The third Vi study visit organized for students from core Spanish member, the University of Barcelona (UB), February 19, counted with the participation of 28 students of UB’s International Economic Law and Policy (IELPO) Master's programme.
More than doubling the attendance of last year’s tour, the students come from 25 countries in Europe, Latin America, Africa and Asia; five of them from Vi member universities(*) in China, Ethiopia, the Russian Federation, Vietnam and the West Indies, who received scholarships from the Patronat Catalunya Mónand and UB,to study in IELPO.
During the first session of the programme, Hamed El-Kady, of UNCTAD's Division on Investment and Enterprise, introduced the increasingly complex legal regime for foreign direct investment, which today consists of more than 3,200 treaties aiming to promote and protect investment, but lacks a binding international investment system such as the one governing trade.
“In the absence of a coherent system and a global body that governs investments internationally, the countries fast-track to bilateral agreements on an individual basis,” El-Kady said. “These treaties are often drafted too generally in order to provide maximum protection for investors abroad, which can, however, create problems for the host country by limiting economic growth.”
The proliferation of International Investment Agreements (IIAs) at bilateral, regional and interregional levels has resulted in multiple overlapping of IIAs and complex investment rules, he added.
“Developing countries need a strategic vision on how to use foreign direct investment before binding their hands with hundreds of treaties,” El-Kady affirmed.
Along with the increase in the number of IIAs came an increase in investor-State dispute settlements (46 new cases were initiated in 2011), challenging scarce developing-country human resources available to negotiate suitable investment agreements or manage investment disputes, which can have a negative impact on their reputation as investment locations.
“As a result, a new generation of foreign investment policies is emerging, one that makes of inclusive growth and sustainable development its core principles,” El-Kady said, presenting UNCTAD’s Investment Policy Framework for Sustainable Development (IPFSD) as a guide for investment policymaking.
“When committing to a legally binding treaty at the international level, it should always respond to the national vision and serve the nation’s needs. Treaties should not be created in a vacuum,” he concluded.
The second training session, delivered by Rashmi Banga, of UNCTAD's Division on Globalization and Development Strategies, was dedicated to global value chains (GVCs) and their role in economic development.
“Participation in global or regional value chains increases a country’s cost competitiveness, as witnessed in particular by the rapid expansion of Asian production networks since the mid-1980s However, GVCs only matter to those countries which are linked to them in a gainful manner,” Banga said, referring to those that export finished goods with more value addition rather than raw materials.
France, the UK, the US, Japan and Germany remain at the highest end of GVCs because they have high domestic value added in exports, whereas the least developed and low-income countries, as well as Brazil, South Africa and Russia, which have a large share of raw materials in their exports, remain at the lowest end of GVCs, she explained.
An option for developing countries may lie in linking to regional supply chains (RSCs), which are more beneficialto developing countries, as the entire rent from exports is distributed between the countries within the region, and the governance of value chains is easier than in geographically wider spread GVCs. RSCs also present a potential for higher export diversification and climbing up the value chains, and can therefore benefit the region by increasing its competitiveness and its attractiveness to investors.
But “(i)n order to add value for the country in either one of the supply chains, we need to rethink and readjust the industrial and trade policies by identifying the sectors which have the potential capability to link and by encouraging regional integration,” she concluded.
After each of the presentations, the students engaged the presenter in discussions. These related to the impact of bilateral investment treaties (BITs) on Argentina and Egypt; renegotiating and modernizing existing treaties; rules of origin related to regional supply chains; China’s domestic value added in exports, and success stories in climbing the value added chain. In addition, the possibilities and difficulties of creating a first global multilateral agreement on investment were discussed.
The students from Vi member universities said that while studying in the IELPO programme was really demanding, they appreciated the variety and high calibre of the programme's lecturers who included not only academics but also practitioners. All of them intended to pursue their careers in the trade and trade law area, be it in academia (the lecturer from Ethiopia), the government (students from the Russian Federation and Vietnam) or the private sector (the student from China).
(*) Shanghai University of Finance and Economics, Addis Ababa University, St. Petersburg State University, Diplomatic Academy of Vietnam, and the University of the West Indies.