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International Last Updated: Feb 6, 2024 - 2:52:50 PM


Setback for the transatlanticists
By German Foreign Policy, 25 Jan2024
Feb 1, 2024 - 2:53:05 PM

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EU Commission unable to push through the controls on European corporate investment in China demanded by the US. Strong objections voiced by German industry.

European Commission President Ursula von der Leyen and German Economics Minister Robert Habeck have failed in their attempt to introduce the investment controls into EU legislation demanded by the United States. Both politicians campaigned last year for regulations to screen, control and, if necessary, ban investments by EU companies in specified third countries, above all China. Washington adopted such rules last year and urged its allies to do the same. The European Commission has now come up with watered-down proposals. In its 2023 EU “Strategy for Economic Security”, presented on 24 January 2024, Brussel’s calls for “data” on investments in China and elsewhere to be collected, but is no longer seeking to impose actual controls. The transatlantic plan has failed due to resistance from the European business community, not least German companies. They see this move as a direct threat to their strategically crucial trade with, and operations in, China. As for foreign inward investment into the EU, the existing controls will however be tightened. In addition, there will be stricter regulations governing research cooperation between EU-based universities and partner organisations, especially Chinese institutions.
“Strategy for economic security”
An ambitious initiative for outward investment restrictions was officially launched last June. But the concrete proposals now presented by the European Commission on 24 January, detailing the measures in its Strategy for Economic Security, primarily address the issue of foreign investment in the EU. Chinese investment projects, in particular, have in fact long been strictly screened by the majority of EU states. In the past, Germany, for example, has restricted or banned such investments on several occasions in sectors considered relevant to security or in so-called critical infrastructure (german-foreign-policy.com reported [1]). The relatively few states that have not yet imposed any oversight or, as in the case of Greece and Bulgaria, simply do not have the administrative mechanisms for investment oversight are now being urged to become proactive.[2] The Commission is pushing for harmonisation of domestic rules and for a “minimum scope” of application when it comes to EU members checking on foreign investments".[3] Moreover, the strategic proposal also contains a requirement to screen investment decisions by companies from EU states if the companies involved are controlled by persons or businesses from a non-EU country.

Export controls
Although exports from EU countries to China are also to be monitored more strictly, European Commission President Ursula von der Leyen has had to make significant concessions in this regard. Originally, von der Leyen had planned for a blacklist of products to be drawn up by last September. Those products were no longer to be exported to China, or at best exported subject to clear restrictions. Targeted were items such as high-tech semiconductors as well as technologies for quantum computers and artificial intelligence.[4] This approach was clearly modelled on US regulations, designed by Washington to prevent China from caching up technologically in the longer term. So von der Leyen’s intention was obviously to bring the EU into line.[5] Yet she has not succeeded. Not only has the desired product blacklist still not become available, but the Commission’s announcement on 24 January only involves a “White Paper on export controls” that is “in full respect of the existing rules at EU and multilateral level”. In other words the legislation would not lead to any significant widening of export restrictions. The Commission does, however, plan a recommendation for better coordination of national control lists for the summer.[6] This move could entail a renewed attempt to tighten controls.

Investment controls
Von der Leyen has suffered a severe setback in her attempt to subject not only exports but also investments by EU companies inside China to strict controls. A US approach again served as the model here, in this case the Biden administration’s decision to scrutinise and possibly prohibit investments by US companies in China in future if they serve the production of high-tech semiconductors, quantum computers or artificial intelligence technologies. Washington introduced such rules in August last year [7] and applied maximum pressure on its allies to follow suit as quickly as possible. President von der Leyen lobbied for this course of action, as did German Economics Minister Robert Habeck. Indeed, Habeck was publicly calling for the implementation of “outbound investment screening” based on the US approach in May last year.[8] This attempt has failed. The EU Commission has announced that it has drawn up another "White Paper” – “on investment in third countries” – in which the proposal is now to collect data on relevant sectors, analyse it and, if necessary, submit a new legislative proposal next year.[9] There is no mention of concrete steps towards investment controls.

Ministry against minister
The attempt by von der Leyen and Habeck to, in effect, transpose the US regulations onto the EU has failed, not least due to objections from German industry. In August last year, for example, it was said that “business” was “putting pressure” on lawmakers to distance themselves clearly from a policy of outbound investment screening. The economic policy spokespersons of both the SPD and FDP openly opposed this aspect of controls.[10] Indeed, it would hardly be possible for German companies with investments in the People's Republic to operate successfully without using high-tech chips, artificial intelligence and other advanced production technologies. The head of foreign trade at the German Chamber of Industry and Commerce (DIHK), Volker Treier, issued this warning immediately after Habeck's initiative back in May 2023. German companies were, he said, “following the discussion about new state supervision of foreign investments with grave concern.”[11] Habeck even met with determined resistance within his own ministry. “The technical management level” had, it was reported, been “foot-dragging, primarily because the consequences of the instrument were uncertain.”[12] “There is great concern that a new investment screening regime ... will create a bureaucratic monster under which German companies will suffer due to lengthy controls.” Ultimately, the economic faction has prevailed over the transatlantic political faction.

“Malign influence”
Stronger regulations will, however, apply to cooperation between EU-based universities or research institutions and their partner organisations in third countries, which primarily means Chinese universities. The European Commission is worried that research results from Europe could potentially be “used for military purposes in third countries or utilised in violation of fundamental values”. Higher education institutions in EU countries could also, it says, “fall victim to malign influence of authoritarian states.”[13] The Commission is therefore issuing a proposal (for a Council Recommendation) aimed at providing “more clarity, guidance and support” to member states engaged in cooperation with third countries. With an eye to the value of advanced research taking place in China, the Commission accepts that research cooperation cannot be dispensed with entirely. However, “risks to research security should be mitigated,” it says. The maxim is now: “As open as possible, as closed as necessary.”

 

[1] See also: The Dialectics of the China Business.

[2] Brüssel rudert bei Kontrolle von Auslandsinvestitionen zurück. Frankfurter Allgemeine Zeitung 25.01.2024.

[3] Kommission schlägt neue Initiativen zur Stärkung der wirtschaftlichen Sicherheit vor. ec.europa.eu 24.01.2024.

[4] Carsten Volkery: EU stellt Anti-China-Pläne vor. handelsblatt.com 20.06.2023.

[5] See also: Mit Investitionsverboten gegen China.

[6] Kommission schlägt neue Initiativen zur Stärkung der wirtschaftlichen Sicherheit vor. ec.europa.eu 24.01.2024.

[7] Sabine Gusbeth, Dana Heide, Felix Holtermann, Carsten Volkery: Biden reguliert US-Investitionen in sensible Technologien in China. handelsblatt.com 10.08.2023.

[8] Martin Greive, Dana Heide, Moritz Koch, Julian Olk, Annett Meiritz: Habeck will China-Geschäfte deutscher Unternehmen kontrollieren. handelsblatt.com 11.05.2023.

[9] Kommission schlägt neue Initiativen zur Stärkung der wirtschaftlichen Sicherheit vor. ec.europa.eu 24.01.2024.

[10] Sabine Gusbeth, Dana Heide, Felix Holtermann, Carsten Volkery: Biden reguliert US-Investitionen in sensible Technologien in China. handelsblatt.com 10.08.2023.

[11] Julian Olk: Ausländische Investitionskontrolle: Wie Habeck mit seinem Vorstoß alle überraschte. handelsblatt.com 11.05.2023.

[12] Sabine Gusbeth, Dana Heide, Felix Holtermann, Carsten Volkery: Biden reguliert US-Investitionen in sensible Technologien in China. handelsblatt.com 10.08.2023.

[13] Kommission schlägt neue Initiativen zur Stärkung der wirtschaftlichen Sicherheit vor. ec.europa.eu 24.01.2024.


Source:Ocnus.net 2024

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