Wednesday

19th Jun 2019

Macron’s investment screening idea watered down by leaders

EU leaders were divided Friday (24 June) on proposals to protect strategic sectors in Europe by giving the European Commission more powers to screen foreign investments.

French president Emmanuel Macron, supported by Germany and Italy, proposed to have the European Commission examine ways to screen third country investments into strategic sectors in Europe, but failed to gather enough support at his first summit.

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"Fairer trade is preferable than the law of the jungle,” Macron said after the summit at a joint press conference with German chancellor Angela Merkel.

The leaders decided to return to the issue at a later summit, and instead watered down the language in their summit conclusions.

They called on the Commission to “analyse" foreign investments in strategic sectors, while member states would still make the decision on those investments.

European Council chief Donald Tusk said the government and state heads engaged in a "long debate on the balance between openness and protectionism” in trade.

"Europe needs to better protect people from unfair trade practices by introducing more reciprocity,” he said, confirming that the commission will analyse investments if needed.

"We agreed that we would explore a new mechanism, whereby the Commission might screen such investments to ensure that it doesn't have those negative strategic consequences for Europe,” Irish prime minister Leo Varadkar told journalists after the summit on Friday.

But it is unclear how that new analysis mechanism would work in practice.

Trojan horse for protectionism

Sweden, the Netherlands, Malta, Portugal, the Czech Republic, Poland and others raised concerns over Macron's proposal, fearing it would be interpreted as a sign of protectionism in a time when Europe wants to reinforce its trade policy.

Varadkar said “trading nations”, the Nordics and the Benelux countries want to avoid "any effort to use this proposal as a Trojan horse for protectionism".

The measure, however, is mostly aimed at China, although it was not mentioned by name in the conclusions, which has been pushing to buy European high-tech companies and businesses with valuable and unique intellectual property.

In Germany, for example, a recent acquisition of a leading robot-maker Kuka by Chinese firm Midea has caused concern.

EU leaders urged EU institutions to swiftly implement anti-dumping measures, currently still under negotiation, to counter Chinese imports.

They also urged the EU executive to come up with ways to "enhance reciprocity" in public procurement and investment.

"Reciprocity is the right way. If we have, for example, access to public contracts in the United States, then we can say 'yes' to access to public contracts in Europe. But if full access was denied then Europe needed an answer," German chancellor Merkel said on Friday.

Since the election of protectionist US president Donald Trump, the EU has been trying to speed up trade talks, particularly with Japan and Mexico, and emphasise that the bloc is open for business.

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The EU is to screen foreign investments to avoid takeovers in sensitive sectors. But the plan, mainly aimed at China, will raise political and technical difficulties.

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