Investment Agreement in International Trade Law in Relation to Developing Country

Unlike the developed country, investment agreement in international trade law in relation to developing country applied quite differently. Not to mention some supervision needed in order to minimize any negative impact for certain countries. 

Background – TRIMs
World Trade Organization (WTO) issues a law that contains provisions regarding the international trade called Trade-Related Investment Measures (TRIMs). The basic principle of TRIMs is regulating investment activities particularly in developing countries, and it has the standpoint of development facility to achieve economic growth rate for the developing countries. 

The law and regulation are applied in order to prevent foreign investment negative impact to the recipient countries as the lawmakers have been made aware of the dispute between the recipient countries and the locals in the developing countries. Furthermore, TRIMs also detects some political negative impact on the investment agreement in international trade law in relation to developing country including the multinational enterprises (MNE) that can control the local companies due to foreign investment.

Limitation on the developing country’s business activity scope of the large corporations is to be applied, as they cannot invest in all sectors in an extravagant manner. The limitation also includes supervision on foreign investment monitoring, investment efforts, and investment requirements. By applying such requirements, TRIMs is expected to regulate the flow of foreign investment to meet the development countries’ objectives.

Other objectives of TRIMs controlling the investment agreement in international trade law in relation to developing country include:
1. Imposing requirements by the recipient countries.
2. Prevent foreign investors to make policy based on the cross-border nature.
3. Prevent foreign investors to control the policy or economy of the recipient countries.

Nevertheless, some developing countries also see TRIMs as a policy of the independent country to govern their own foreign investment and prevent the negative impact of the investment.

Regarding the laws and regulations, the foreign investors commonly see it as a barrier to world trade activity and a hindrance to the global competition trading strategy. It is, however, giving greater chances for the developing countries to fulfill their investment goal.

S&D Treatment in The Multilateral Trading System
Special and differential treatment (S&D), which previously counterfeit in the Multilateral Trading System (MTS) has now taken its role in the trade negotiations as well as investment agreement in the developing countries.

The main objectives of S&D are to build economic equality and allowing developing countries to access the market by rebalancing the law of sovereign equality. The S&D also aims to implement equal treatment to formally accommodate the flexibilities and preferences to apply trading and economic agreement that is adjusted to the countries’ capability.

S&D includes a wider notion that provides preferential treatment for investment to achieve the development goals. The regulation gives easiness for the least developing countries that based on the mutual benefits, offering assistance to the LDC in the regional cooperation to improve the number of developments through valuable investment.

In terms of investment agreement in international trade law in relation to developing country, S&D also implement temporary suspension and special transition period for countries to address their developmental needs. In the MTS, S&D treatment rises, stating that allow states to have different responsibilities within an agreement to promote balanced development.

Source: BP Lawyers