2007/SOM3/IEG/005

APEC: Joint IEG-GOS Workshop on the Relationship between Investment and Trade in Services in RTAs and Other International Investment Agreements

Report by the IEG and GOS Convenors

The APEC Group on Services (GOS) and the Investment Experts Group (IEG) held a Joint Workshop in Adelaide on 18 April 2007. The purpose of the workshop was to explore the interface between the provisions on investment and trade in services in APEC regional trade agreements (RTAs) and bilateral investment treaties (BITs).

The key objectives of the Workshop were to:

•examine, discuss and deepen collective understanding of the investment and services sections of APEC member economy RTAs, FTAs and BITs with a view to analysing the key interactions;

•improve understanding of the impact of the various approaches (NAFTA- or GATS-based) on the degree of investment promotion and liberalisation;

•through this better understanding of the issues, contribute to the goal of high quality, transparent, broadly consistent and comprehensive RTAs/FTAs and BITs in the region and identify possible further capacity building needs; and

•discuss and understand the implications of MFN provisions in RTAs/FTAs compared to the WTO’s MFN rule.

In Session 1 “The Coverage of Investment Provisions Regarding Services”, discussion focussed on the main scheduling patterns of chapters on investment and trade in services:

Ms. Anna Joubin-Bret (UNCTAD) discussed some of the key issues of arising from UNCTAD studies (such as the World Investment Report). In particular Ms. Joubin-Bret emphasized the shift towards FDI in the services sector as a key feature shared amongst developed rather than developing nations. While the mixed approach to RTAs/FTAs is common among APEC economies, protectionism in the architecture persists APEC member economy uptake of BITs mirrors the global experience; cumulatively they are rising, but annually they are decreasing or stabilising. However, there is still room for growth in BITs among APEC members.

Session 2: The Interaction between the Services and Investment Chapters;

Major points raised and discussed in this session included:

•Ms. Maryse Roberts (Organisation of American States)discussedthe NL approach as being the more common approach in the Americas and suggested the recent uptake of RTAs in Latin America has led to increased services liberalisation commitments when compared to those under GATS;

•Ms. Jane Drake-Brockman (Trade and Environment Solutions) pointed out that trade negotiators had minimal experience in investment negotiations — as this expertise normally rests with Treasuries and Finance Departments, and therefore there are implications in getting messages heard during negotiations;

•Scheduling issues in services and investment chapters of RTAs/FTAs are fluid, and a GATS-style approach can accommodate either a positive list or negative list;

•Ms. Drake-Brockman suggested a negative list approach to services and investment commitments has been delivering superior outcomes and reiterated a common theme: that in addition to policy issues impacting on RTA/FTA investment chapter negotiations — the message to the private sector should be that FDI is welcome;

•And, while investment experts debate architectural issues — by and large, to the private sector these issues remain confusing and elusive.

Session 3: Degree of liberalisation achieved by different approaches to services/investment in RTAs

This session dealt with GATS+ Services liberalization in East Asia, architectural issues and achievements and a comparison between the NAFTA-inspired and GATS-inspired approaches in terms of the degree of liberalisation achieved.

Mr Martin Molinuevo (World Bank)introduced recent research investigating the architectural aspects and achievements of services liberalization in East Asian FTAs; that challenges the view that a NAFTA based negative list approach produces better outcomes in terms of transparency, predictability and degree of liberalization. While some agreements show few commitments beyond GATS level (AFAS, Thailand-Australia) others exhibit much broader,not deeper,commitments (US-Lao PDR, US–Singapore, Japan–Singapore). Mr Molinuevo also suggested that beyond obligations to market access and national treatment; there is generally no mechanism to bind actual levels of openness, thereby making architectural issues irrelevant Caution was also urged in trying to create a better/worse dichotomy when discussing architectural approaches — as each has no inherent benefit or disadvantage in regards to transparency and liberalisation.

Mr Sebastien Miroudot (OECD) proposed that liberalisation is more of a trade, rather than investment concept and some RTAs do not actually liberalise investment as commitments merely correspond with the status quo. Miroudot pointed out that OECD analysis did not prove a quantitative link between BITs and FDI flows. However, the joint effect of a BIT and a RTA with substantive and actual investment provisions may positively impact on FDI. One of the key points concerned liberalisation as it relates to different approaches — it’s not a matter of how listing is approached but rather what is listed.

Session: 4 What are the implications for the MFN rule at the regional/bilateral level?

Views on the implications of the MFN rule were presented by Australian experts (Mr Andrew Stoler, the Institute for International Trade, University of Adelaide; Professor Chris Findlay, University of Adelaide;andMr Tony Hinton, former Commissioner, Australian Productivity Commission).

A robust and challenging discussion on MFN issues was held between the three panellists, with some panellists suggesting MFN should not be a major concern at the regional/bilateral level. Indeed it was questioned why different economies should receive preferential treatment at all MFN also introduces risks and inconsistencies — especially regarding investor-state disputes. Comments from the panel and the floor noted there was much to learn about the complex nature of the co-existence of multilateral, regional and bilateral agreements and the arrangements and approaches to investment issues contained therein while others cautioned against ‘treaty shopping’. Avoiding the conflicts with RTAs/FTAs/WTO GATS rules was one area identified for future discussion — possibly in the form of a case study or further workshop.

Overview

The Joint seminar was well-attended and like the previous joint seminar held by IEG and the MAG exploring the nexus between trade in goods and investment, the session was extremely thought-provoking and encouraged shared information and experience amongst experts, negotiators, academics and the business community. Several areas for future cooperation between IEG and GOS should be possible as a result of this seminar. A CD with the Seminar presentations is available upon request from and on the IEG website.