22 July 2009 - The OECD Council has released a report and annexes updating the 30 OECD countries' positions under the legally binding OECD Codes of Liberalisation of Capital Movements and of Current Invisible Operations, as well as the companion OECD National Treatment instrument.
Under these liberalisation codes, OECD members progressively liberalise foreign direct investment, other capital movements and international services, notify any new measures having a bearing on the instruments, and undertake not to introduce new restrictions (often referred to as standstill). Reservations they have lodged regarding operations which they were in a position to liberalise must be eliminated when the underlying restrictions no longer apply so as to ensure that the status quo can only evolve in the direction of liberalisation – this is what produces the so-called "ratchet-effect" of the Codes.
The results of this update are good news overall:
13 countries have eased restrictions on FDI in one aspect or another, and 4 have liberalised certain cross-border services since the last update 5 years ago
a number of countries have entered new reservations, either because the scope of application of the Codes has been clarified in the course of the update or because some long-standing restrictions had been inadvertently omitted. But in none of these cases has there been a material breach of standstill
with the exception of Iceland, no members have returned to exchange controls in response to the financial crisis. Restrictions to capital movements which remained in certain countries (Korea, Mexico) have now been all eliminated
At the same time, 6 members have taken measures to clarify or enforce national security reviews of foreign investments. The Recommendation recently adopted by Council on Guidelines for Recipient Country Investment Policies relating to National Security has been designed precisely to avoid that national security measures be misused for disguised protectionist purposes. Also, in this current juncture of financial turmoil, countries' willingness to undertake further liberalisation commitments in the area of foreign establishment and cross-border trade in financial services has diminished.
The timing of this update was decided in 2007 following the launch of discussions for accession to OECD membership with 5 candidate countries and the desire of members to set an example in regard to transparency and observance of their obligations under the OECD investment instruments. This work has gained even further relevance in light of commitments to standstill reiterated by members at G20 summits and the 2009 OECD Ministerial meeting.
For further information, contact Pierre Poret, Head of the OECD Investment Division
(tel. + 33 1 45 24 88 56).
Report and annexes