EU Vows More Proactive, ‘Assertive’ Use of Economic Security Tools

Maros Sefcovic, the EU commissioner for trade and economic security, said other countries should expect to see “more strategic and assertive use of our existing tools, the development of new ones where needed, and stronger capacity to collect and share economic intelligence.”

The 18-page document pointed to growing “instability” in global trade and calls on the EU to respond by acting with greater “boldness, speed and unity.” The EU needs to “stay ahead” of other countries in emerging technologies, it said. To do that, the bloc needs a “paradigm shift, moving from a reactive posture towards a more proactive and systematic deployment of our toolbox.”

The European Commission described several steps it plans to take to follow through on this new approach, including:

• developing new guidelines to make sure national foreign direct investment (FDI) screening authorities are all screening investments consistently.
• carrying out an “evaluation” of the EU’s dual-use export control regulations next year.
• launching a pilot program to monitor EU tech startups that are susceptible to “hostile foreign acquisitions.”
• reviewing the EU’s blocking statute to stop foreign countries from “applying extraterritorial sanctions against EU citizens and businesses.”

The EU specifically said it will create new FDI guidance for member states so that they apply the “same strategic economic security considerations” when reviewing inbound investments. The guidelines will also set out how to “take account of the potential cumulative risk of multiple investments” and cover the “interplay between any EU level requirements and the application of national screening mechanisms in the financial sector.”

In addition, the bloc will evaluate its dual-use export controls to examine whether they're meeting the EU’s “objectives in the context of the new geopolitical and geoeconomic realities, including the impacts of increasing recourse to unilateral controls that may also impact the Single Market,” the EU said. It will continue working with member states on how they can best adopt new controls on emerging technologies -- an apparent reference to the malfunctioning Wassenaar Arrangement, the multilateral export control body that has been hampered by Russia’s membership (see 2511180026).

Improved FDI screening and more targeted export controls can help shield European companies against “certain third countries” trying to acquire advanced EU technology or know-how, the document said. It added that addressing this “technology security and leakage” is “of strategic importance” and suggested that the EU may need better enforcement and implementation of its existing export controls, which it called increasingly “fragmentated.”

The European Commission said it’s also considering launching a new pilot program to track startups working in critical technology industries “that are vulnerable to the risk of hostile foreign acquisitions.” This program would redirect those startups to “EU investment alternatives,” including possible matchmaking services with other investors.

The EU will review its blocking statute as well, which prohibits European companies from complying with extraterritorial sanctions as a way to protect them from those measures. The bloc said it’s hoping to “simplify” those rules, reduce compliance costs for EU people and businesses, and create a “credible deterrent against the extra-territorial application of third-country sanctions.”

The EU didn’t specify what those “deterrent” measures could be but said it will look to better use its anti-coercion measures and other trade restrictions to help in “shielding the EU’s businesses from extraterritorial measures imposed by third countries and, where relevant, triggering a change in behaviour of the country concerned.”

Improving the blocking statute “will strengthen European economic security by better protecting EU operators from conflicting third-country measures and by ensuring a more predictable, effective and assertive framework.”

The document outlined several specific industries that are facing economic security risks, including “mainstream” semiconductors and electric vehicle batteries. The EU said it plans to work with “trusted partners” to diversify its chip supply chain while increasing chip production within Europe, and it will use its “risk mitigating toolbox” to de-risk from “high-risk entities in relevant connected components of” those electric vehicles.

The EU also suggested that member states nominate a group of new senior "National Economic Security Advisers," who will be responsible for coordinating economic security risk assessments and related topics across the bloc. The commission will "promote greater policy coordination and joint actions by regularly bringing these advisers together."

The commission said it already has begun “putting in motion any necessary legislative changes, guidelines and other supportive measures to implement the actions set out” in the document. “The Commission will continue to engage intensively with the Member States, third countries and with stakeholders on the new economic security strategic approach.”