Ensuring foreign direct investment does not harm Europe's interests 

 
 
International investment directly supports 7.6 million jobs in the EU ©AP Images/European Union-EP 

MEPs are currently assessing a proposal to establish a legal framework for screening foreign direct investment in the EU.

Responsible for 36% of the wealth generated in the EU and for 7.6 million jobs, international investment is an important source of growth for the EU economy. In 2016, the EU received €280 billion in foreign direct investment with Switzerland (€55 billion) and the United States (€54 billion) the leading investors.

 

Foreign direct investment was especially important for countries struggling during the latest financial crisis. Yet recent takeovers by foreign, state-owned companies of critical energy and transport infrastructure and hi-tech companies have been a cause for concern, and EU governments are especially worried about having critical infrastructure in the hands of emerging powers such as China and Russia.

 

Screening of foreign direct investment

 

There are currently 12 EU countries with mechanisms in place to evaluate the potential risks of foreign direct investment (these are Austria, France, Germany, Italy, Latvia, Finland, Lithuania, Luxembourg, Poland, Portugal, Spain and the United Kingdom). Trade partners such as Australia, China, Japan, Russia and the United States also perform similar assessments.

 

Following calls from both the Parliament and national governments to investigate the issue, the European Commission presented a proposal last September on establishing a legal framework for screening foreign direct investment in the EU and preventing the Union’s technological edge and security from being put at risk.

The Commission proposal includes a cooperation mechanism between the Commission and EU governments on how to deal with cases where a specific foreign investment in one member state may affect the security or public order of another. The proposal aims to ensure more transparency in the takeover process, and the Commission would also be able to screen investments that could impact EU programmes such as Horizon 2020 and Galileo.

 

What is Parliament’s view?

 

MEPs are currently evaluating the Commission proposals. Addressing a meeting with EU trade commissioner Cecilia Malmström on 23 January, French EPP member Franck Proust said, “Our interdependence requires us to see the bigger picture. The acquisition of a company may have security repercussions on the other side of Europe. We should at least exchange information.” The author of the international trade committee’s report on the matter added that we must “use previous experiences to create a mechanism that is balanced, proportional and effective”.  

 

Most MEPs at the meeting on 23 January welcomed the proposal and the exchange of information on foreign investments, but there were some concerns about the scope and criteria of the mechanism, including the definition of what can be deemed a risk for security. Some MEPs also voiced concerns over Chinese and Russian takeovers and, in order to ensure reciprocity, they called for the removal of barriers to EU investment in both countries.

 

Want to learn more? Read our briefing on the EU framework and find out what the Parliament is doing to address the challenges and opportunities of globalisation.