Europe is very carefully taking new steps to better arm itself against economic threats. On Wednesday, the European Commission presented a new package of measures that should better protect the traditionally very open European economy against risks resulting from growing geopolitical tensions. Brussels wants, among other things, to strengthen controls on foreign investments in European companies and to better streamline export controls within Europe.
The proposed measures are, among other things, a response to the tug-of-war surrounding the Dutch chip machine maker ASML, which has had to deal with US-enforced export restrictions to China in recent years. And although the latter country is hardly mentioned in the plans, they are clearly intended to better protect the EU against economic threats from that country.
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The EU wants to better protect the European economy. But how far are Member States willing to go?
‘Shopping’
In the future too, the final decision must be taken nationally. But the Commission does want EU countries to discuss their national considerations at European level and also to achieve more European coordination about why or why not. This should, among other things, prevent companies from ‘shopping around’ because the export policy differs per Member State, and they can get out of the restrictions by shipping something from another EU country within the EU.
Trade Commissioner Valdis Dombrovskis spoke on Wednesday of “the risk of a patchwork [..]”, which not only leads to “fragmentation of the internal market” but also exposes countries “to geopolitical pressure.” At the same time, the Latvian emphasized that the final decision-making power still lies with member states. Not all EU countries are still equally keen on European interference in export policy.
This is even more so with the most sensitive part of the package presented on Wednesday: screening how much money European companies invest elsewhere in the world. Last March, Commission President Ursula von der Leyen suggested that he should quickly come up with a proposal, for example to monitor the extent to which European companies were moving crucial production processes to China. But resistance to this is great – not only in the Netherlands, but also in Germany and France. For the time being, the announcement remains that the possible risks of this will be investigated again.
Preventing bureaucracy
Vestager defended the cautious approach on Wednesday. “By doing this step by step, we will not get bogged down in a power struggle with member states, but we can investigate this together.” The Danish also pointed out that she wanted to prevent too much bureaucracy for companies.
More concretely, the proposal is to better screen non-European investments in EU companies to prevent strategic sectors from falling into foreign hands. For example, a European port, in which China is gaining an increasing interest, or a chip company that is unintentionally taken over. Five years ago, the EU decided to monitor such investments, but in recent years it became clear that in practice this was not done sufficiently – in fact not at all by a handful of countries.
The Commission now wants to guarantee that EU countries actually monitor investments and specifically concentrate on sectors where risks are high. EU countries must also look at suspicious investments from another Member State, if there is a suspicion that a non-European actor is actually behind them.
Finally, the Commission also suggests that universities should become more aware of possible theft of strategic knowledge. A new European center should assist universities and research centers in investigating vulnerabilities. The Netherlands is seen as an example: outgoing Minister Robbert Dijkgraaf (Higher Education) is currently preparing a bill that will allow Dutch universities to screen research personnel to guarantee so-called “knowledge security”.
Overall, these are still small steps, focused more on risk screening than on risk mitigation. But for the EU, which has always had open free trade as its starting point, it is a clear shift in emphasis. The European Union, Dombrovskis emphasized, remains open for business. “But improving our economic security will allow us to maintain our open economic model.”