MNI BRUSSELS WATCH: Expert Urges Care On EU Inv'ment Screening

--Open Other Markets, Don't Close EU - DGAP

--Juncker Wants Investment Screening

By Tara Oakes

     BRUSSELS (MNI) - Any investment screening to be implemented after EC

President Jean-Claude Juncker's State of the EU address should not be

"politically motivated", German think-tank DGAP's Head of Globalisation and

World Economy told Market News Wednesday.

     Juncker told the world in his upbeat State of the Union speech that the EU

"are not naive free traders".

     "This is why today we are proposing a new EU framework for investment

screening," he said in Strasbourg's EU parliament.

     But Claudia Schmucker from DGAP, the German Council on Foreign Relations,

told MNI that Juncker's suggestion had to be handled with care.

     "The investment screening is an answer to the fears of globlization and

"unfair" trade which implies that other trading partners are taking unfair

advantages because of EU openness. In my view the best way forward would be to

open other markets and not to close ours," Schmucker told MNI.

     Juncker went on to tell MEPs that if a "foreign, state-owned, company wants

to purchase a European harbour, part of our energy infrastructure or a defence

technology firm, this should only happen in transparency, with scrutiny and

debate. It is a political responsibility to know what is going on in our own

backyard so that we can protect our collective security if needed." 

     His remarks have been lauded by key member states, who have worried about

the scale of foreign investment in their own back yard taking power over

Europe-based companies away from their own back yard.

     French, German and Italian ministers issued a joint statement after

Juncker's speech to commend his plans, which they believe are a step forward to

establishing a real "level playing field", allowing the possibility of EU

countries to intervene in direct foreign investment in the bloc's strategic

assets.

     "We are highly interested in foreign investment when it takes place under

market conditions," German Economic Affairs Minister Brigitte Zypries wrote.

     "But we need to prevent other states from taking advantage of our openness

in order to push through their industrial policy interests," she added.

     French Finance Minister Bruno le Maire joined the chorus of approval, even

adding that Juncker's proposal doesn't yet go far enough.

     "It needs to be complemented by further work to ensure reciprocity in

public procurement," he wrote.

     DGAP's Schmucker noted that decisions on whether to interfere in these

transactions were probably best not left for politicians to decide.

     "If you want to implement investment screening, you need to make sure that

the decisions are not politically motivated. This means, you need a decision

from a technical body (not from politicians) and clear guidelines," she said.

     EU leaders have previously railed against any form of protectionism,

particularly since the election of U.S. President Donald Trump, fearful of his

'America First' rhetoric and what it could mean for their own companies abroad.

     Rather, the bubbling undercurrent at targeting foreign investment has been

sparked in the bloc by large-scale Chinese takeovers and resentment that

parallel access is not offered to EU firms. Last year saw China's Midea buy

German robotmaker Kuka for around E4.5bln, to the disgruntlement of politicians

in Berlin and in Brussels.

     With approval from such big EU economies, Juncker's crackdown is unlikely

to meet much else in the way of roadblocks, at least in the short term while the

political appetite is likely to reward governments for saying they are defending

strategic assets back home.

--MNI Brussels Bureau; +44 203-865-3851; email: tara.oakes@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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