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Recent developments in International Investment Agreements

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Recent developments in International Investment Agreements Powered By Docstoc
					Feasibility and viability of a
 possible ACS Framework
 Agreement on Investment

XXIIth ACS Trade Committee Meeting
 Havana, Cuba, 6 November 2007
 Definition and types of regional
investment agreements, and their
     potential benefits/costs




                                    2
    Definition and types of economic integration
                     agreements


   EIAs may be defined as agreements that
    facilitate international trade and cross-border
    movement of factors of production.
   Foreign investment activity may be one or even
    the exclusive ingredient of such international
    cooperation.
   For the purpose of this presentation, EIAs
    containing investment rules, are called regional
    investment agreements (RIAs).
                                                       3
        Types of economic integration
                 agreements

   Sectoral trade agreements;
   Free trade agreements;
   Customs union;
   Regional investment agreements;
   Common market;
   Economic union.



                                        4
Potential benefits of regional investment
           agreements (RIAs)


   A removal of trade barriers enlarges the market
    and allows firms to benefit from greater scale.
   Relaxation of market entry conditions favours
    relocation. Relocation is driven by comparative
    advantage and helps increase intra-regional
    efficiency-seeking foreign investment.



                                                      5
          Potential benefits of RIAs (II)


   More foreign investment may increase
    competition, lower prices and improve the
    quality of products and services.
   The lock-in effect of investment liberalisation and
    protection of a RIA adds credibility to these
    commitments, thereby contributing to policy
    stability, transparency and reliability.


                                                      6
         Potential benefits of RIAs (III)


   Regional integration may strengthen the
    bargaining power of members vis-à-vis third
    countries.
   It may improve overall political relations between
    member countries.




                                                     7
             Potential costs of RIAs

   If RIA members are at different levels of
    development, the task of liberalisation may fall
    asymmetrically on the less developed partner.
   Relocation may impose heavy social and
    economic costs in some sectors, while others
    expand.
   There may thus be a need for policy measures
    to facilitate the adjustment process.


                                                       8
           Potential costs of RIAs (II)

   RIAs may reduce policy options for member
    countries and reduce regulatory flexibility.
   Policy making may become more complex for
    member countries.
   RIAs may introduce some degree of
    discrimination of investors from outside the
    region, potentially resulting in investment
    distortion.


                                                   9
The current universe of RIAs




                               10
       The present universe of regional
        investment agreements (RIAs)

   The global number of RIAs is growing rapidly
    and exceeded 218 in 2006.
   RIAs include both intraregional and interregional
    agreements;
   Most countries are parties to at least one RIA.
   In terms of geographical distribution, most RIAs
    have been concluded in the Americas.


                                                    11
Growth of RIAs, 1945 – 2004




      Figure III.1. Growth of EIIAs, 1945 - June 2005
                         (Number)




                                                        12
Total RIAs concluded by Region, as of
         June 2005




                                        13
Intraregional and interregional RIAs by
         type, as of June 2005




                                          14
The spaghetti bowl of IIAs




                             15
     Some prominent examples of RIAs


   Americas: NAFTA, Caricom, Mercosur, Andean
    Pact.
   Asia: ASEAN, BIMSTEC, SAARC.
   Africa: ECOWAS, SADC, COMESA.
   Europe: EU, EFTA.




                                                 16
Distinction between Developed and Developing
                 Country RIAs

   Most RIAs are between developed and developing
    countries. There is also a growing number of South-
    South RIAs.
   In general, South-South RIAs tend to have the following
    characteristics:
    • They are less likely to include specific liberalisation
      commitments;
    • They tend to have less extensive provisions on intellectual
      property rights.
    • They are more likely to have provisions on differentiated
      treatment according to the level of economic development.

                                                                    17
Existing options for investment
       integration in RIAs




                                  18
       Different degrees of investment
              integration in RIAs

   Investment promotion through cooperation;
   Framework agreement for future negotiations;
   Investment liberalisation;
   Investment liberalisation and protection;
   Investment protection and promotion.




                                                   19
        Investment promotion through
                cooperation

   These agreements typically spell out specific
    investment promotion measures that contracting
    parties should undertake.
   They include, e.g., exchange of information,
    elimination of investment obstacles,
    consultations, encouragement of future, more
    ambitious treaties.
   Examples:EU – APC Partnership Agreements.

                                                 20
      Framework for future negotiations


   Some investment promotion agreements include
    a mandate for future negotiations aimed at
    liberalising and/or protecting investment.
   Mandate may be general or specific.
   Examples: Euro-Mediterranean agreements;
    EU-APC Parnership Agreements; BIMSTEC -
    FTA.



                                               21
            Investment liberalisation

   Some RIAs focus mainly or exclusively on
    investment liberalisation. These treaties show
    various degrees of liberalisation:
     • General commitment to remove investment
       obstacles;
     • Progressive liberalisation in the form of
       binding obligations (NT, MFN).
     • Full liberalisation with general, country- and
       sector specific exceptions and reservations
       (« top-down » vs. « bottom-up » approach).
     • Examples: CARICOM Revised Treaty,
       ASEAN Investment Treaty.                         22
    Investment liberalisation and protection


   This type of RIA combines liberalisation
    commitments of the contracting parties with
    investment protection provisions as can be
    found in BITs, including dispute settlement.
   Examples: NAFTA, MERCOSUR Colonia
    Protocol.




                                                   23
    Investment protection and promotion



   Some RIAs follow the traditional European BIT
    pattern that provides only for post-establishment
    protection.
   Examples: ASEAN Investment Agreement;
    several free trade agreements in Latin America
    (e.g. Mexico-Costa Rica).



                                                    24
      Treatment of Third Parties in RIAs

   Typically, RIAs establish preferential treatment
    of investors from within the region.
   However, most RIAs do not oblige members to
    treat investors from outside the region worse.
   A few RIAs explicitly provide for non-
    discriminatory treatment of outside investors
    over time (Ex. ASEAN Framework Agreement),
    or – on the contrary – exclude full non-
    discriminatory treatment (Ex. MERCOSUR).

                                                       25
The interaction between RIAs and
            other IIAs




                                   26
    Interaction between RIAs and other IIAs


   RIAs may overlap with other IIAs (e.g.BITs) that
    individual members have concluded between
    themselves.
   In case of an inconsistency between these
    agreements, the provisions of the most recent
    agreement between the parties concerned
    prevail (see 1969 Vienna Convention on the Law
    of Treaties).

                                                   27
    Interaction between RIAs and IIAs concluded
                  with third parties

   Privileges granted under a RIA may have to be
    extended to investors from outside the region if
    the latter are covered by an IIA containing an
    MFN clause (« free rider issue »).
   RIA members may exclude this outcome by
    including a « REIO exception » in their IIAs with
    third parties. Accordingly, the MFN clause would
    not extend to privileges granted within such a
    regional integration organisation.
   The definition of a « REIO » in the IIA is crucial
    for determining the scope of its « protective »
    effect for the REIO members.
                                                     28
Policy challenges related to RIAs




                                    29
    Policy challenges for developing countries
                  related to RIAs

   Developing countries negotiating RIAs need to
    consider how best to incorporate the
    development dimension in their agreement.
   They need to strike a balance between the
    potential for the RIA to increase investment
    flows, and the flexibility of countries to pursue
    their particular policy objectives.
   RIA provisions through which flexibility may be
    ensured include in particular the scope of the
    agreement, the scope of the NT clause, rules on
    performance requirements and incentives, and
    competition policy.                             30
    Policy challenges for developing countries
                 related to RIAs (II)

   RIAs often touch upon a range of important
    social and environmental concerns. Thus, RIAs
    should reflect in a balanced manner the rights
    and obligations of foreign investors and states.
   The proliferation of EIAs results in a multilayered
    and multifaceted web of interrelated investment
    rules that is difficult to manage for many
    developing countries. Thus, further capacity
    building and technical assistance remain of
    crucial importance.
                                                      31
             Concluding remarks

   While BITs continue to constitute by far the most
    frequent form of IIAs, the number of RIAs is
    growingly rapidly.
   More recent RIAs are moving gradually towards
    greater coverage and depth of investment
    issues.
   While RIAs can be an important tool to
    strengthen cooperation between members,
    thereby contributing to economic and social
    development, they also pose new challenges in
    terms of their complexity and consistency.
                                                    32
Thank you.




             33

				
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