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 adopted a proposal on 14 February to establish a legal framework for screening foreign direct investment in the EU.

The new EU-wide screening mechanism enables the European Commission and EU governments to cooperate in cases where a specific foreign investment in one member state may affect the security or public order of another.

The aim is to ensure that foreign investment does not pose a threat to critical infrastructure or allow access to sensitive information or key technologies, while keeping the EU open for investment.

“This mechanism is a symbol of Europeans becoming aware that the world isn’t just full of investors who are full of good intentions,” said French EPP member Franck Proust, the MEP in charge of steering the plans through Parliament, said during the plenary debate.

“Now we can say where we are going - towards a Europe that stands for its interests and defends them,” he added.

The pros and cons of foreign investment

International investment is an important source of growth and jobs for the EU economy. At the end of 2017 total foreign direct investment in the EU amounted to €6.3 trillion, with the United States (€2.2 trillion) and Switzerland (€800 billion) being 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.

EU governments are especially worried about having critical infrastructure in the hands of powers such as China and Russia.

Screening of foreign direct investment

Half of EU countries now have mechanisms in place to evaluate the potential risks of foreign direct investment. Trade partners such as Australia, China, Japan, Russia and the United States also carry out similar assessments.

The systems vary widely and so far countries have not coordinated their approaches even where investments might affect other countries.

The new EU rules do not seek to harmonise national screening mechanisms, but to boost cooperation and the exchange of information between EU countries and the Commission.

EU and globalisation

These new rules are part of the EU's trade policy to make use of the opportunities created by globalisation. It also uses trade agreements and trade defence instruments. In May 2018, MEPs approved rules to strengthen the EU's anti-dumping policy.

Find out more on the EU’s positions in world trade with our infographic.