http://ccsi.columbia.edu/files/2016/10/No-190-Sauvant-FINAL.pdf
Columbia FDI Perspectives
Perspectives on topical foreign direct investment issues
No. 190 January 2, 2017
Editor-in-Chief: Karl P. Sauvant (Karl.Sauvant@law.columbia.edu)
Managing Editor: Daniel Allman (daniel.allman@columbia.edu)
China moves the G20 on international investment
by
Karl P. Sauvant *
During China’s Presidency of the Group of Twenty (G20), culminating in the G20
Hangzhou Summit in September 2016, important decisions were taken that could shape
the future of international investment law and policy. China was the driver, given its fear
of FDI protectionism and of discriminatory treatment toward its outward investors.
First, the Summit endorsed 1
nine “Guiding Principles for Global Investment
Policymaking,” agreed in July 2016 by the G20 Trade Ministers,
2
and prepared by their
Trade and Investment Working Group to provide overall guidance to investment policy
making: avoidance of FDI protectionism; openness, non-discrimination, transparency,
and predictability; investment protection, including dispute settlement; transparency in
investment rule-making, involving all stakeholders; coherence in rule-making, consistent
with sustainable development; the right to regulate; investment promotion and facilitation;
responsible business conduct; and international cooperation.
Reaching agreement was a challenge, with G20 members having to compromise in a
short period in the face of disparate views on key issues. The Principles, therefore, were
formulated in general language, and certain issues such as specific protections could not
be agreed. Other notions could not be clarified, such as that investment promotion and
facilitation should include maximizing benefits for host countries; that investment, best to
contribute to sustainable development, should exhibit certain sustainability characteristics;
and that “responsible business conduct” should include obligations, in such areas as those
addressed, for instance, in the OECD Guidelines for Multinational Enterprises. More
generally, the G20 Principles remain focused on the obligations of host countries, with
only modest references to investor obligations and no mention at all of home country
obligations.
China, with help from Canada as Working Group co-Chair, brought about a compromise,
aided by its links to other members of the BRICS group and supported by the Secretariats
of UNCTAD, the OECD, the WTO, and the World Bank. Agreement was possible
2
because the Principles are general in nature, are non-binding and keep the focus on host
country obligations. Overall, they are a desirable step toward outlining a comprehensive
international investment framework and preparing the ground for an eventual plurilateral
or multilateral investment regime.
Going forward, it is important for governments to build on the Principles. For example, a
review (e.g., a gap analysis) could be undertaken of the extent to which international
investment agreements already reflect the Principles and the ways in which new
agreements take them into account. Another possibility would be for international
organizations to monitor future treaty practice in light of the Principles and periodically
to report on the results of such monitoring, or to invite countries to report on
implementation of the Principles in their own policies. Finally, the Principles could be
elaborated through the addition of annotations. The key is for governments actually to
work with the Principles. As a first step, then, the Principles need to be widely
disseminated.
Second, China’s Presidency has laid the groundwork for something concrete, relatively
non-controversial and in the interest of all countries, namely, the facilitation of higher
FDI flows to developing countries, and especially the least developed among them. The
Trade Ministers “encourage[d] UNCTAD, the World Bank, the OECD and the WTO to
advance this work within their respective mandates and work programmes.”
3 Various
international organizations have initiated such work.
Encouraging, too, is India’s proposal for an “Agreement on Trade Facilitation in
Services” at the WTO,4
explicitly covering Mode 3 (i.e., commercial presence) of the
General Agreement on Trade in Services. FDI (akin to “commercial presence”) in
services accounts for roughly two-thirds of total FDI. Such an Agreement could become a
stepping-stone for a broader international support program for sustainable investment
facilitation.5
In the near/medium term, one way to make progress would be to prepare
G20 “Guiding Principles for Global Investment Facilitation,” drawing on the precedent of
the “Guiding Principles for Global Investment Policymaking.”
Finally, the G20 decided to maintain its Trade and Investment Working Group. This
Group could remain a valuable additional platform for intergovernmental discussion
regarding governance of international investment in a non-rule-making setting, and can
serve as an incubator for related ideas.
Germany, holding the G20 Presidency in 2017 and co-chairing the Working Group, can
move the G20’s investment policy work forward. However, given the controversies
surrounding some investment issues, and given Germany’s federal elections set to take
place in the fall of 2017, that country’s focus is likely to be on investment facilitation.
Argentina, holding the G20 Presidency after Germany and having an interest in FDI
facilitation, could build on whatever work has been done to achieve additional concrete
results.
3
Considering the difficulty of the investment issue and the shortness of time, the
agreements reached by the G20 represent important accomplishments. The challenge,
now, is to build on them.
* Karl P. Sauvant (karlsauvant@gmail.com) is Resident Senior Fellow, Columbia Center on Sustainable
Investment, a joint center of Columbia Law School and the Earth Institute, Columbia University. The
author is grateful to Jonathan Fried for his helpful comments and to Julien Chaisse, Mark Feldman and
Wenhua Shan for their helpful peer reviews. The views expressed by the author of this Perspective do
not necessarily reflect the opinions of Columbia University or its partners and supporters. Columbia
FDI Perspectives (ISSN 2158-3579) is a peer-reviewed series.
1
See “G20 Leaders’ Communiqué,” available at
http://www.consilium.europa.eu/en/meetings/international-summit/2016/09/LeadersCommuniqueHangzhouSummit-final_pdf/,
para. 29.
2
“G20 Trade Ministers Meeting Statement,” available at
https://www.wto.org/english/news_e/news16_e/dgra_09jul16_e.pdf.
3
Ibid., para. 18.
4
See WTO Working Party on Domestic Regulation, “Concept Note for an Initiative on Trade Facilitation
in Services,” Doc. S/WPDR/W/55, Sept. 27, 2016.
5
See Karl P. Sauvant, “We need an international support programme for sustainable investment
facilitation,” Columbia FDI Perspectives, No. 151, Jul. 6, 2015.
The material in this Perspective may be reprinted if accompanied by the following acknowledgment: “Karl
P. Sauvant, ‘China moves the G20 on international investment,’ Columbia FDI Perspectives, No. 190,
January 2, 2017. Reprinted with permission from the Columbia Center on Sustainable Investment
(www.ccsi.columbia.edu).” A copy should kindly be sent to the Columbia Center on Sustainable Investment
at ccsi@law.columbia.edu.
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No. 187, Jan Knoerich, “Why some advanced economy firms prefer to be taken over by Chinese
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No. 185, Frank J. Garcia, “Investment treaties are about justice,” October 24, 2016.
All previous FDI Perspectives are available at http://ccsi.columbia.edu/publications/columbia-fdiperspectives/.
Brad Parks is AidData’s executive director and a research faculty member at the College of William and Mary’s Institute for the Theory and Practice of International Relations. His research focuses on the cross-national and sub-national distribution and impact of international development finance, and the design and implementation of policy and institutional reforms in low-income and middle-income countries. His publications include Greening Aid?, Understanding the Environmental Impact of Development Assistance (Oxford University Press, 2008) and A Climate of Injustice: Global Inequality, North-South Politics, and Climate Policy (MIT Press, 2006). He is currently involved in several empirical studies of the upstream motivations for, and downstream effects of, Chinese development finance. His research in this area has been published in the Journal of Conflict Resolution, the Journal of Development Studies, China Economic Quarterly, and the National Interest.