Trade Policy Note Final-rev08 - Development

A “New Generation” of Bilateral Investment Treaties
There are now over 2000 Bilateral Investment Treaties (BITs) in force 72 . Traditionally
used as instruments for the protection of investments, BITs are acquiring different
characteristics. Some developed countries are pursuing a “new generation” of BITs
which incorporate trade provisions, notably obligations on entry and establishment,
and prohibitions on performance requirements. These usually apply to both goods and
services and thus undermine the commitments included in the GATS services
schedules. They also employ a wider definition of investment, including portfolio
investment and cover a wide range of domestic regulation that can be challenged by
the foreign investor. They also identify dispute settlement and arbitration mechanisms
that allow foreign investors to bypass the national judicial system to a larger extent
than was previously possible. Sometimes lack of coordination between the
government ministry responsible for trade policy and that responsible for investment
policy can lead to less than optimal results.
FTAs are being used to impose more stringent disciplines over the scope of
investment polices. As will be discussed in Section 8, many FTAs make national
treatment a general obligation for both goods and services, reducing or eliminating
the various policy tools listed in GATS Article XVI. Often this is accomplished
through the technique of dissecting the Services Chapter of such FTAs, and bringing
all investment policy, on both goods and services, under the scope of an Investment
Chapter. FTAs can also include mechanisms for promoting investment amongst the
concerned parties. In fact, many developing countries believe that FTAs with major
trading partners will attract FDI. However, evidence shows that, with few exceptions,
BITs and FTAs generally have little impact on attracting FDI. 73
VIII. MNP – ACCESS TO THE WORLD EMPLOYMENT
MARKET
Movement of national persons (MNP) across frontiers to supply services provides a
major source of potential employment and export income for many developing
countries. However, it can also have negative social and economic impacts. What are
the elements of a coherent strategy to maximize the contribution of MNP to
development and the achievement of the MDGs?
MNP and the MDGs
The movement of persons across frontiers to supply services is a major potential
source of employment for poor people and an opportunity to dramatically increase
their earnings. 74 MNP provides a means for developing countries to draw upon their
competitive advantage of lower wage costs in trade in services as they have
72 UNCTAD World Investment Report 2002.
73 See Stiglitz and Charlton, op.cit., pp 149-152.
74 We use the GATS acronym “MNP” rather than ”labour movement” (which would suggest unskilled
workers) or “movement of persons” (which could imply permanent migration ), so as to cover the
whole range of the provision of services that involves suppliers moving temporarily from one country
to another from unskilled agricultural workers to highly skilled medical, engineering and IT
professionals.
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