WTO’s IFA

Recently (July 2023) over 110 (it does not include India) of the WTO 164 members concluded text-based negotiations on the Agreement on Investment Facilitation for Development (IFA).

Agreement on Investment Facilitation for Development (IFA)

• The Agreement on Investment Facilitation for Development (IFA) is a WTO-negotiated agreement designed to create a more investor-friendly business environment by simplifying investment procedures and promoting transparency and predictability for foreign direct investment (FDI), particularly in developing and least-developed countries.
• It is meant to create legally binding provisions aimed at facilitating investment flows.
• IFA does not cover areas like market access, investment protection, government procurement, specific subsidies, or investor-state dispute settlement (ISDS).
• In essence, the IFA is not aimed at liberalising investment policies. Its objective is to simplify investment procedures.

Facilitation Vs Promotion

• The difference between investment facilitation and investment promotion is that promotion focuses on presenting a location as an attractive investment destination, while facilitation aims to simplify the process for foreign investors to establish or expand their businesses by addressing practical challenges they may face.

Why Didn’t India Participate ?

• India believes that investment matters are beyond the WTO’s scope and prefers bilateral negotiations for investment provisions.
• India views the IFA as a step by developed nations to introduce investment facilitation in the WTO, potentially followed by contentious investment protection rules later on.
• India opposes plurilateral agreements within the WTO, as they do not follow the consensus decision-making process.
• India is wary of including MFN provisions in the IFA due to past negative experiences, including repercussions faced after including an MFN provision in its Australia Bilateral Investment Treaty (BIT).
• The apprehension that foreign investors could use a future IFA to bring claims under the existing BITs.
• India has terminated its older bilateral investment treaties (BITs) and is in the process of negotiating new agreements based on its 2016 Model BIT text.

Practice Questions for Prelims

Consider the following statements:
1. WTO was formed to overcome the ineffectiveness of IBRD to promote world trade.
2. The World Trade Organization (WTO) was established to implement the final act of Uruguay round agreement of GATT.

Which of the above given statements is/are correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2|

Ans. b)

Mains Practice Question

Discuss the relevance of Agreement on Investment Facilitation for Development (IFA) negotiated by WTO. Also, discuss the relevance of WTO and also suggest suitable reform in its functioning.

Chetan Bharat Learning is the best institute in Chandigarh for UPSC IAS ,PCS preparation. To know more about Chetan Bharat Learning’s Online & Classroom Courses, click on the following links: