WTO and India

India fighting pressure at WTO to allow ‘plurilateral pact’ on investment facilitation


From UPSC perspective, the following things are important :

Prelims level: Plurilateral Agreement/Pact and WTO

Mains level: India's Strong Stand against the IFD at WTO MC13;

Why in the News?

An official stated on Tuesday that India opposes a China-led proposal on investment facilitation at the WTO, arguing that it is a ‘non-trade’ issue beyond the global trade body’s mandate.

About Plurilateral Agreement/Pact:

  • A plurilateral agreement is a trade agreement between more than two countries, but not necessarily encompass all members of a larger organization such as the World Trade Organization (WTO).
  • These agreements are binding only on the signatories and not on the entire membership of the organization under annexure-4 of the WTO.
  • They allow for deeper integration among interested parties without requiring full consensus, which can be difficult to achieve in larger multilateral frameworks.

What is the China-led Investment Facilitation for Development Agreement (IFD)?

  • The IIFD Agreement is a proposed pact by China, with support from other countries, to streamline and facilitate foreign investment.
  • The main objectives of the IFD Agreement include:
    • Enhancing transparency of investment measures.
    • Streamlining and speeding up investment-related authorization procedures.
    • Promoting international cooperation, information sharing, and exchange of best practices.
    • Encouraging sustainable investment practices.
  • The proponents of the IFD argue that it would bring benefits to all WTO members, especially developing and least-developed countries, by creating a more predictable and transparent investment climate.

India’s Strong Stand against the IFD at WTO MC13

India has taken a firm stance against the inclusion of the IFD Agreement in the WTO framework for several reasons:

  • Investment is Not a Trade Issue: India argues that investment does not fall within the traditional purview of the WTO, which primarily focuses on trade issues. It points out that past Ministerial decisions have explicitly kept investment outside the WTO’s scope.
  • Sovereignty Concerns: A significant concern for India is the potential impact on its policy space. The IFD Agreement includes provisions that would require the government to consult with investors on policy matters, which India fears could undermine its ability to make sovereign decisions.
  • Lack of Consensus: India, along with South Africa, has highlighted the absence of a unanimous consensus among WTO members regarding the inclusion of the IFD as a plurilateral agreement. They argue that without exclusive consensus, it should not be brought onto the formal agenda.
  • Policy Autonomy: India is wary that the IFD Agreement’s requirements could constrain its autonomy in regulating investments to align with national development priorities and strategies.
  • Procedural Concerns: India contends that the issue should not have been part of the MC13 agenda and instead, should be discussed at the General Council, given the divisive nature of the proposal among WTO members.

Conclusion: India’s opposition to the IFD Agreement at the WTO stems from a combination of concerns about preserving national sovereignty, adhering to established WTO boundaries regarding trade versus investment issues, and ensuring that any significant changes in the WTO framework are backed by broad-based consensus.

Mains PYQ:

Q The broader aims and objectives of WTO are to manage and promote international trade in the era of globalisation. But the Doha round of negotiations seems doomed due to differences between the developed and the developing countries.” Discuss in the Indian perspective. (UPSC IAS/2016)

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