Committee on Covered Measures, Principles & Transparency

To provide the Applicants with the best possible and most relevant experience, the Model WTO has decided to adapt this years topic. By narrowing the topic to Trade & Investment: the framework of a potential Investment Facilitation Agreement, the Model WTO intends to create an even more relevant experience for its Participants as this topic has become even more relevant in recent weeks. We apologise for any inconveniences due to the delayed publication.

Committee on Investment Facilitation 1: Covered Measures, Principles and Transparency 

Covered Measures of an Investment Facilitation Agreement

To discuss the scope of a potential Investment Facilitation Agreement, the Committee must first define “Investment Facilitation,” as this is currently contested. It is disputed whether the definition of Investment Facilitation should include pre-establishment topics such as market access (UN ESCAP, 2017, p. 2) or focus on the post-establishment side of the debate, determining that investment facilitation refers to measures by governments to render foreign investment more attractive by making the administration around investment more effective and efficient (SOM Chair‘s Office, 2008, p. 1).

A possible approach to discussion is by examining admission, establishment acquisition and expansion of investments (WTO, 2018b, p. 2). A further approach is using a negative approach, that is, by discussing what investment facilitation does not include, rather than specifically what it does include (Hees & Cavalcante, 2017). Additionally, the Committee could discuss if the Investment Facilitation Agreement should be restricted to specific sectors, and if so, define which sectors.

Principles of an Investment Facilitation Agreement and Transparency

Once it has been established which definition of Investment Facilitation is to be used throughout the discussion, the participating countries could discuss the principles that nations can agree upon to facilitate investment. These principles should aid the goal of a potential Investment Facilitation Agreement, which may have as its goal, to ease and encourage investment in another country (for example in WTO, 2018b, p. 1 or in CFIA). Thus, for such an agreement, the general principles of the agreement should ease and encourage investment.

Many investors agree that an important factor in investing in a foreign country is transparency as it raises investor confidence (Mukiibi & Barkan, 2017, p.16). Transparency intends to increase stability, accountability, predictability for the investor and the investee (UNCTAD, 2004, p.3). According to the WGTI (Mukiibi & Barkan, 2017, p.16), for an international treaty to achieve transparency the following three requirements must be fulfilled; relevant information on policies and laws within the treaty must be accessible to investors, a notification system must be put in place so that investors and other relevant parties are aware of changes to the treaty, and finally, the enforcement of the treaty must be equal and uniform so as to avoid unequal treatment of investors (also in OECD, 2008b, p. 2). These guidelines could possibly be applied analogously to investment facilitation and a potential Investment Facilitation Agreement.

Another factor in raising investor confidence in regard to investment facilitation is non-discrimination (Mukiibi & Barkan, 2017, p.18). Non-discrimination describes the idea that “a country should not differentiate between its trading partners or between its own and foreign products, services or nationals, thereby providing equal competitive opportunities” (Osiro, 2003, p. 79). This principle is often divided into the principle of Most-Favored-Nation (MFN) and National Treatment (NT). MFN states that all products flowing into a country are treated equally (“Principles of the Trading System”, 2018). NT on the other hand ensures that foreign imported products and local products are treated equally (“Principles of the Trading System”, 2018).

Additionally, the principle of the predictability (UNCTAD, 2017a, p. 3) intends to raise investor confidence in all areas relevant to an investment such as the legal and political environments. However, predictability may also result from the previously mentioned principles.

The Committee on Investment Facilitation 1: Covered Measures, Principles and Transparency could discuss the principles that nations can agree upon to facilitate investment. That is, what principles are needed for each country to abide by, to facilitate investment effectively. This may also include, the hurdles and conceptions that countries need to overcome to accept a multilateral solution to investment facilitation. The principles may include transparency, non-discrimination and predictability mentioned above as well as other principles the Committee sees as necessary and appropriate. Other principles could include general, already existing, principles of the WTO as well as new principles possibly relevant solely to an Investment Facilitation Agreement. In addition to defining leading principals of the Agreement, the Committee could discuss the extent and limitations to the respective principals. This shall create a basic framework for a possible multilateral solution to investment facilitation and the findings shall be summarized by the Committee as part of a new regulatory Agreement.

 

Author of the Committees 2018:

Marisa Menzel (marisa.menzel@model-wto.org)
Model WTO Head of Simulation Design

Disclaimer

This year’s Model WTO focuses on trade and investment, and notably investment facilitation.  The Model WTO organizers are fully cognizant that the ‘Joint Ministerial Statement on Investment Facilitation for Development‘ – co-sponsored by 70 WTO Members at the WTO’s Eleventh Ministerial Conference held in Buenos Aires in December 2017 (document WT/MIN(17)/59) – explicitly specifies that the “structured discussions with the aim of developing a multilateral framework on investment facilitation” […] “shall not address market access, investment protection, and investor-State Dispute Settlement” (emphasis added).[1]

This is why the 2018 Model WTO focuses on investment facilitation. Nevertheless, it was considered interesting for participating students – merely for educational purposes – to consider also investment promotion and market access (in Committee 5), as well as investment protection (Committee 6).  It is hoped that this will lead to a better understanding of the scope of investment facilitation and how it differs from these other areas.

We thank you for your understanding.