A spectre of disintegration is staring in the face of the Atlantic West. Events over the past fortnight point towards an evolving process of “disaster apartheid.” Large-scale annihilation of innocent human lives in Mosul, Iraq, by precision bombs dropped by American planes and suspected gas attacks in Syria, the US decision to walk away from the Paris Climate deal and intensify the human-made climate change by embracing the coal industry, and efforts to develop new nuclear weapons and bring the doomsday clock to two-and-half minutes to midnight are frightening.
On the trade front, several proliferating developments in the Atlantic West could possibly wreck the so-called liberal trade order they created over the past two centuries.
Britain’s decision to invoke Article 50 of the European Union treaty to withdraw from the 27-member single market and customs union in two years, the accompanying divorce bill of €60 billion, and other matters such as the rights of citizens resident in other countries are issues that could cause unforeseen tectonic shifts.
Of course, the chances of the EU, which started as a coal and steel cartel, remaining as one entity also seem bleak. Surely, the EU cannot ignore existential issues of continued trade surpluses of Germany and few other countries, while Greece, Italy, France, and other nations in Middle Europe face economic stagnation and bulging trade deficits.
In a similar vein, it is also alarming to witness the dangerous obsession of the US under President Donald Trump to opt for bilateral free trade agreements based on its terms and the insidious protectionist measures such as the US “border adjustment” and the escalating restrictions on the H1B visas.
“Mr Trump and his team view the world in 2017 as marked by economic nationalism and strongmen from Vladimir Putin in Russia and Narendra Modi in India to China’s President Xi Jinping,” journalists Lionel Barber, Demetri Sevastopulo and Gillian Tett of the Financial Times said after interviewing Trump, on 2 April. “They (Trump and his team) see it as a place where the US must vigorously assert its own interests.”
Against this backdrop, one would expect the developing and middle-income countries to pursue credible and environmentally sustainable trade policies that could bring about a paradigm shift in the global trade order. Unfortunately, they remain as divided as the Atlantic West.
Even the BRICS—Brazil, Russia, India, China, and South Africa—which could have easily provided an alternative economic and trade agenda to the dominant narrative offered by the Atlantic West are also divided. Three members—Russia, China, and Brazil—of the BRICS are now in the process of bringing back to life a dead agreement called “multilateral agreement on investment,” or MAI.
That agreement was conceived during 1995-98 at the Paris-based Organization for Economic Cooperation and Development (OECD), the rich country economic club founded by the US as a follow-up to the Marshall Plan.
It was primarily aimed at strengthening the protection-privileges of private investors over the rights of sovereign governments. Because of protests by developing countries and civil society pressure groups, it collapsed like a house of cards in 1998.
Later, the EU along with other key members of the Atlantic West revived the MAI in a different form called trade and investment. Finally, trade and investment was sneaked into what are called the four controversial Singapore issues. The other three include competition policy, government procurement, and trade facilitation.
The Singapore issues, which were first introduced at the World Trade Organization’s first ministerial conference in 1996, became part of the Doha Work Program in 2001.
But, in 2003, the Singapore issues suffered the biggest setback in the face of opposition from a group of developing countries led by Malaysia’s former trade minister Rafida Aziz and India’s then trade minister Arun Jaitley.
The EU and its partners such as Japan and Korea, among others, abandoned trade and investment both at the OECD and the WTO. Last month, South Africa and India opposed discussing investment at the WTO during a meeting of G20 officials in Berlin.
Nevertheless, Russia, China, and Brazil are now moving heaven and earth to bring back investment as a major issue for negotiations at the WTO.
As a first step, Russia circulated a three-page proposal titled “Investment Policy Discussion Group” on 31 March. The proposal calls for immediate discussions on multilateral investment facilitation (MIF) rules.
Strangely, the Russian proposal borrowed the structure and even language from India’s proposal on Trade Facilitation for Services, particularly on provisions concerning “transparency” and “domestic regulation”— knowing well that India remains skeptical on investment at this juncture.
Like the Indian proposal on trade facilitation for services, which calls for simplification and streamlining of procedures and provisions concerning trade in services without seeking market access, the Russian proposal says that the proposed discussions on MIF rules “are not intended to cover such issues as market access and treatment of investments, as well as expropriation and investor-state dispute settlement.”
The Russian proposal says its main objective is to bring about “a transparent, stable and predictable regulatory administrative framework for investors, without questioning the rights of the Members to regulate and without interfering with their policies of protection of investments, including issues of nationalization, expropriation and compensation of losses”.
In short, it’s a tale of two facilitations—one concerning facilitation of trade in services, and the other on multilateral investment facilitation—going to clash with each other at the WTO’s 11th ministerial meeting in Buenos Aires later this year.
In all probability, both will face fierce opposition from African countries as well as some South American countries.
But there is also the other possibility: Given the growing demands for investments with several developing countries, including India, which are currently spending millions of dollars advertising about their investment policies on global television channels, Russia, China, and Brazil with support from the European Union, Japan, Korea, Singapore and several other countries, could tip the scales in favour of investment.
