Berlin, Brussels The EU and the USA want to defend their technological lead over China with coordinated investment and export controls. At the meeting of the “Transatlantic Council for Trade and Technology” (TTC) next week in Sweden, the US government and the EU Commission want to announce measures to keep China at a distance in security-critical areas such as chip production, artificial intelligence or biotechnology.
Part of the agreement is the “coordinated adjustment” of the export restrictions for safety-critical goods. This is shown by the TTC statement, which the Handelsblatt was able to view in advance. The transatlantic partners also promise each other a “robust” assessment of foreign investments based on “national security considerations”.
If, for example, a Chinese company wants to buy a German chip manufacturer, the government should raise an objection – as happened in the case of the takeover of a Dortmund factory of the semiconductor manufacturer Elmos, which was recently prohibited by the Federal Ministry of Economics. The TTC, as the statement emphasizes several times, is intended to find answers to “the challenge of non-market economy practices”, an allusion to the state-controlled Chinese economy.
Vestager: Restrict trade in risky goods
EU Commission Vice-President Margrethe Vestager told the Handelsblatt and other European media that trade in some risky goods had to be restricted in order to ensure free trade in all other goods. “This leaves a lot of room for trade with China,” she said.
The words are also addressed to Beijing. The Chinese government has repeatedly expressed its displeasure with the so-called de-risking strategy in recent weeks. The aim of this strategy is to enable the West to maintain its lead in security-related technologies and withstand Chinese blackmail attempts.
Vestager, together with Commission Vice-President Valdis Dombrovskis, will represent the Europeans at the meeting on May 30-31 in the northern Swedish city of Luleå. US Secretary of State Antony Blinken, Trade Representative Katherine Tai and Secretary of Commerce Gina Raimondo are expected to attend.
We also recognize the need to protect certain advanced technologies that could be used to threaten our national security without unduly restricting trade and investment. G7 declaration at the Hiroshima summit
The TTC is the central forum for economic policy agreements between the EU and the government of US President Joe Biden. Recently there had been serious disagreements between Brussels and Washington: Biden’s climate law, the “Inflation Reduction Act”, discriminates against European companies. For months, the USA and the EU have been trying to settle the dispute – with moderate success.
From the perspective of both sides, however, the TTC has already proven its worth: in the weeks before the Russian invasion of Ukraine, the EU and the USA worked closely together in preparing their sanctions against Russia and coordinated export controls for western cutting-edge technology on which the Russian defense industry depends is.
The allies now want to build on this experience and thus underpin the new buzzword in Western China policy: de-risking, risk reduction.
EU and US consider foreign investment controls
In addition to export controls and investment reviews, the EU and the USA are considering creating a new control procedure that should apply to foreign investments by their own companies: the so-called outbound investment screening. The USA has been discussing this for some time, and the head of the EU Commission, Ursula von der Leyen, is now also campaigning for such a set of rules.
Read here: G7 heralds new China policy
The declaration by the leading Western industrialized countries (G7) at their Hiroshima summit last weekend said: “We also recognize the need to protect certain advanced technologies that could be used to threaten our national security, without trade.” and unduly restrict investment.”
Most recently, Federal Economics Minister Robert Habeck surprisingly spoke out in favor of an instrument to control investments abroad. Overall, however, the federal government is more cautious. Although one can also see in Berlin that the outflow of technology is a problem, there are doubts as to whether the means of investment control is the right one.
Vestager also dampened expectations: talks about possible investment controls are “at a very early stage”. She recalled that European companies made the most foreign investments in the world. It is very difficult to filter out from this crowd what actually poses a security risk. The commission does not want to overload the companies with new reporting obligations, in fact, the aim is the opposite.
Several states have banned the installation of components from the Chinese telecom equipment supplier in mobile networks.
(Photo: AP)
However, it is only logical to also think about restrictions on outbound investments after inbound investments have already been checked for security risks. An example of this is the ban on components from the Chinese telecom supplier Huawei in the European 5G mobile infrastructure.
Companies warn of investment controls
In the TTC declaration, the US and the EU agree to regularly exchange information on the extent to which “capital, experience and knowledge of our companies” contribute to “technological advances of strategic rivals”. Both sides want to “discuss further” the introduction of outbound investment screening.
This could have far-reaching consequences for companies: if a European company builds a factory in China, knowledge often flows out as well. If this involves know-how that can also be used militarily, such investments could be prohibited in the future.
Read here: China uses Russia friend as mediator in Ukraine war
The reason behind this is that China’s head of state and party leader Xi Jinping has been promoting the merging of military and civilian facilities for years.
The Chinese President wants to expand economic influence worldwide.
(Photo: Reuters)
The EU Commission intends to present a strategy paper on economic security on June 20th, in which it will explain its idea of restricting foreign investments in more detail. Business representatives are skeptical. “This could only be a last resort in exceptional cases, in which serious safety concerns have actually been proven,” warns the industry association Business Europe.
However, the plans in Brussels and Washington are going in this direction anyway. The instrument should only protect particularly critical areas – chip production, quantum computers, artificial intelligence, for example.
Vestager used the metaphor “small garden, high fence”. It’s not about all technologies, she said. The idea is to define narrowly defined fields in which the West should maintain its technological edge.
More: Germany is looking for its own way between the USA and China.