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Public
FTAA.soc/civ/126/Add.1
March 2, 2004
Original: English - Spanish
Translation: non FTAA Secretariat
FTAA -
COMMITTEE OF GOVERNMENT REPRESENTATIVES ON THE PARTICIPATION OF
CIVIL SOCIETY
CONTRIBUTION IN RESPONSE TO THE OPEN AND ONGOING INVITATION
- EXECUTIVE SUMMARY
| Name(s) |
Laura Páez,
Trade and Development Analyst |
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Organization(s) |
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Country |
Venezuela |
FTAA ENTITIES (Please check the FTAA
Entity(ies) addressed in the contribution)
| Negotiating Group on
Agriculture |
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Committee of Government
Representatives on the Participation of Civil Society |
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| Negotiating Group on
Competition Policy |
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Consultative Group on Smaller
Economies |
X |
| Negotiating Group on
Dispute Settlement |
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Technical Committee on Institutional
Issues (general and institutional aspects of the FTAA Agreement) |
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| Negotiation Group on
Government Procurement |
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FTAA Process (check if the
contribution is of relevance to all the entities) |
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| Negotiating Group on
Intellectual Property |
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| Negotiating Group on
Investment |
X |
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| Negotiating Group on
Market Access |
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| Negotiating Group on
Services |
X |
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| Negotiating Group on
Subsidies, Antidumping and Countervailing Rights |
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ABSTRACT
The following paper analyses possible legal and economic arguments
supporting the inclusion of an investment chapter in the Free Trade Area
of the Americas (FTAA), which is currently on the negotiating agenda. In
particular, by looking at some of the former integration efforts and their
contribution to investment protection, it draw lessons from these previous
experiences, in an attempt to determine what could realistically be
expected from the FTAA. Further, provisions in existing FTAs are compared
with the FTAA proposal on investment, in order to determine if the latter
will either congest or genuinely enhance investment protection.
From a legal perspective, the cross-comparison of existing agreements
reveals that the FTAA investment chapter could have the positive effect of
raising protection and harmonizing treatment in the region. However, the
economic rationale for the FTAA fostering investments is not so strong.
Existing FTAs with investment provisions have promoted trade rather than
investments, as the empirical analysis reveals.
In the particular case of Andean countries, evidence on substitution is
found, where sourcing countries prefer to trade rather than invest. This
means that the FTAA is likely to promote trade rather than investments in
that region, as the previous experiences with the Andean Community of
Nations (CAN), NAFTA and the Group of 3 suggests. Therefore, despite the
inclusion of an investment chapter in the FTAA and its positive effect of
raising legal certainty, FDI is not expected to increase as a result of
higher protection.
Therefore, if countries are to benefit from the spillovers of greater
capital flows they must focus on economic policy design in the FTAA
context. In the light of the unsatisfactory reforms in South America, the
negotiation outcome of the investment chapter will greatly determine the
extent to which members may define their policy and development
strategies.
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