PRESS/42
13February 1996
FOREIGN DIRECT INVESTMENT SEEN ASPRIMARY MOTOR OF
GLOBALIZATION, SAYS WTO DIRECTOR-GENERAL
"Anincreasingly symbiotic andintegrated relationship
between trade andinvestment."
"There canbenodoubt thatforeign direct investment hasjoined international trade
asaprimary motor ofglobalization," saidMrRenato Ruggiero, WTO Director-General, at
theUNCTAD Seminar onforeign direct investment andthemultilateral trading system in
Geneva on12February 1996. "Indeed, intoday'seconomy, trade andinvestment arenot
merely increasingly complementary, butalsoincreasingly inseparable astwosides ofthecoin
oftheprocess ofglobalization."
Speaking toanaudience ofgovernment officials, businessmen andacademics,
Mr.Ruggiero emphasized howforeign direct investment facilitates aninternational division
oflabour totakeadvantage ofinternational trade opportunities byincreasing themobility of
factors ofproduction. "Itrepresents themost effective mechanism forthediffusion of
productive know-how andcapital around theworld andthegeneral creation ofwealth. Itcan
release much oftheuntapped production potential oftoday'sdeveloping andtransition
economies, while atthesame timeopening upnewmarkets forhighvalue-added products
andservices oftheindustrial countries thatgenerate highincome jobs."
MrRuggiero pointed outanumber ofimportant aspects ofinvestment policy which
werealready thesubject ofWTO rulesgoverning thetreatment offoreign companies operating
within acountry 'sterritory -suchastherules covering trade inservices, ortheprotection
ofintellectualpropertyrights,andtheagreementdealingwithtrade-relatedinvestmentmeasures
which includes acommitment bytheWTO member governments toconsider within thenext
fouryears theneedforcomplementary provisions oninvestment policy.
Turning todevelopments outside theWTO framework, MrRuggiero saidthattheneed
forinternational agreements forthepromotion andprotection ofinvestment hadbeenwidely
manifested inthegreat increase ininterest inbilateral investment treaties -some 60percent
ofthemore than900existing bilateral investment treaties hadbeennegotiated during thecourse
ofthisdecade, including agrowing number andproportion among developing countries. He
alsopointed toaproliferation ofregional andother initiatives toaddress theestablishment
ofinternational rules relating toforeign investment suchastheEuropean Union whose rules
inthisareaextend tothewhole ofWestern Europe; NAFTA which integrates issues oftrade
andinvestment intoasingle trade agreement; theASEAN leaders 'initiative tostudy the
establishment ofanASEAN freeinvestment area; thework ofAPEC oninvestment; andthe
OECD negotiations aimed atconcluding amultilateral agreement oninvestment bymid-1997.
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MrRuggiero cautioned thatthisproliferation ofinitiatives raised anumber ofconcerns
such asthatsome countries were notinvolved inanyofthese efforts andthatsome key
initiatives were notopentomany countries, especially developing countries, thereby risking
outcomes thatmight bemutually conflicting anddiscriminatory particularly where strong and
coherent multilateral rulesdidnotapply. Healsoexpressed concern attheinteraction ofthese
initiatives withtheexisting multilateral rules andwork programme oftheWTO.
Bearing inmind theproliferation ofsuchtreaties andinitiatives, MrRuggiero stressed
thatthere could benodoubt ofthewidespread recognition oftheneed forinternational
cooperation. Hehighlighted some ofthecharacteristics which might justify multilateral work
oninvestment:
-Theinvolvement ofasufficiently representative cross-section oftheinternational
community;
-While notnecessarily replacing bilateral investment treaties, obviating theneed
forthenegotiation ofthetensofthousands ofBITs thatwould benecessary to
provide equivalent international rules;
-Ensuringthatregionalandanyothermorelimitedarrangementsfitintoaframework
thatprovides adequate safeguards against discrimination tothird countries;
-Promoting access toforeign direct investment, andreducing thecostofsecuring
ittorecipient countries, through providing greater security andcommon rules,
forexample against beggar-my-neighbour investment policies;
-Notundermining butincreasing theability ofstates todetermine theirownfutures.
Ingeneral, foreign direct investment, byincreasing wealth andtransferring know-
how, willdothis,butitisnecessary tobesensitive totheconcerns ofMember
countries, especially those whoperceive themselves asweaker onesonthisscore;
-Ensuring anadequate balance thatreflects themutual dependence ofthehome and
hostcountries inanyforeign investment;
-Ensuring thattheissue isnotperceived asoneofNorth/South relations, butas
oneofcommon interest;
-Consolidating commitments to,andfacilitating public support for,thefreeflow
ofinvestment andofgoods andservices. Inthisregard weshould notdelude
ourselves thatpublic support foroutward investment isautomatic.
"There isanincreasingly symbiotic andintegrated relationship between trade and
investment," saidMrRuggiero. "Akeyquestion before themultilateral trading system is
whether thetimeisripetoinitiate aconsideration astowhether thisbroader approach totrade
policy should beextended toallareas ofinternational trade."
ThefulltextofMrRuggiero 'sstatement isavailable onrequest.
END