EU must prevent sensitive assets from falling into ‘wrong hands’, warns Valdis Dombrovskis

The EU must find ways of preventing its most sensitive technologies, companies and assets “ending up in the wrong hands”, a senior official said, as Brussels prepares to unveil measures to bolster its economic security.

The proposals are designed to help the bloc stay competitive in core industries such as software, chips and aircraft and reduce the potential for rival powers including China to control vital infrastructure in a time of global instability.

“We are facing a much more confrontational geopolitical landscape than we were facing some years or decades ago and we need correspondingly to see how we also are securing our national security interests,” Valdis Dombrovskis, the European trade commissioner, told the FT during the World Economic Forum in Davos.

The actions proposed would be “targeted . . . and proportionate”, he insisted, so that “this whole debate on economic security does not become a pretext for protectionism”.

Decisions on investment and export controls are in the hands of member states. But given rising trade tensions between the US and China along with Russia’s decision to invade Ukraine, putting pressure on eurozone economies, Brussels believes it needs to increasingly work as a bloc.

“We are certainly stronger if we act together,” Dombrovskis said. “Then we have the economic weight to be a major player on the world stage, whereas for individual member states it is often much more difficult.”

The European Economic Security Package, due to be published next week, will include legislative improvements to the EU’s regime for screening investments from outside the bloc. It will also set out ideas on scrutinising investments flowing out of the EU, coupled with proposals to add a “European dimension” to controls on sensitive technology exports.

One recent example concerns US pressure on the Netherlands and Japan to end the sale of advanced silicon chipmaking equipment to China last year. After months of talks, The Hague agreed to implement export restrictions, hitting the sales of ASML, the market leader.

Dombrovskis said he wanted to ensure there was more European co-ordination in the area as such decisions were taken.

After the shock of quitting dependence on Russian oil and gas, EU countries also want to de-risk their exposure to China, which dominates production of green technology such as solar panels and raw materials.

The European parliament this week voted overwhelmingly in favour of mandatory screening of Chinese investments in “European critical assets, such as ports and transport networks”. The resolution has no legal effect but adds to pressure on the commission to act.

“The EU needs to urgently improve the way it protects its vital economic interests in a co-ordinated fashion, but member states will remain very careful that the commission doesn’t overstep its powers,” said an EU diplomat in reference to the economic security package.

The package will also update 2020 rules that oblige governments to notify the commission of foreign direct investment that could threaten security or public order.

The commission is likely to propose a similar system for outbound investments to prevent companies avoiding export controls but setting up plants overseas. However, each government would have to adopt a screening process first.