Strengthening Europe’s Strategic Sectors
Coordinating Investment Policy for Resilience and Predictability
29 January 2025
Author: Petya Barzilska
The EU has promoted trade and investment liberalisation for decades. The world, however, has changed, and the EU needs to re-think its international engagement and focus on economic security.
Executive Summary
The European Union (EU) has promoted trade and investment liberalisation for decades. The world, however, has changed. Increased geopolitical risks driven by competing economic models and strategic goals, as well as strategic miscalculations mean that the EU needs to re-think its international engagement and focus on economic security1. Stronger trade and investment defence tools are key weapons in the EU’s regulatory arsenal.
The EU should speed up the alignment of different trade and investment policies affecting critical infrastructure and strategic sectors, particularly energy and transport as already highlighted in the European Economic Security Strategy2. A holistic policy approach should include harmonisation and alignment across risk assessments, implementation and enforcement and lists of strategic sectors. This must be achieved across EU member states and across horizontal and vertical legislation. One hundred percent alignment across the board will be a challenge, but this is not an excuse not to pursue maximum harmonisation in priority risk areas “at the speed of relevance.”
The new EU foreign direct investment (FDI) screening mechanism needs to come into effect as soon as possible, preferably in 2025. The framework should focus on strategic sectors and activities to cover dual use and military technologies, semiconductors, energy and critical raw material technologies.
The European Commission’s role should be enhanced to support improved harmonisation and coordination across the EU regarding implementation of screening practices, risk assessments and enforcement when its interests are affected. To enhance regulatory clarity and economic resilience, consistent and harmonised minimum risk criteria when screening FDI are needed.
Greater consistency across the EU would improve predictability for investors, while protecting the economic and public interests of the EU. The EU and member states should maintain substantial regulatory alignment across investment regimes, public procurement and competition policy, including enforcement of rules.