift in how WTO handles investment-related discussions.

For information on Investment Facilitation Agreement read here

Why does India oppose the IFD agreement?

India, along with South Africa, was key in opposing the inclusion of IFD in the WTO rulebook.

The opposition is based on two main concerns: the suitability of including investment under WTO’s scope, and the process of integrating IFD into WTO rules.

India contends that there was no collective decision to start negotiations on an IFD Agreement within the WTO framework. This stance is based on past decisions, like the 2004 WTO General Council ruling and the 2015 Nairobi ministerial decision, emphasizing the need for consensus among all members to initiate new negotiations.

Is Investment Considered Part of Trade?

OECD data showing that approximately 70% of international trade occurs within global value chains involving both trade and investment

Modern free trade agreements, such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, often include detailed investment provisions, reflecting the link between trade and investment.

India’s trade agreement with the European Free Trade Association also contains investment elements, further substantiating the relationship between trade and investment.

What is the Significance of the IFD Agreement?

Streamlining Global Investment: The IFD Agreement’s primary goal is to simplify administrative procedures and increase regulatory transparency, aiming to bolster foreign investment inflows.

Excluding Certain Provisions: The focus of the IFD towards the facilitation of investment rather than addressing these broader investment-related issues, like market access, investment protection, and investor-state dispute settlement (ISDS).

WTO Evolution: The IFD represents an evolution in the WTO’s scope, potentially incorporating investment alongside trade.

Plurilateral Agreement Framework: Its integration as a plurilateral agreement within the WTO indicates a shift towards more flexible, inclusive frameworks for international economic cooperation.

Question for practice:

Examine why India opposes the Investment Facilitation for Development (IFD) Agreement at the WTO’s 13th Ministerial Conference in Abu Dhabi.