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Bilateral investment dialogues and trade agreements

Overview

On a bilateral level, the EU is committed to the use of investment dialogues and trade agreements to ensure open investment. 

Investment dialogues allow both sides to raise concerns about investment conditions in the other country and to discuss issues of mutual concern, with a view to promoting investment.  The EU launched an investment dialogue with the United States in 2007 and is committed to similar dialogues with other key partners.

The EU has negotiated and continues to negotiate several bilateral trade agreements.  These agreements contain chapters on capital movements and payments, with provisions ensuring that payments operations remain unrestricted; that transactions related to direct investment remain free of restrictions; and that temporary safeguard measures are only possible in the case of serious difficulties for the operation of monetary and exchange rate policy.

Currently the Commission is negotiating several bilateral trade agreements to which both the EU and Member States are parties.

Their provisions usually contain chapters on establishment and services.  They also contain a chapter on capital movements and payments.

The agreements typically consist of the following provisions:

  • A provision to ensure that payment operations remain unrestricted
  • A provision ensuring that transactions related to direct investment made in accordance with the host country or in accordance with the provisions of the respective agreement remain free of restrictions.
  • A clause allowing for time-limited safeguard measures in case of serious difficulties for the operation of monetary and exchange rate policy; and
  • In some cases, there is a standstill clause.

After entering into force of the Lisbon Treaty, the EU has exclusive competence on foreign direct investment (Article 207 TFEU). This will allow the EU in the future to conclude comprehensive investment agreements, while, until now, agreements on investment protection were concluded only bilaterally by individual Member States.

On 7 July 2010 the Commission adopted a Communication "Towards a comprehensive European international investment policypdf" which outlines the Commission's approach to future agreements.

The replacement of Bilateral Investment Treaties (BITs) between Member States and third countries by EU agreements will be a long term process and require a transition regime. On 7 July 2010 the Commission adopted a proposal for a Regulation establishing transitional arrangements for bilateral investment agreements between Member States and third countriespdf. The Regulation proposal is currently in ordinary legislative procedure. It shall, inter alia, empower Member States to amend BITs in order to remove incompatibilities with EU law.

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 Free Trade Agreements (FTA)

Free Trade Agreements provide for market access and liberalisation of services going beyond GATS. In accordance with negotiation mandates, FTAs strive for liberalisation of capital movements while providing for necessary safeguard clauses.

Currently the EU is negotiating many FTAs, in particular with Canada, India, Singapore, Malaysia, Colombia/Peru, Mercosur and Central America. An agreement with South Korea has been signed. Negotiations with the Gulf Cooperation Council (GCC) and other ASEAN countries are currently on hold.

 Partnership and Cooperation Agreements (PCA)

A new Partnership and Cooperation Agreement with China is under negotiation.  Negotiations have started with Russia on an update of the existing PCA.

 European Neighbourhood Policy (ENP)

The ENP Policy offers the EU neighbours a privileged relationship.  It includes elements of economic integration, as well as support for reforms to stimulate economic and social development.  It is currently based on Partnership and Cooperation Agreements with Eastern European countries and Association Agreements with Mediterranean countries (Euromed), and commonly agreed Action Plans to achieve these reforms. The Action Plans include, among others, the objective of facilitating establishment of companies and foreign direct investment, and also set the aim to gradually liberalise capital movements.

A new deep and comprehensive agreement is currently being negotiated with Ukraine. Other neighbourhood countries may follow.

The Euromed Association Agreements are also gradually to be turned into deep and comprehensive FTAs.

 Economic Partnership Agreements (EPA)

Economic Partnership Agreements (EPA) are promoting trade between the EU and African, Caribbean and Pacific group of countries. They are driven by development policy and are less ambitious with regard to capital movements. An EPA with Cariforum has been concluded recently. EPAs are also being negotiated with Central African and West African states.

For more details on this, together with details on current progress on bilateral trade discussions, see the European Commission's dedicated website.