India’s WTO resistance risks slowing investment in developing nations

Orlando, Florida: Not all WTO travails can be traced to the US' shortsighted opposition to the rules-based multilateral trading system. There's also India. While the US has done its best to undermine WTO through chaotic unilateral trade actions and scofflaw trade tactics, India, despite presenting itself as a stalwart supporter of the institution, is stonewalling reforms that would make it more responsive to the trade challenges of the 21st c.

Most prominently, India's blocking the adoption of Investment Facilitation for Development Agreement (IFDA), a   plurilateral agreement among 131 WTO members, including 94 developing countries. Now that Turkiye and South Africa have withdrawn their opposition, India stands alone in preventing the agreement from becoming part of the WTO rulebook.

Under a plurilateral agreement, some, but not all, of the member countries can agree to improvements while permitting the rest of the members to accept the new rules and obligations later when and if they choose to do so. India refuses to join other WTO members in a consensus to add new plurilateral agreements to the WTO rulebook.


What is the price the world - especially the developing world - is paying for India's continued intransigence against IFDA? Last month, Unctad released its annual World Investment Report 2026. The good news is that, after 2 yrs of decline, FDI investment increased 6% in 2025 to $1.6 tn.

The worrying news is that while FDI flows rose by 11% to developed countries, they rose by only 2% to developing countries. Least-developed and lower-middle-income countries received only 10% of global greenfield project investments. Many of these countries in dire need of much more FDI are parties to IFDA.

Why is India blocking this agreement? So far as anyone can tell, it has no significant substantive opposition to IFDA. The agreement doesn't include provisions on market access, investment protection or investor-dispute settlement. It is, after all, mainly about cutting red tape that impedes FDI.

On that front, India's record is commendable. Domestically, India has eliminated a lot of investment red tape. Instead, Indian opposition to IFDA is predicated on its professed apprehension that adding more plurilateral agreements to the WTO treaty will ultimately fragment the WTO-based trading system.

But there are several plurilateral agreements in the WTO rulebook. And such fragmentation need not happen if, as usually happens, more members add their signatures over time to the existing plurilateral agreements. In other words, these agreements can be building blocks for multilateral agreements. Indeed, several plurilateral trade agreements that preceded establishment of WTO in 1995 - on dumping, subsidies, standards and more - were transformed into fully multilateral agreements in the WTO treaty.

India sees itself as a champion of the world's poorer countries. It shouldn't stand in the way of their economic progress by blocking adoption of a WTO agreement that would provide those countries with more FDI.

India's insistence that new WTO rules must begin with full-blown multilateralism is not preserving the trading system. Indeed, it is having the ironic effect of making WTO less central to the global economy. Its outright refusal to endorse plurilateral approaches to dealing with new trade issues in WTO is forcing other member countries to look for trade solutions outside WTO, creating the very fragmentation in trade that India fears.

Meanwhile, FDI to developing countries is slower than it ought to be. With its long history of fighting poverty at home and elsewhere in the world, India should be helping lead the way toward encouraging more FDI in poorer countries by removing needless obstacles to it. It should not be adding to those obstacles through a misguided policy of intransigence against much-needed new global investment rules that will help reduce poverty worldwide.

The writer is distinguished university professor of global affairs, University of Central Florida, US