Dual goods and direct investment, EU’s anti-China and anti-Russia crackdown

Brussels – Greater preventive scrutiny of potential buyers and sellers. The European Union, in the name of its security—economic and otherwise—revises its strategy toward third countries. The EU Commission launches proposals to amend the rules governing foreign direct investment and the sale of all civilian products that can be used for military purposes. A change of course that for Europe implies the “US model,” which before selling certain technologies wants to know what is intended to be done with them.

Foreign direct investment concerns China, so-called “dual” technologies (civilian-military employment) mainly concern Russia and how much they could reuse “made in EU” products to support the Kremlin. After all, the communication addressed to member states points out that “new risks to economic security are emerging as a result of rising geopolitical tensions, geo-economic fragmentation, and profound technological changes.” Trade Commissioner Valdis Dombrovskis puts it more explicitly. “We must control the export of sensitive products to prevent them from falling into the wrong hands.”

So, here is the proposed revision of the Foreign Direct Investment Regulation, a much-needed though probably belated initiative. China already controls critical European infrastructure such as ports, thus exerting pressure on the Twenty-seven bloc, posing security challenges. A situation due to missing all-European attention.

The commission, through the proposed regulation, intends to ensure that all member states have a control mechanism and a harmonization of different national rules to make cooperation with other member states and the commission more effective and efficient. Not only that. Each member state will have to identify a minimum sectoral scope to be kept under control, with the possibility for governments to remain free in their choices for anything not on the essential list, depending on their national security interests. Moreover, the commission intends to stretch the scope of EU screening to cover transactions within the EU, where the direct investor is ultimately owned by individuals or entities from a non-EU country. For the export of sensitive goods, the Commission puts on the table a white book, a non-legislative but preparatory document. A recommendation to states is announced “by the summer.” Meanwhile, the EU executive is proposing to introduce uniform EU controls on those items that have not been adopted by multilateral export control regimes due to blocking by some members. “This would avoid a patchwork of national approaches,” stresses the commission, which also proposes to create a forum for policy coordination, which would enable discussions between the commission and member states at an appropriate senior level to promote common EU positions on export controls.