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Decoding the News - India Blocks Investment Pact at WTO

What's the ongoing story?

On Wednesday, India blocked an attempt by certain WTO members to include the China-inspired Investment Facilitation for Development (IFD) proposal in the development agenda of the 13th Ministerial Conference. This move underscores India’s stance that the IFD is a non-trade issue and falls outside the mandate of the global trade body. South Africa joined India in opposing the inclusion of the IFD in the MC13.

What is 'Investment Facilitation for Development (IFD)'?

  • A WTO Initiative: The IFD is a World Trade Organisation (WTO) initiative launched by a group of developing and least-developed countries.

  • Focus: It aims to create a multilateral framework to improve transparency, efficiency, and predictability in investment regulations worldwide.

  • Goal: To make it easier for businesses to invest across borders, particularly aiming to boost investment flows to developing countries and support their sustainable development objectives.

Key Objectives of the IFD

  • Transparency: Increase the accessibility and clarity of investment-related information such as laws, regulations, and procedures.

  • Efficiency: Reduce administrative burdens, streamline processes, and improve procedural efficiency for investors.

  • Predictability: Create a more stable and predictable environment for investors, reducing uncertainty.

  • Cooperation: Foster international cooperation in investment facilitation, including technical assistance and capacity building for developing countries.

  • Sustainability: Encourage responsible and sustainable investment practices aligned with goals like the UN Sustainable Development Goals.

Why is the IFD Important?

  • Stimulating Development: By attracting increased investment, the IFD helps promote economic growth, job creation, infrastructure development, and technology transfer in developing economies.

  • Fair and Open Investment: Aims to create a more level global playing field for investment, making the process more transparent and less prone to arbitrary or discriminatory actions.

  • Strengthening Multilateralism: The IFD reinforces the role of the WTO and the importance of a rules-based multilateral trading system, especially in the face of rising protectionism.

How the IFD Works

The IFD doesn't impose a "one size fits all" approach. Instead, participants are working on a framework with provisions focused on:

  • Publishing investment-related information

  • Streamlining procedures

  • Enhancing cooperation between government agencies

  • Providing focal points to address investor inquiries

  • Providing support and capacity-building, especially for developing and least-developed countries

Why did South Africa join India?

South Africa joined India in opposing the IFD pact due to concerns that it could limit their policy space in regulating foreign investment. Developing countries like India and South Africa are concerned that the IFD pact could limit their ability to implement policies that they believe are in their national interests, such as protecting domestic industries or promoting sustainable development.

How is India-South Africa Bilateral trade and investment?

India and South Africa have strong economic ties, with bilateral trade exceeding $20 billion annually. Both countries are members of BRICS (Brazil, Russia, India, China, and South Africa) and IBSA (India, Brazil, and South Africa) groupings.

What is the WTO and the Ministerial Conference?

The World Trade Organisation (WTO)

The WTO is an intergovernmental organisation with over 160 member countries, acting as the primary rule-setting body for global trade. Its core functions include:

  • Trade Liberalisation: The WTO negotiates and implements agreements that aim to reduce barriers to international trade, such as tariffs and quotas, promoting the free flow of goods and services.

  • Trade Facilitation: It establishes frameworks and standards for streamlining customs procedures, harmonising technical regulations, and improving transparency to facilitate trade.

  • Dispute Resolution: The WTO provides a robust dispute settlement mechanism, ensuring that member countries adhere to trade agreements and resolving conflicts in a structured and equitable manner.

  • Development Support: Recognising the specific challenges faced by developing countries, the WTO offers technical assistance, capacity-building programs, and tailored support to integrate these countries into the global trading system.

The Ministerial Conference