The Foreign Investment Debate: Opening Markets Abroad or Closing Markets at Home?

By Cynthia A. Beltz | Go to book overview
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APPENDIX B
Provisions in
Existing Multilateral Instruments with
Significant Impact on FDI

1) World Trade Organization (WTO) Instruments

General Agreement on Trade in Services (GATS). The GATS covers investments in the form of "commercial presence" for the purpose of supplying a service. The benefits of GATS are granted, inter alia, to "service suppliers" of another Member. Investment as such is protected to the extent that the service supplier is more than 50 percent owned or controlled by a natural or legal person of another Member. The GATS is the only agreement containing substantial obligations on FDI with potential worldwide coverage (over 100 signatories up to now). It covers all service sectors and its obligations extend to establishment and subsequent operations of the service suppliers of other Members. However, negotiations on important service sectors (financial services, basic telecommunications, maritime transport) are still continuing. Monopolies, government procurement, and subsidies are also covered, but specific disciplines still need to be negotiated.

The central obligations of the GATS are to accord most favored nation treatment for market access (exceptions possible) and national treatment (subject to limitations set out in each Member's schedule of commitments).

The GATS extends obligations to subnational measures, although exceptions regarding state or provincial measures can be inscribed in the schedule. The GATS requires Members to make transparent the measures relating to trade in services. The Agreement provides for compensation in case a liberalization commitment is withdrawn.

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