Context: The non-adoption of IFD agreement at the 13th Ministerial Conference on account of opposition by countries like India and others has raised doubts regarding the legality and future of IFD agreement.
About Investment Facilitation for Development (IFD) agreement
- The negotiations for IFD agreement at WTO was launched in 2017 on a plurilateral basis by a group of developing and least-developed WTO members with a mandate to streamline investment procedures and facilitate cross-border investments. The text of agreement was finalised in 2023.
- This Plurilateral agreement was launched by a China led group of around 70 countries. Today, around 120 out of 166 WTO member countries back the agreement.
- The agreement aims to create legally binding provisions to facilitate investment flows.
- Focuses on aspects such as augmenting regulatory transparency and streamline administrative procedures to boost foreign investment inflows.
- Does not contain provisions on market access, investment protection and investor-state dispute settlement.
Issues in the Investment Facilitation for Development (IFD) agreement
- The IFD was first mooted in 2017 by China and other countries who depend heavily on Chinese investments, and countries with sovereign wealth funds are party to that pact.
- So, it has attracted criticism for potentially favouring countries heavily reliant on Chinese investments and those with sovereign wealth funds. So, even the USA has stayed out of it.
- In this regard, India and South Africa played a crucial role in not letting the agreement become part of the WTO rulebook.
Grounds for India's Opposition:
- Potentially favouring countries heavily reliant on Chinese investments and those with sovereign wealth funds.
- Also, India believes that some of its provisions would put the onus on the government to consult investors on policy matters which could encroach on its policy space.
- Investment is not a trade issue and it had been decided in earlier Ministerial conferences that it should be kept out. Because investment could or could not result in cross-border trade. So, WTO being a trade body should not include such negotiations or agreements on investment.
- India is opposed to its inclusion in the WTO as an Agreement to Annex 4 (Plurilateral agreement) of the Marrakesh Agreement as the issue does not have a Ministerial mandate which is a fundamental requirement. India cited the WTO' General council decision of 2004 where it was decided to drop talks on relationship between trade and investment from Doha round negotiations (one of the four Singapore issues).
Singapore issues:
The term "Singapore issues" refers to the work of four working groups set up during the World Trade Organization's Ministerial Conference of 1996 in Singapore. These groups are tasked with the following issues:
Some Prelims Pointers regarding WTO:
- Annexure 4 of the WTO agreement provides for Plurilateral agreements. The Plurilateral agreements bind only those WTO that accept the agreement and do not impose obligations on remaining members.
- Decisions to add an agreement to the existing set of Plurilateral agreements in Annexure 4 can be made exclusively by consensus. But launch of negotiations for a Plurilateral agreement does not require a consensus.
- Under the WTO's dispute settlement mechanism, only states can bring legal claims against other states.