Topic of the 2018 Model WTO:

Trade & Investment


In the Model WTO 2018 edition, participants will have to discuss and negotiate the creation and development of new or existing regulations, to adapt current international trade rules regarding international investments. This shall be done within one of the 6 committees which have been set up on the basis of the most relevant issues for international investment law currently discussed by scholars and WTO experts.

Introduction Trade & Investment

As a result of globalization, trade and investment are more linked than ever. In particular, in light of global value chains and development, investment has become ever more inextricable from trade and services (WTO, 2017a, p.1). Countries and their economies profit greatly from investment; thus, this topic is more relevant than ever, and individual countries are also realizing the need for discussion of investments in the context of trade. Particularly recently, investment facilitation has been placed on the world stage. This is evident from the Brazilian Proposal of this year for a multilateral Investment Facilitation Agreement (WTO, 2018b), the creation of the Friends of Investment Facilitation for Development, which includes 11 WTO members, as well as the discussion of investment at the Ministerial Conference 2017 in Buenos Aires and the E15 Initiative on Investment Policy.

In order to discuss this Investment Facilitation, certain terms must be defined and discussed:

Investment: In this simulation, the focus of investment lies on foreign direct investment (FDI). In 2016 alone, there have been FDI net outflows worth over $1.8 trillion (World Bank, 2017a) and net inflows of over $2.2 trillion (World Bank, 2017b). The definition is contested, with broader and more narrow definitions being preferred by developed and developing countries alike. However, this simulation will follow the (broader) IMF definition which refers to FDI when a “resident entity in one economy obtains a long-term interest in another country’s enterprise” (Mukiibi & Barkan, 2017, p. 11).

Foreign Direct Investment: Direct investment can take different forms. One possibility is a cross-border investment made by a resident of the firm of one country “with the objective of establishing a lasting interest in an enterprise” resident in another country (OECD, 2008a, p. 17). Another possibility of foreign direct investment is for a firm to hold a direct investment enterprise, that is holding a subsidiary with over 50% of voting power or an associate company with 10-50% voting power (OECD, 2008a, p.17). Both possibilities of FDI have the characteristic of the investor wanting a long-lasting relationship with the direct investment enterprise (OECD, 2008a, p. 17).

As is evident, however, should nevertheless be noted, is that this definition of FDI explicitly excludes the purchase and sale of temporary assets such as shares. The reason for this exclusion is due to the temporary nature of this financing. Whilst the FDI in question is not easily reversible (e.g. building a new plant in another country), the purchase and sale of temporary assets are. Therefore, in this context, only long-term direct investment will be discussed.

Investment Regulation in Current Trade Agreements

As is evident, trade and investments are inextricably linked. However, a thorough coverage of investment so far has been lacking. Regulation of investment has occurred in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) which affects the legal environment of FDIs, the General Agreement on Trade in Services (GATS) discussing FDI in services, and the Agreement on Trade-Related Investment Measures (TRIMs) provides that investment measures should be consistent with the General Agreement on Tariffs and Trade (GATT) (Mukiibi, 2017, p. 4&5). This multitude of different agreements covering investment has caused regulation to be fractured (Vocke, 1997, p. 6).

Investment Facilitation

As a result of this spotty regulation, investment facilitation has in recent years taken the center stage within international organizations, providing countries with the possibility to reopen discussions on investment. This is due to the contribution of investment facilitation to growth and its prevention of corruption (SOM’s Chairs Office, 2008, p. 2).

The current interest in investment facilitation is particularly evident from the proposed Investment Facilitation Agreement by Brasil in February 2018, as well as the creation of the Friends of Investment Facilitation for Development, a committee consisting of 11 WTO members, NGOs, personnel from academia, and the WTO created Informal Dialogue on Investment Facilitation in May 2017 (Hees & Cavalcante, 2017). It is also noticeable in the change in wording in international investment agreements. Of more than 3,300 international investment agreements (IIAs), most do not discuss investment facilitation or only contain weak provisions to investment facilitation (UNCTAD, 2017a, p. 6). However, in recent years, ever more bilateral agreements have emerged focusing explicitly on Investment Facilitation, such as the Brazilian Cooperation and Investment Facilitation Agreement (CIFA). In light of the increasing focus on international willingness to discuss Investment Facilitation on the international stage, the WTO is in a unique position to aid countries in regulating investment facilitation and offer its forum for discussion, monitoring, and other activities.

Role of the WTO in Regulating Investment

This role of the WTO shall briefly be examined because investment, as such, is often seen as subject to the World Bank and the IMF. Whilst the World Bank has the official goal set to reduce poverty, within its Articles of Agreement it also states that its goal is the promotion of foreign investment (“Who we are”, 2018). The IMF intends to “foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth” (“About the IMF”, 2018). The WTO traditionally only regulates the trade in goods and services. However, due to the intertwined nature of trade and investments nowadays, they must be discussed together (WTO, 2017a). Rather as one facilitating the other and vice versa. Therefore, as trade grows as a result of the investment, it is of global interest to discuss investment and trade on a larger scale, namely the WTO forum.

Therefore, in the Model WTO 2018 edition, participants will be tasked with discussing and negotiating different aspects of trade and investment with the final goal of creating a Multilateral Investment Facilitation Agreement. This shall be done within the 6 committees which have been set up on the basis of the most relevant issues to trade and investment by current scholars and WTO experts. With the first committee discussing important principles of Investment Facilitation, the second discussing investment facilitation and what it concerns, the third discussing investment facilitation within developing countries. The other three committees shall discuss topics that go hand in hand with investment facilitation: investment promotion, investment protection and corporate social responsibility.

Author of the 2018 Topic Paper:

Marisa Menzel (
Model WTO Head of Simulation Design


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.


Find out more about the structure of the negotiations, the different committees and countries.
The complete 2018 Model WTO Topic Paper is available upon request.