WTO: Options for the Investment Facilitation for Development Agreement
At the WTO’s 13th Ministerial Conference, India and South Africa objected to the incorporation of the plurilateral Investment Facilitation for Development Agreement (IFDA) into Annex 4 of the WTO Agreement.1 Given that Article X.9 of the WTO Agreement requires “consensus” for any agreement to be added to Annex 4, this stopped the IFDA from being added to the WTO rulebook.2 The objection notes India and South Africa’s willingness to discuss their concerns at the General Council (along with their earlier broader issues around plurilaterals) and it seems members are planning to use that route to work out next steps.
This raises the question of what options remain for the IFDA participants to implement the agreement and the current status of the IFDA itself. Rob Howse had some ideas on this at his Trade Takes Substack, I’ve fleshed out my own thoughts below (admittedly from an airport lounge and slightly jetlagged, so looking forward to corrections!).
On the legal status of the IFDA, the text of the agreement itself is finalised and concluded, and the Joint Ministerial Declaration by IFDA participants includes a testimonium in the annexed treaty text saying it was:
DONE at Abu Dhabi this twenty-fifth day of February two thousand and twenty-four, in a single copy in the English, French and Spanish languages, each text being authentic.
There’s also been some messaging (e.g. from the WTO Director-General and UK Trade Secretary) referring to IFDA “signatories”. While I haven’t seen any suggestion that the IFDA was actually signed in Abu Dhabi, it seems that the treaty text of the IFDA is settled and ready for entry into force subject to its acceptance requirements, namely:
45.1 Any Member of the WTO may accept this Agreement. Acceptance shall take place by deposit of an instrument of acceptance to this Agreement with the Director-General of the WTO. This Agreement shall enter into force, for those Members of the WTO which have accepted it, on the 30th day following the deposit of the 75th instrument of acceptance, and thereafter for each other Member on the 30th day following the deposit of its instrument of acceptance.
This means the IFDA could enter into force after 75 participants deposit an instrument of acceptance with the Director-General.
However, the participants seem to have made clear that they won’t be lodging any acceptances until there is agreement around adding the IFDA to the WTO Agreement:
We confirm our shared objective to incorporate the IFD Agreement into the WTO Agreement as soon as possible and will request to add the IFD Agreement to Annex 4 of the WTO Agreement, pursuant to paragraph 9 of Article X of the WTO Agreement. A multilateral decision to add the IFD Agreement to Annex 4 of the WTO Agreement will enable domestic procedures for acceptance of the IFD Agreement to proceed, with a view to ensuring its timely entry into force.
This makes sense given the current drafting of the IFDA largely assumes and relies upon it being part of the WTO institutional structure - for example, in relation to its Committee and dispute settlement.
To get the IFDA into the WTO, however, the options for participants are limited.
While the the Services Domestic Regulation plurilateral was able to make use of GATS schedules for its implementation, this would be more complicated for the IFDA to attempt. Using just GATS schedules would technically limit the scope of the commitments to services investments and indeed only ‘Mode 3’ services investment (i.e. the establishment of a commercial presence). It’s also not clear that provisions such as that establishing a ‘WTO Committee on Investment Facilitation’ could properly done through a GATS additional commitment.
Instead - it looks like if the participants want to have the IFDA as part of the WTO, they’ll need to continue trying to get it into Annex 4. The problem is that only the Ministerial Conference that can decide to add agreements into Annex 4. Given that MC14 is not until 2026, that means at least a two year wait that the participants would probably prefer to avoid (update: unless the participants can convince the General Council to exercise the functions of Ministerial Council intersessionally under Article IV(2) of the WTO Agreement).
If the participants do want to start implementing the IFDA ahead of MC14, one option is to first implement the IFDA as a standalone, non-WTO agreement, with a view to its incorporation into the WTO in the future (which I take Rob’s post to be suggesting in part).3
This has the downside of potentially being seen to have ‘given up’ on the WTO route - with one of the hopes of the IFDA being that it can help demonstrate the continued relevance of the WTO and validate plurilaterals as an option to continue its rule-making function. More substantively, it would mean the IFDA not having any of the WTO’s institutional backing, secretariat support, nor access to a standing dispute settlement system (although as Rob notes, it’s not clear this is a major issue given the kinds of commitments in the IFDA, particularly in its early days4).
This ‘standalone’ route would likely require some changes to the current IFDA text. This could be done by a transitional or implementation protocol that regulates how participants will apply the IFDA while waiting for it to be added to the WTO (e.g. no WTO dispute settlement5). The institutional elements will probably be the most difficult to accommodate - in particular how the Committee would work, how the technical assistance program would be managed and also how the TFA-style transitional elements for developing country members will be monitored and implemented.
It is still early days, and IFDA participants have not shown any indication that they intend to implement the agreement independently nor have it enter into force until it is incorporated into the WTO. Their press release noted that:
The IFD participants also underlined that, once incorporated in the WTO, the IFD Agreement will allow developing and least-developed country (LDC) members to receive the technical assistance and capacity-building support they need to implement it. … Participants stressed that incorporation of the IFD Agreement into the WTO is critical for the Agreement to deliver its benefits, notably for developing and LDC members, who are in the greatest need of more sustainable investment flows. An IFD Agreement in the WTO will also serve as a key catalyst for international support for national and regional investment facilitation efforts.
At the same time, some participants such as Singapore are hoping for entry into force as soon as possible:
In the grand scheme of things - perhaps another two years wait isn’t intolerable. But if the General Council discussions don’t look likely to bear any fruit, the standalone option might start looking more attractive.
See this previous communication from India and South Africa outlining their concerns with three ‘Joint Statement Initiative’ plurilaterals; and their full February statement here.
We’ll see if this has any longer term impacts on the desire to redefine how consensus operates at the WTO - see here for a suggestion that this could need reconsideration.
The pedantic in me would note that Article X.9 refers to the “parties” to an agreement requesting it be entered into Annex 4 of the WTO Agreement. Is there an argument this means agreements that aren’t in force (and so don’t have ‘parties’) aren’t eligible for entry? I would think this is an overly literal reading that needlessly complicates the process (particularly as it would mean you’d potentially have a ‘non-approved’ agreement making use of WTO institutions in the period before the Ministerial Conference approves adding it to Annex 4).
The IFDA also has a grace period provision for dispute settlement.
Rob suggests: “Why couldn’t the IFD participating Members have an additional protocol with a sui generis dispute mechanism, at least an interim one until the Agreement is put into Annex 4? Most of the obligations in the IFD Agreement consist in commitments progressively to improve domestic governance mechanisms for foreign direct investment. Like the multilateral Trade Facilitation Agreement (TFA), in the case of developing countries the pace is linked to capacity and in some cases availability of technical assistance. These kinds of norms seem more suited to regular peer reporting on implementation rather than adversarial dispute settlement around legal interpretation of “rules.””