Trade Policy Note Final-rev08 - Development

Investment Policy is Central to Trade Negotiations on Services
In essence, the main thrust of the GATS negotiations is investment, with the
developed countries as demandeurs. Thus, this section should be read in juxtaposition
with Section 7. GATS provides a structure in which an optimum middle way can be
negotiated in which foreign investors are granted access to markets subject to
development related conditions which are inscribed in the GATS schedules. Neither
the liberalization of export markets, nor liberalization of trade and investment in
services, will necessarily impr ove the situation of the poor in developing countries
without supportive policy measures by governments.
Requests to developing countries for liberalization of trade in services usually focus
on Mode 3 commercial presence/investment. The challenge facing developing
countries is to negotiate the optimum conditions of access for such investment. The
situation in several selected sectors is described in relevant annexes.
The process of the proliferation of FTAs has covered trade in services and subjected
services to more stringent disciplines at the bilateral or sub-regional levels. In some
cases, definitions have departed from those used in GATS. The use of negative lists
and the inclusion of GATS Mode 3 measures in “Investment” chapters covering both
goods and services , are more than mere questions of form and can have an adverse
developmental impact, as they can eliminate the possibility of conditioning access on
the acceptance of development oriented performance requirements or social
obligations.
VII. INVESTMENT, JOBS FOR YOUTH
AND ACCESS TO TECHNOLOGIES
Developing countries are actively seeking FDI as a means of acquiring capital and
technology and providing employment and export opportunities. Many governments
wish to maintain an investment regime which, while attractive to investors, protects
the national interest against potential adverse effects, such as crowding out of
domestic producers and exacerbating inequalities. Such a regime should also channel
investment toward development objectives. Investment measures, including
incentives and performance requirements, are used to integrate FDI into development
strategies, for example by assuring a transfer of technology and higher level
employment for nationals, particularly young people (consistent with MDG targets 16
and 18). However, developing countries are increasingly faced with requests to accept
commitments in trade agreements that would further reduce the scope for investment
policy.
International Commitments on Investment Policy
The efforts of some developed countries to include the negotiation of a Multilateral
Framework for Investment in the Doha Round were unsuccessful. 64 However, the
ongoing GATS negotiations are primarily aimed at reducing conditions on FDI. These
“Mode 3” negotiations are currently underway as discussed in Section VI and their
objective is to agree on further limitations on investment policy in services. GATS
64 As were similar efforts in the OECD
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