Services and Investment
Services are crucial to the European Internal Market and to the Japanese economy, accounting for around 80% of EU employment and value added. The EU and Japan already export many services to each other, but EU firms still face hurdles in selling their services on the Japanese market. Correspondingly services represent a key area of discussion in the ongoing FTA, plurilateral and multilateral negotiations.
What is covered?
Many different sectors are covered, eg retail and wholesale trade, construction, business/professional services, real estate, tourism and some entertainment services, transport, network utilities, health and financial services, and government services (public administration and education).
Goods and services are increasingly linked together. Access to services is a prerequisite for economic performance of many manufactured products. For example, producers and exporters of textiles, cars or computers cannot be competitive without access to efficient banking, insurance, accountancy, telecoms or transport systems. And the purchase of many products nowadays often comes with a service component.
The rise of cloud computing means that technical infrastructure, platforms and software are increasingly provided as services on a global basis. What used to be hardware installed at the premises of a company is becoming a service provided cross-border.
Services-related policy developments in the EU
In 2006, the EU adopted the Services Directive (Directive 2006/123/EC) to ensure that both consumers and businesses reap the full benefits of the Internal Market by being able to easily offer and buy services. The Directive facilitates the establishment of a business in a Member State, and it also aims at improving the regulatory environment for service providers who want to supply their services across borders to other Member States, without setting up an establishment there. The Services Directive obliges Member States to cut red-tape, increase transparency for undertakings and service recipients, and eliminate unjustified or disproportionate requirements. It applies to all activities and sectors that are not expressly excluded from its scope of application (e.g. financial services or gambling).
Services-related policies of the European Commission: DG Trade; DG Internal Market, Industry, Entrepreneurship and SMEs (general policy, postal services; tourism, business services); DG Mobility and Transport (air transport, maritime transport); DG Financial Stability, Financial Services and Capital Markets Union (financial services); DG Communications Networks, Content and Technology (telecommunications).
Promoting investment flows between the European and Japanese economies is increasingly at the forefront of the EU-Japan relationship and is currently being discussed in the ongoing FTA negotiations. More investment is of mutual interest. The EU benefits from an open Japanese economy with which European companies can trade smoothly and where they can easily establish branches or subsidiaries to develop their business activities. For Japan, Foreign Direct Investment (FDI) plays a crucial role in boosting its economy.
Investment protection provisions in the FTA will encourage investment by guaranteeing that governments will treat investment between the EU and Japan in line with some basic principles which prohibit:
- expropriation of foreign investments without compensation
- denial of justice to foreign investors in domestic courts
- abusive or arbitrary treatment of EU and Japanese investors in each other's territory.
What is covered?
Free movement of capital is at the heart of the European Single Market and is one of its 'four freedoms'. It enables integrated, open, competitive and efficient European financial markets and services - which bring many advantages to us all. For citizens it means the ability to do many operations abroad, such as opening bank accounts, buying shares in non-domestic companies, investing where the best return is, and purchasing real estate. For companies it principally means being able to invest in and own other European companies and take an active part in their management.
Foreign direct investment is a direct investment into production or business in a country by a company in another country. The EU has long been in the vanguard, promoting investment by European companies and investors into other Member States and third countries, and investment into the EU by third countries. This is in everyone's mutual interest and is all the more important now as the world emerges from the financial crisis and the economic downturn.
As investment is part of the EU’s common commercial policy the European Commission may legislate on investment. Its approach is outlined in its paper "Towards a comprehensive European international investment policy". The EU's investment policy is focused on providing EU investors and investments with market access, legal certainty and a stable, predictable, fair and properly regulated environment in which to conduct their business.
As well as ensuring that its markets are as open as possible to stable, secure and beneficial foreign investment, the EU also looks to promote these principles at a global level through international fora and multilateral agreements; bilateral investment dialogues and trade agreements; and through relations with third country investors, and, in particular, Sovereign Wealth Funds.
Investment-related policies of the European Commission: DG Trade; DG Financial Stability, Financial Services and Capital Markets Union. Destination Europe: The EU Single Market: An attractive destination for Japanese FDI (PDF)