Admission And Establishment.docx

Admission and Establishment I.

The Move Towards Economic Liberalism

In the late 1980s there was a growing international consensus that economic liberalism promised more growth and innovation than economic protectionism within closed national or regional borders. A now famous paper by ] Williamson provided a list of conditions for successful economic growth, which eventually came to be known as the ‘Washington Consensus’.1 The 1980s were considered, from a development perspective, as the ‘lost decade’ in Latin America and Africa, which led to more poverty, economic stagnation, and fiscal disorder, mainly due to inward-looking, non competitive economic policies and a lack of domestic reforms. The comparison of empirical economic data, more than ideological factors, between countries with growth (mainly in Asia) and stagnant regions pointed to economic liberalization and domestic reforms as the main driving forces of growth. The lack of support for Third World countries by the Soviet Union and its eventual collapse lent further support to this movement. Ultimately, the retreat of ‘bureaucrats in business’ and the move towards privatization were prompted in developing countries by the reality of insufficient services for the population, by fiscal disorder, and by the compelling need for foreign capital and technology. The Washington Consensus has had a strong influence on international economic policies, even though it has also become clear that economic reforms need to be complemented by social and environmental policies. In current practice, the Washington Consensus is reinforced by acute competition among capital importing states for foreign investment. Nevertheless, national policies are far from uniform in this area, and even liberal countries, such as the United States, have by no means totally opened up their economies. More recently, the global trends in national policy developments do not point in one direction. Whereas most states (mainly in Asia and Africa) have, since 2000, introduced measures with the aim of liberalizing the regime of foreign investment, others (mainly in Latin America) have adopted new regulations and restrictions. From the perspective of general international law, states are in no way compelled to admit foreign investment. The economic dimension of territorial sovereignty continues to confer the right on each government to decide whether to close the national economy to foreign investors or whether to open it up, fully or with respect to certain sectors. This includes the right to determine the modalities for admission and establishment of foreign

investors. Among the national considerations speaking against full liberalization are the concerns of weak domestic industries being ‘crowded out’, and the social effects of rapid economic change. In addition, there are moral, health, and environmental concerns and a growing agenda of national security. Also, views differ as to whether it is useful to conclude treaties providing for guarantees towards liberalization or whether the flexibility inherent in domestic legislation subject to continuous review may provide more benefits for the national economy of the host state. In any event, governments negotiating investment treaties must be aware that binding commitments on admission and establishment create lasting obligations, even when economic circumstances have changed.