Abuja High-Level Forum Examines Link Between Investment Facilitation, Trade

9 November 2017

The interlinkages between trade and investment – as well as the potential role of the WTO in investment facilitation – took centre stage during a high-level meeting in Abuja, Nigeria, held from 2-3 November.

The high-level forum was co-hosted by the Nigerian government, the Commission of the Economic Community for West African States (ECOWAS), and a group of WTO members who have dubbed themselves the “Friends of Investment Facilitation for Development,” or FIFD. It also drew the participation of private sector, think tank, and civil society representatives.

The forum produced a document entitled “Deepening Africa’s Integration in the Global Economy Through Trade and Investment Facilitation for Development,” which examined the role that investment and trade play across the African continent, including for its development prospects. For example, the document refers to Africa’s connectivity needs in an increasingly digitalised world, along with supporting sectors that can, in turn, lead to improved health and educational outcomes.

“African is emerging as the next global growth frontier and realising the potential must be a major priority, not just for Africa, but for the global economy as a whole,” the document says.

It also refers specifically to how meeting various sustainable development objectives is contingent on a rapid scale-up of investment flows.According to a 2014 report from the UN Conference on Trade and Development, developing economies face a US$2.5 trillion shortfall every year in the investment they need for meeting the Sustainable Development Goals (SDGs). This includes investment for areas ranging from infrastructure to climate mitigation and adaptation, among various others.

That UNCTAD report was prepared as UN member states were still negotiating the goals and related targets, which were endorsed in late 2015. The SDGs and the 2030 Agenda for Sustainable Development together aim to eradicate extreme poverty, improve education quality and access, achieve gender equality, improve ocean conservation, and foster more inclusive, sustainable economic growth. (See Bridges Weekly, 1 October 2015)

“This situation deserves our attention. Bridging these gaps could help reduce Africa’s trade costs, boost its competitiveness, diversification, industrialisation, and participation in global trade,” said WTO Director-General Roberto Azevêdo to forum participants last week, referring to the investment gap for meeting the SDGs.

Role of the WTO?

While referring to the importance of governments undertaking domestic policies which lead to an enabling business climate, as well as the value of regional initiatives such as the Continental Free Trade Area (CFTA) negotiations, the text also devotes a significant level of attention to the WTO.

Assessing the role of the global trade body in the field of investment facilitation was one of the high-level forum’s “central objectives,” the document says. Along with calling on WTO members to develop a “multilateral framework to facilitate investment for development,” it also notes the role of other intergovernmental bodies and agencies in this area, such as the UN Conference on Trade and Development (UNCTAD) and the International Trade Centre (ITC), as well as regional bodies.

Addressing investment facilitation under the WTO’s multilateral framework has long been a controversial subject among members. Proponents argue that doing so could support greater cross-border investment by leading to rules that cut red tape, facilitate collaboration between countries, and provide a forum for discussing and addressing developing country needs in this area.

The “Friends of Investment Facilitation for Development,” or FIFD, has convened workshops, seminars, and other informal meetings on the subject throughout the year. The FIFD includes Argentina, Brazil, Chile, China, Colombia, Hong Kong, Kazakhstan, Mexico, Nigeria, Pakistan, Qatar, and South Korea.

They suggest that discussing the issue within the WTO could be a valuable initiative, pointing to the role investment plays in helping developing economies participate in global value chains (GVCs), along with achieving the connectivity those countries need to be more competitive players in the digital space.

Furthermore, they have suggested that establishing a clear distinction between trade and investment is no longer appropriate in a 21st century context, given the current nature of production patterns. They therefore argue that addressing inefficiencies in investment regulations and administrative procedures are critical for enhancing trade flows.

The Abuja forum statement says that “a critical starting point for their exchange of insights and sharing of experiences was the reaffirmation that trade and investment are inseparable – and remain indispensable ‘twin engines’ for economic growth, modernisation, and development in Africa, as well as in the wider global economy.”

Meanwhile, some developing countries warn that crafting rules in this area could limit their domestic policy space, including in the right to regulate, and have vocally pushed against bringing this discussion within the WTO framework. They have also said that investment issues do not fall within the WTO’s scope, citing the wording of past legal agreements, and further argue that investment facilitation is a more complex area that pure trade facilitation in goods, given the various behind-the-border aspects of investment.

After last week’s meeting, the FIFD coalition could soon see more countries joining their ranks. The Abuja statement refers to expressions of interest from several African nations, though not specifying which ones. Sources familiar with the meeting note that while some African economies are interested in taking part in these discussions, others are not of that view.

During his intervention in Abuja last week, the WTO director-general suggested that one factor for the growing interest in investment facilitation comes from the Trade Facilitation Agreement (TFA), a global deal adopted by trade ministers at the WTO’s ministerial conference in Bali, Indonesia, four years ago. (See Bridges Weekly, 7 December 2013)

That accord, which is now in force for those members who have ratified, aims to cut red tape and otherwise ease customs procedures, with the larger goal of lowering costs and lag times when goods are traded across borders. Experts have examined in detail how the TFA and the Aid-for-Trade Initiative can be used in developing a sustainable investment facilitation framework.

When making his statement, Azevêdo also made a distinction between investment facilitation and other facets of the trade-investment debate, such as market access or legal protections for investors, arguing that the current push by some members to address investment facilitation at the WTO is not driven by the so-called “Singapore issues.”

This refers to the 1996 WTO ministerial conference where members initially set up working groups on trade and investment, competition policy, and government procurement. Of these, only trade facilitation was included in subsequent WTO negotiations from 2004 onward.

However, Azevêdo also warned that moving forward multilaterally on investment facilitation within the WTO could prove difficult, given the current political landscape.

“I do think that, if you have a properly framed conversation, you will find that the WTO has a lot to offer. But having said that, I must also share my belief that most members would not be willing to revive – at least now – the kind of conversations we were having on investments several years ago,” the WTO chief said.

Informal dialogue on investment facilitation has been taken place in various forums with particular emphasis in the last two years. In such conversations among delegates, academics, and other stakeholders, the concept refers to policies and measures that facilitate investment, without affecting market access, investor protection, or investor-state dispute resolution.  

The final version of the Abuja statement has been forwarded to the WTO’s General Council and the upcoming ministerial conference in Buenos Aires, Argentina.

ICTSD reporting.

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