Opening Remarks to the OECD-UNCTAD Global Forum on International Investment
Assistant Secretary, Bureau of Economic, Energy and Business Affairs
Secretary General Gurria, Secretary General Supachai, Ministers, Ambassadors, Colleagues, I am pleased and honored to participate in the Eighth Global Forum on International Investment as my first public activity as the Assistant Secretary of State for Economic, Energy and Business Affairs. Here the world’s leading experts among major stakeholders discuss the most pressing issues on the international investment agenda with senior government officials, particularly how to advance the contribution that international investment makes to economic growth and sustainable development.
Before beginning my remarks, I want to thank Secretary General Gurria and Secretary General Supachai for assembling an agenda that focuses on the critical issues that need to be addressed as we seek to sustain and expand our economic recovery. The OECD and UNCTAD are the two international organizations that have contributed the most to our understanding of emerging investment issues. They have led multilateral efforts to encourage the domestic policies and practices which can allow our countries to realize the enormous contribution that international investment can make to global growth and development. We all benefit from collaboration between OECD and UNCTAD in support of open investment policies. We also benefit from collaboration among the OECD, UNCTAD, and WTO in reporting on Investment Measures in relation to the G-20 pledges to avoid protectionism and promote international capital flows. Going forward, I believe that continuing this collaboration, especially between OECD and UNCTAD, will be critical for us to meet present and future challenges.
But maintaining our vigilance against protectionism is only part of the formula for restoring growth to the global economy. The United States has a significant stake, as both the world's largest source and recipient of foreign direct investment, in working with our economic partners to implement policies that facilitate global investment flows. Maintaining investment flows is critical to our economic prosperity; statistics show that the rapid decline in international investment in the wake of the crisis contributed significantly to the depth of the economic slowdown. Correspondingly, sustaining and expanding international investment flows is the key to economic recovery. Many of us are now experiencing unacceptable levels of unemployment and foreign investment will be one of the most important drivers for the creation of new jobs.
President Obama has repeatedly called for policies that promote the development of innovative technologies and the creation of new jobs to support a transformed global economy. Success will be heavily influenced by our steadfast commitment to open investment policies in both the short and long term. This transition to a more sustainable economy will also present us with new challenges and opportunities, given the role that international capital flows must play in response to global issues like climate change and the development of green technologies.
As we seek to revitalize positive trends in international investment that the crisis temporarily stalled, we must recognize the importance of new dynamics in international investment. One of the most significant of these is the growing role of emerging economies as major sources of foreign investment. Another is the increase of investment flows among and between developing and emerging economies. These developments present opportunities for dialogue on policies to continue supporting the expansion of international investment and the contribution it makes to global growth and development.
The OECD’s Freedom of Investment Roundtable, and UNCTAD’s efforts to foster this dialogue are making a valuable contribution. The United States is complementing these multilateral efforts with high-level bilateral policy dialogues on open investment principles with major emerging economies, including bilateral investment treaty negotiations with China, India, and Vietnam, and exploratory investment talks with Brazil and Russia. Broadening acceptance of open international investment policies as the foundation of economic growth and job creation will continue to be a major component of U.S. diplomatic engagement.
Currently there are some 2,500 bilateral investment treaties and other agreements in existence. The qualitatively different degrees of investor protections, investment promotion, and, in some cases, market access commitments, may raise important issues of coherence. These may be particularly challenging for developing countries, but also are of concern to the rest of us. The United States supports the work underway at the OECD and UNCTAD to better understand these complex issues.
I want to stress that these various questions and challenges should not become the basis for undermining the important role that these agreements play in supporting international investment flows. And recent actions by some governments to terminate or withdraw from existing agreements -- which raise questions about their willingness to abide by their international obligations with respect to dispute settlement procedures under these agreements -- will not improve their prospects for attracting international investment critical to their economic development. Increasing capitol flows across international borders will require that investors feel secure about the host country’s willingness to abide by their contractual obligations, including dispute settlement mechanisms.
Finally, while it is vital to continue to promote the advantages of open investment policies and to expand adherence to them, we must also ensure that relationships that have served as the foundation of post World War II economic growth are maintained. In this regard, the United States warmly welcomes the entry into force of the Lisbon Treaty and the positive changes that we expect to follow.
The investment relationship between the United States and Europe is long-standing, deep, and reciprocal. The bilateral stock of investment between our two economies exceeds $3 trillion and is the foundation of the transatlantic economy. That relationship has been founded on shared values and commitments in the OECD and other institutions, as well as bilateral commitments with individual governments. We look forward to working with the new European leaders, the Commission and the Member States to ensure that our relationship continues to be a vibrant and positive force for transatlantic economic growth. That is the reason why I’m here less than a week into my job.
In closing, let me leave you with one thought. For many years, investment policy has been linked in most minds to trade policy. However, over the last quarter century the relationship between trade and investment has changed dramatically with the exponential increase in international investment flows. This has changed how our companies compete on the global stage and contribute to economic progress at home and abroad. Inward investment is important to domestic job creation and outward investment draws exports from affiliates in the home country. During the recent financial and economic crisis, global investment flows declined by a significant rate, while trade flows remained by comparison relatively constant. Most economists would agree that this decline in investment flows contributed significantly to the depth and length of the crisis.
Investment now drives trade, innovation, and ultimately economic development.
We need to reflect seriously on these changes. Perhaps it’s time we recognize that investment policy needs to emerge from the shadow of trade policy and deserves the same level of attention which we have in the past given to trade, finance, and development.