WORLD TRADE
ORGANIZATIONWT/WGTI/W/140
12 September 2002
(02-4826)
Working Group on the Relationship
between Trade and InvestmentOriginal:  English
COMMUNICATION FROM THE EUROPEAN COMMUNITY
AND ITS MEMBER STATES
The following communication, dated 10 September 2002, has been received from the
Permanent Delegation of the European Commission.
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CONCEPT PAPER ON DEVELOPMENT PROVISIONS
Note by the Secretariat
1. Paragraph 22 of the Doha Ministerial Declaration mentions “development provisions” among
the issues to be clarified by the Working Group on the Relationship between Trade and Investment
(WGTI), in the period until the Fifth Ministerial Conference. WTO Ministers have recognised at theDoha Ministerial Conference that the development dimension should be incorporated as a central and
cross-cutting element of the Doha Development Ag enda (DDA). The EC full y supports the objective
of having sustainable development appropriately reflected in the DDA, as provided for in
paragraph 51 of the Doha Declaration and, in this context, believes that the provisions of a
multilateral investment framework should take into account the specific needs and constraints ofdeveloping countries.
2. The development dimension is a horizontal concern that has been addressed in the WGTI in
the context of specific discussions on scope and definition, transparency, non-discrimination and pre-
establishment commitments
1. In addition to the written submissions already presented2 and the
statements made during past meetings, this subm ission outlines some views on how a multilateral
framework on FDI could incorporate development provisions.
3. In this paper we will outline some ideas on the concept of flexibility for development,
existing development provisions, in particular in the GATS, and technical assistance.
                                                     
1 See, for instance WT/WGTI/W/19, W/22, W/23, W/28, W/29, W/30, W/33, W/34, W/36, W/37,
W/42, W/51, W/54, W/68, W/71, W/75, W/79, W/84, W/89, and W/104.
2 In particular, EC submissions WT/WGTI/W/84, W/89 and W/102.This concept paper is intended as a suggestion on the developmen t
provisions that could be included in a Multilateral Investmen t
Framework. It should not be read as a text proposal.WT/WGTI/W/140
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I. INVESTMENT AND DEVELOPMENT
4. Investment liberalisation should be seen as part of the broad process of regulatory reform that
developing countries (as well as developed countries for that matter) have to go through in order to
create an enabling business environment, while retaining their ability to regulate for public purposes.
5. It is undisputed that FDI can bring important de velopmental benefits to recipient countries, in
the form not only of capital but also technology, knowledge, improved access to export markets, etc.
An inflow of FDI can be especially important in orde r for developing countries to be able to reap the
benefit of potential market access opportunities created by open trade policies and future unilateral or
negotiated liberalisation. As a consequence, attracting foreign direct investment has become an
objective of particular importance for many developing countries. In parallel to unilateral domestic
reforms most countries have concluded bilateral and regional investment treaties for the purpose ofpromoting and protecting investment flows with their partners.
6. At the same time, while most developing countries recognise the merit of providing an open
and transparent investment climate in order to attract FDI, some of them also feel the need to maintain
certain investment policies and measures aimed at promoting the development of specific sectors,regions, filling technology gaps or protecting minorities and cultural heritage. Regardless of the
effectiveness or appropriateness of any specific policy, it is our firm conviction that any development
policy and measures can and should be compatible with a multilateral investment framework.
7. By saying this, we believe not only that a MIF can and should be compatible with
development objectives and policies, but in fact it could actually support them. Let us not forget that
developed countries are both sources and destinations  of the greater part of FDI flows world-wide.
However, developing countries are those who most need FDI in order to make up for their lack of
domestic capital and technology. A MIF would certainly benefit developing countries in particular by
improving the legal security, transparency and credibility of their domestic framework.
8. Thus, should a MIF include meaningful provisions that enhance transparency, predictability
and non-discrimination for FDI, those who will mostly  benefit from it will be developing countries.
II. THE CONCEPT OF FLEXIBILITY
9. We wish to underline that flexibility for development is an important concept that should be
taken into account in the negotiation of a MIF. However, if flexibility is understood as the right of agovernment to discriminate among investors, it will not be effective as a means to enhance
development. Flexibility instead can be useful if it is seen as a broader concept which combines an
appropriate policy space that governments require to pursue their national development objectives
with the quest for an appropriate stable, predictable and transparent FDI framework through which
firms are encouraged to operate.
10. Flexibility is to make up for insufficient financial and human resources and, in particular,
institutional weaknesses which put heavy restraints on developing countries. Flexibility may typically
involve: lower levels of commitments; asymmetric ally phased implementation timetables; exceptions
from obligations in certain areas; flexibility in the application of – and adherence to – disciplines.
11. As already discussed in this Working Group, international investment agreements can include
each, or a combination of these approaches and instruments.WT/WGTI/W/140
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III. SOME DEVELOPMENT PROVISIONS THAT ALREADY EXIST IN THE WTO
12. The WTO system includes a number of deve lopment provisions throughout the different
agreements. The WTO Committee on Trade and Development (COMTD) has classified the different
special and differential (S&D) treatment provisions in the following 6 categories3: (i) provisions
aimed at increasing the trade opportunities of developing countries; (ii) provisions under which WTOmembers should safeguard the interests of developing country members; (iii) flexibility of
commitments, of action, and use of policy instruments; (iv) transitional time periods; (v) technical
assistance; (vi) provisions relating to least-developed country members.
13. A number of these provisions already apply directly or indirectly to FDI, as the WTO
Secretariat explains in its paper WT/WGTI/W/119.
A. F
LEXIBILITY AS THE UNDERLYING PRINCIPLE : THE EXAMPLE OF GATS
14. The GATS is probably one of the most “development-friendly” agreements in the WTO
system because of its structure. The GATS architecture has a “built-in” mechanism, which has the
same effect as and even stronger than a S&D provision, by providing complete flexibility in making
commitments.
15. In fact, Article XIX spells this out by recognising that the negotiation of specific
commitments shall take place with due respect for national policy objectives and the level of
development of individual members. Moreover, it recognises developing countries’ right to open
fewer sectors, liberalising fewer types of transact ions, progressively extending market access in line
with their development situation.
16. It has been noted that “ The GATS does not adopt the traditional concept of Special and
differential treatment, according to which, to a large extent, all developing countries are treated the
same. It rather addresses the concerns and needs of developing countries through providingappropriate flexibility on an individual basis. Such flexibility is reflected in numerous provisions of
the Agreement as well as in its basic structure, which allows each Member to undertake liberalisation
commitments in a manner consistent with its development needs. Such commitments are always
negotiated on a case-by-case basis ”
4.
17. We entirely share this appreciation. This is why we support the GATS-type approach as a
useful model for a MIF. It is also evident that most developing countries have made ample use of theflexibility provided by Art. XIX GATS by taki ng fewer, and less comprehensive commitments than
developed countries.
18. In the end, under this system, each country draws its own balance between the need to offer a
stable, predictable and transparent policy framework to foreign investors and the need to retain amargin of flexibility necessary to pursue its specific national development objectives.
IV. TECHNICAL ASSISTANCE
19. As suggested in our submission WT/WGTI/W/102, Technical assistance and capacity
building should be foreseen for the pre-negotiation phase, during the negotiations as well as theimplementation of provisions that required specific additional resources for developing countries.
                                                     
3 WT/COMTD/W/77 and Rev.1 and Add. 1-4.
4 WT/COMTD/W/77 and Rev.1 and Add. 1-4.WT/WGTI/W/140
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20. In the case of, for instance, transparency provisions, the benefits of the provisions included in
a MIF would be greatly enhanced by promoting investment opportunities in a pro-active manner. Host
and home countries, could benefit from transparency provisions included in a MIF, respectively as a
way to inform about investment opportunities in their territory and to the advantage of their investors.
Transparency and dissemination of information on investment laws and regulations, should be animportant element of investment promotion for all countries and in particular developing countries.
21. As we have pointed out in document WT/WGTI/W/110, technical assistance for the specific
goal of improving transparency and investment promotion could build on existing projects and offer
support to officials and investment promotion agenci es from developing countries in terms of know-
how as regards (i) identification of national legislation concerning investment, (ii) dissemination of
information, and (iii) strengthening the capacity to  upgrade regulatory frameworks and to maintain
this upgrading.
V. CONCLUSION
22. Rather than only including specific development or S&DT provisions, which can certainly be
useful in certain cases, we believe that the development dimension should be incorporated in the
overall structure of a MIF. The end result of a MIF should be development friendly. However, the
level of commitments of each country will determine the value added of an MIF for itself and its realcontribution to the improvement of FDI conditions  world-wide to the benefit of development.
23. A MIF should have among its key objectives, the promotion of development and the growth
of the capacity of developing countries to attr act FDI flows and also to become sources of FDI.
24. As to the coverage, the agreement could focus on FDI, which is the most stable form of
capital, it is widely acknowledged to be essential for development and it is one of the main engines of
world trade and growth.
25. A flexible, GATS-type structure based on positive commitments could be used for market
access and NT provisions at the pre-establishment stage. This mechanism would allow some countries
to take phased commitments on market access and NT which would be adapted to their level of
development. The level of commitments of developing countries would be commensurate to their
level of development and there would be no obligation for them to liberalise sectors. Moreover, each
developing country would be able to attach to its market access and NT commitments possible
conditions related to its development objectives.
26. Technical assistance should be foreseen for developing countries for all the stages, i.e. the
pre-negotiation phase, the negotiation as well as for the implementation of provisions that required
specific additional resources.
27. The right of members to regulate ‘in order to meet national policy objectives’ should be
explicitly recognised, as well as possible exceptions for public interest (for example: security,protection of public moral, public order and consum ers, exercise of governmental authorities) and
restrictions to safeguard the Balance of Payments in accordance with IMF rules.
28. The question of investors’ behaviour and their responsibility vis-à-vis host countries could
also be addressed. As mentioned in our submission WT/WGTI/W/81, there is a concern of developingcountries that MNEs apply high standards of behaviour, so that host countries can be in a position to
reap most benefits from FDI. In our view the OECD Guidelines for multinational enterprises provide
a useful example of how to ensure that MNEs conduct their activities in a responsible manner and in
harmony with the policies of the countries in which they operate.WT/WGTI/W/140
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29. We look forward to continuing our discussions on the possible development provisions to be
included in a MIF and to hearing other Members’ views and suggestions on all the options available.
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