. /.WORLD TRADE
ORGANIZATIONWT/WGTI/W/128
1 July 2002
(02-3648)
Working Group on the Relationship
between Trade and InvestmentOriginal:  English
COMMUNICATION FROM THE SEPARATE CUSTOMS TERRITORY OF
TAIWAN, PENGHU, KINMEN AND MATSU
The following communication, dated 28 June 2002, has been received from the Permanent
Mission of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu.
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SCOPE AND DEFINITION OF “INVESTMENT”
1. The Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu would like to follow
up the issues discussed in the Working Group meeting on April 18 and 19, 2002 on the scope and
definition of investment.
2. We are of the general view that the definition of “Investment” in the future WTO rules on
investment should be broad in scope so as to afford adequate protection for investors.  Indeed, theadoption of an asset-based definition of “Investment” will be consistent with various bilateral
investment agreements already in existence among Members of the WTO.
3. While we do not envisage that our existing laws and policies will pose any particular
obstacles to the implementation of future WTO rules on investment that adopt a broader definition of
“Investment”, and will thus effectively provide foreign direct investment a higher degree of
protection, we are however of the view that if portfolio investment would be included in such
definition, movements of capital that are mere financial transactions, in nature for speculativepurposes and which might have adverse impact on the financial system of a jurisdiction, should
preferably be excluded from the obligations.
4. In adopting an asset-based definition, there may be significant overlapping problems with
other existing WTO agreements.  If, for example, intellectual property is embraced in the definition of
“Investment” of the future rules of investment, such rules will inevitably overlap with variousprotection afforded in the TRIPS Agreement.  The TRIPS Agreement not only requires Members to
ensure that relevant intellectual works will be provided with exclusive rights in their respective
jurisdictions, it also imposes obligations on Members to provide protections for intellectual properties
as well as the right-holders from other Members.  Including intellectual property rights into the future
investment rules may give rise to issues concerning the proper application of different rules withjurisdiction on the protection of existing intellectual properties and their right-holders.
5. Likewise, the question of overlapping with the provisions in the GATS and the Government
Procurement Agreement (GPA) would have to be resolved as well.  It is apparent that without
properly limiting the scope of the definition on investment, the third mode of trade in services
(i.e. commercial presence) under the GATS would be fully covered by the future investment rules.With regard to the government procurement matters, suppose a supplier from a signatory to the GPA
argues that it should have been awarded the government project and suppose the country or areaWT/WGTI/W/128
Page 2
which awards the project is also a signatory to the GPA, in this case, it is possible that the supplier’s
country or area could argue that the GPA has been violated due to the fact that the provisions
governing the awards of contracts under Article XIII of the GPA had not been observed.  It is also
possible for the Member to argue that the rights under contract of its nationals or companies have not
been protected under the investment rules, if there will be any, under the WTO.
6. In any event, we consider that the definition issues should be dealt with in conjunction with
the discussions of possible overlapping questions.
7. With respect to the issue of definition of investment, it should be noted that the GATS
practices and the structures embodied therein are of significant importance for reference purposes in
the drafting of future rules on investment.  Under the GATS, services have been defined to include
any service in any sector except services supplied in the exercise of governmental authority.
However, a number of ways have been designed to limit the scope or effect of such broad definition,some of which are: to allow MFN exemptions by individual Members, to adopt annexes so as to limit
the practical scope of the application of the GATS (f or instance, to exclude exchange of traffic rights
from the GATS in the Annex on Air Transport Servic es), and to apply a positive list approach with
regard to the sectors needed to be opened up for foreign competitors based on negotiations.  In the
Doha Ministerial Declaration, it has been decided that “modalities for pre-establishmentcommitments” should be based on a GATS-type and positive list approach.  We consider it
appropriate to apply the GATS approach with respect to the “definition of investment” as well.
8. In other words, we suggest to have a broad definition based on property in the first place and
to apply restricting schemes through the schedules of commitment and possible annexes so as to deal
with issues arising from the special nature of relevant sectors.  The suggestion is not only to ensureconsistency with existing WTO agreements, but also to avoid structural differences on similar matters
that could give rise to unnecessary administrative costs.
9. We consider that any future rules on investment should preferably provide a certain degree of
flexibility.  This is of particular importance if developing Members would be to benefit fully from
these rules.  However, the flexibility should be reflected only in proposed deviations from theobligation.  Examples of such deviations are those listed in the preceding paragraph.  Our view is that
the need for flexibility should not in any way affect the adoption of a broad definition of investment.
10. It seems that the discussions of the scope of investment focus exclusively on inward
investment.  Perhaps Members would like to exchange views on whether and how to deal with
outward investment.  Although it has been the arrangement under the GATS that Members are
required to open up their service markets according to  their commitments;  it is not within the scope
of jurisdiction under the GATS to regulate or restrict the export of services.  Studies and views in thisregard on investment should provide a valuable reference for Members in deciding whether it would
also be in their interest in discussing or even in negotiating issues pertaining to the restriction or
regulation of outward investments by a Member.
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