EU Screening of Foreign Direct Investment Meets Resistance

September 18, 2017 Investments

A sharp increase in Chinese foreign direct investment (FDI) into Europe over the past couple of years has fueled concerns that the European Union could be selling out technological know-how or strategic assets. In comparison, the Chinese market is far more restrictive to outside investment, and talks on an investment treaty between Brussels and Beijing have been unsuccessful.

The European Union’s plans for tougher screening of Chinese takeovers and other foreign direct investment has been met with resistance from with some trade ministers, saying that they will achieve little except to provoke investors in China, India, and the United States. The European Commission’s plan, which seeks to improve coordination between countries – and give Brussels a say on takeovers, could easily do more harm to foreign investment than good.

Brussels has argued that the new initiative would bring Europe into line with major trading partners, including the United States, that already have arrangements in place to vet foreign takeovers in the interest in national security. The EU parliament has previously called for even bolder measures to create a centralised EU version of the U.S. Committee on Foreign Investment.

The new plans would require all countries in the EU to set up contact points so governments can notify each other of sensitive takeovers, thereby providing a vehicle for capitals and Brussels to apply pressure if they fear an acquisition could harm the EU’s interests. The EU plans will need backing from the European Parliament and from a weighted majority of member states if they are to become law.

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