India and South Africa on Wednesday blocked the passage of a major investment agreement at the World Trade Organization (WTO) conference in Abu Dhabi, potentially scuttling hundreds of billions of dollars in investments — many of them slated for developing countries of the “Global South,” which India frequently claims to champion.
A trade delegate from a Western nation told Reuters it seemed “ironic that India and South Africa stand in the way of something with such manifest benefits for developing countries.”
The “something” in question is the Investment Facilitation for Development Agreement (IFD), introduced at the WTO by Chile and South Korea, with support from China. Depending on how they are implemented, the projects covered by the IFD would be worth between $200 billion and $800 billion.
The WTO has a rule that any of the 164 member nations can block an agreement by filing a formal objection. India and South Africa exercised that option, while 123 of the other members affirmatively supported the IFD.
India filed its objection because it would compromise the “multilateral” nature of the WTO by imposing binding regulations and agreements on all members. Indian officials suggested the nations eager to participate in the IFD could negotiate among themselves and reach an agreement outside the World Trade Organization.
India contends that an agreement such as the IFD must be adopted through a specific set of WTO procedures that would require the unanimous agreement of all members. IFD co-sponsor South Korea seemingly agreed with that point at the Abu Dhabi conference and said WTO leaders are trying to persuade India and South Africa to withdraw their objections.
India also argued that developed nations have a history of making promises to the developing world that they cannot keep, so carefully negotiated multilateral agreements would be preferable to the huge, sweeping IFD proposal advanced by South Korea and Chile.
Less expressly stated was India’s concern that the IFD agreement, which has been rattling around the WTO in various permutations since 2017, is a power play by China and its client states in the Belt and Road Initiative (BRI). Indian media often refer to the agreement as “China’s IFD.”
Mint noted on Thursday that the IFD has been criticized for “potentially favoring countries heavily reliant on Chinese investments and those with sovereign wealth funds.”
South Africa did not comment on its reasons for blocking the IFD, beyond agreeing with India’s procedural objections.
