With the 14th Ministerial Conference (MC14) of the World Trade Organization scheduled to be held in Cameroon in March-end, the diplomatic gloves are off and battle lines clearly drawn have been against India for persisting with its two-year-old opposition to the inclusion of the Investment Facilitation Agreement (IFA) in the WTO rulebook as a plurilateral accord.
What is a plurilateral agreement at the WTO, what is the background of the IFA negotiations, who are its main proponents, what are their objectives, and why is India strongly opposing them almost single-handedly? Let us examine these issues.
At the WTO, there are two broad categories of agreements—multilateral ones, to which all its members have to mandatorily subscribe; and plurilateral ones, which only the willing countries, and not the entire WTO membership, sign on.
At this juncture, the WTO comprises 16 multilateral agreements and only two plurilateral accords. Clearly, multilateral agreements are the norm and plurilateral ones the exception.
It is relevant to note that while voting can be resorted to for deciding most issues at the WTO, the call on adding a new plurilateral agreement to the WTO has to be made exclusively by consensus of the entire membership.
Thus, countries that are not parties to a plurilateral agreement also have a say in deciding whether that agreement should be included in the WTO.
IFA Negotiation Background
As regards the IFA, its text is an outcome of an initiative by a group of developed countries (except the US), China, and some other developing countries during the WTO Ministerial Conference held in Bueno Aires in 2017.
Having failed to get a consensus-based negotiating mandate on the issue from the entire WTO membership, the proponents decided to negotiate a text outside the WTO and bring back the final outcome to the WTO for its inclusion as a plurilateral agreement.
Their attempt to add the IFA to the WTO rulebook at the MC13th in 2024 failed, mainly on account of objections by India, South Africa, and Türkiye.
It is no secret that the IFA is mainly a China-led initiative aimed at securing its investments in the countries participating in its Belt and Road Initiative. It should not come as a surprise that China has been active in decisively influencing these countries to join the IFA and support its inclusion in the WTO rulebook.
However, some of the other proponents of the IFA, including the US, appear to be pursuing another objective with far-reaching systemic implications at the WTO. With almost 128 countries supporting the IFA, the developed countries seek to ignore the need for consensus and instead use the weight of numbers to add the IFA as a plurilateral agreement at the WTO.
Why is India persisting in its opposition, despite being overwhelmingly outnumbered by the proponents of investment facilitation? India’s opposition stems mainly from systemic concerns about how negotiations at the WTO will be initiated and concluded if the IFA were allowed to become a part of the organisation at the MC14.
This would create a new paradigm for negotiations among WTO members—abandoning a multilateral consensus-based approach in favour of a cherry-picked plurilateral one, loaded in favour of developed countries.
With the US clearly envisaging the future of the WTO as a forum mainly for plurilateral negotiations, India’s stand on the IFA will determine whether the already weak bargaining position of developing countries will be further eroded. This requires some elaboration.
Changing Negotiating Dynamics
The reality of the WTO negotiating table is that the negotiating agenda and the negotiated outcomes are largely determined by a handful of countries, mainly the rich ones with economic and political heft.
It is only on rare occasions that developing countries such as India have been able to advance their agenda by linking issues of their interest with those of the developed countries.
To illustrate, in 2013-2014 India was able to secure some of its negotiating objectives in respect of food security and public stockholding by linking it with trade facilitation, which was being mainly pushed by the developed countries. If the opportunity for this linkage did not exist, it is unlikely that India would have succeeded on the issue of public stockholding.
How would the negotiating dynamics change if plurilateral negotiations become the norm at the WTO? Given the asymmetry in bargaining power at the negotiating table, rich countries would find it relatively less difficult to pursue issues of their interest in plurilateral negotiations, as amply evident in the IFA.
An argument could be made that even the developing countries can seek to negotiate new agreements on issues of their interest. However, this approach is largely flawed.
If a plurilateral negotiation requires developed countries to make concessions or assume new obligations—say by cutting their agriculture subsidies—they would have the flexibility to not participate in such negotiations.
Consequently, with developed countries opting out of plurilateral agreements on issues of interest to developing countries, these would be largely devoid of substance and practical utility.
Further, as plurilateral negotiations on different issues would proceed independently, the possibility of developing countries enhancing their negotiating leverage through creating linkages between different issues would go missing.
India is likely to be under considerable diplomatic pressure to soften its stand on the IFA. Bending under pressure would create an undesirable precedent, open the doors for new plurilateral agreements, and diminish the possibility of multilateral negotiations.
Consequently, India and most other developing countries would find themselves further marginalised at the WTO.
If India feels compelled to change its approach on the IFA, it must at least ensure that the WTO membership agrees to appropriate guardrails so that future plurilateral negotiations do not undermine the interests of a large number of developing countries and divert attention from core trade issues.
The writer is an international trade expert
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.