EU-US Join Forces on Restrictions for Chinese Advanced Technology Investments... Member States Cite "Lack of Practicality"

EU and US Consider Joint Regulatory Proposal
Member States Oppose Establishment of Investment Review Agencies
Concerns Over Agency Credibility and Practicality

Reports have emerged that the United States plans to jointly establish regulatory measures with the European Union (EU) to restrict private investments in advanced technologies from China, but there is considerable resistance from EU member states. The EU and the US intend to launch a separate body to assess the security threat level of corporate investments, but member states are expressing doubts about the credibility of this institution.

According to Bloomberg on the 23rd (local time), the US and the EU plan to hold a Trade and Technology Council (TCC) meeting in Lule?, Sweden, on the 30th-31st to discuss measures to limit investments in advanced technology sectors by hostile countries.

According to a draft approved by both the US and the EU, which is expected to be adopted at next week's meeting, both sides will seek measures to prevent China’s non-market practices in strategic technology sectors such as semiconductors. The EU and the US plan to evaluate whether investments by regional companies in advanced technology sectors of hostile countries like China and Russia pose threats to supply chains and security.

As part of the security strategy for the second half of this year to be announced next month, the European Commission is considering establishing an investment screening body to perform this role. Meanwhile, the US House of Representatives passed a bill in February, ahead of the EU, to establish the National Critical Capabilities Council (NCCC), which monitors investments against hostile countries. The NCCC has the authority to review whether domestic companies’ investments affect the military or advanced technological development of competitor countries and can order investment suspensions.

However, it is expected to be difficult for the EU to establish a similar institution like the US. Resistance from EU member states is unexpectedly strong. Bloomberg cited anonymous sources reporting that at the EU trade ministers’ meeting held yesterday in Brussels, Belgium, trade ministers expressed concerns about the joint regulatory proposal. Member states worry about how the investment screening system will apply to their domestic companies and doubt the credibility of the screening body.

Siana Mendes, Deputy Minister of Trade for Spain, told Bloomberg in an interview, "(Overseas investment monitoring) is a very difficult measure to implement," adding, "No one views this policy favorably."

Conscious of the resistance from EU member states, the European Commission has begun efforts to persuade the necessity of an EU-specific investment monitoring body. Margrethe Vestager, EU Executive Vice-President in charge of competition, stated, "If Europe does not independently assess the risk levels posed by hostile countries, China and the US will try to set those standards," adding, "We need to create an EU framework to evaluate geopolitical risks," signaling her intention to persuade member states.