Openness to Foreign Direct Investment in Services: An International Comparative Analysis

N ATIONAL policies towards FDI typically feature measures aimed at both attracting and discouraging inflows. Policies to attract FDI such as tax breaks, favourable regulatory treatment and subsidies of various sorts are usually focused on manufacturing. 1 Policies towards services are far more ambivalent. Laws and regulatory practices frequently discriminate against foreign investors in services such as public utilities (electricity distribution and telecommunications in particular), transport (notably air and maritime transport), financial services, and even construction and wholesale/retail distribution. The ambiguous attitudes towards FDI in services are amply illustrated in recent policy actions and debates. The Committee on Foreign Investment in the United States (CFIUS), an inter-agency group that screens foreign direct investment for national security concerns, has recently been in the limelight with several high-profile cases, notably one involving the acquisition of a US port by investors in Dubai. A recent ‘open skies’ aviation agreement between the United States and the European Union was scuttled in part because the United States refused to ease its restriction that all US airlines must be at least 75 per cent owned by US citizens. Japan rejected a takeover offer from the UK-based Children’s Investment Fund in the energy company J-Power. China has been