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NOT SO LONGFDIFDI EUEU EU EUFDIEU FDI ASML EUFDI FDI EUYour browser does not support the element. ago, the countries that restricted outbound foreign direct investment () were usually relatively poor ones, driven by a desire to keep cash and know-how at home. That is changing. On January 2nd an executive order passed by the outgoing American president, Joe Biden, to restrict investment in China came into effect. And now the European Union is following suit. Two weeks later, the European Commission unveiled plans to review outward in areas deemed critical for the security of the .The commission is focusing on three types of advanced tech: semiconductors, artificial intelligence and quantum computing. member states have been told to review transactions that have taken place since January 2021 in areas where these technologies have formed part of overseas investment. They must submit a progress report in July and a comprehensive risk assessment a year later. The commission claims that the assessment is country-neutral and should encompass all direct investment into any non-countries. But governments are allowed to prioritise their activities based on the loosely defined “risk profiles” of certain states. China is likely to feature prominently in the final reports.Complying with the ’s demands will prove tricky for two reasons. The commission acknowledges that most governments do not systematically gather information on individual transactions in specific countries, much less review them in a way that would flag up potential risks. The fact that governments have 18 months to prepare their final reports is a tacit acknowledgment that this information is not readily available.The second difficulty is the sheer scope of the review. Governments need to look at the full range of , including mergers and acquisitions, joint ventures, new (”greenfield”) investment and reinvestment in existing projects. Venture capital and intellectual-property transactions also feature on the commission’s checklist. As if this were not already enough, risk assessments also need to cover indirect investments made through third countries, if there is a possibility that technology might end up in the wrong hands.This will produce an enormous amount of data. Fearful of being accused of underreporting, governments may end up erring on the side of caution and flagging all potentially worrying cases in their final reports. That would leave the thorny task of identifying what actually constitutes a risk to the commission at a later date.What will the commission do with this data mountain? Restrictions on outward to unfriendly countries look likely when advanced technology forms part of the investment. Sensing the direction of travel, some governments have already taken pre-emptive action. Last September the Netherlands tightened regulations that control the export of products used in semiconductor production to China, affecting Dutch-based (the world’s largest supplier of photolithography machines, used to produce microchips). Others may follow.All of this creates headaches for the ’s would-be investors. Few would dispute that advanced tech should not be rolled out where it may boost the military and intelligence capabilities of countries that pose risks to international security. But although most deals are unexceptional, and some are plainly dangerous, a great many are ambiguous. Tracking what eventually happens to dual-use technologies in foreign countries can be a daunting task. Far from clarifying the nature of outward , the’s review may end up confusing the picture even further.
