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Behind the screen: Understanding national support for a foreign investment screening mechanism in the European Union

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  • Zenobia T. Chan

    (Princeton University)

  • Sophie Meunier

    (Princeton University)

Abstract

What determines national preferences for institutionalizing foreign direct investment (FDI) screening? Over the past decade, advanced economies worldwide have tightened their national investment screening mechanisms (ISMs). In March 2019, the European Union (EU) adopted its first common FDI screening framework. This article explores variations in Member State preferences for the creation and nature of a pan-European screening framework. Based on extensive interviews with high-level EU and country officials involved in the negotiation process, and using a unique measure of national support for the EU-wide ISM created through the first-ever elite survey on this subject matter, we find that countries with higher technological levels were more supportive of FDI screening due to concerns over unreciprocated technological transfer. We also show the effects of Chinese FDI on country-level support for FDI screening sector-dependent. We found no evidence that total Chinese FDI predicts preferences for ISM. Instead, countries with high levels of Chinese FDI in strategic sectors are more likely to support the ISM, while those with high levels of Chinese investment in low-tech sectors tend to oppose screening. Our overall findings suggest that EU investment screening, and national-level screening in general, might become more restrictive in the future, especially in light of the COVID-19 pandemic.

Suggested Citation

  • Zenobia T. Chan & Sophie Meunier, 2022. "Behind the screen: Understanding national support for a foreign investment screening mechanism in the European Union," The Review of International Organizations, Springer, vol. 17(3), pages 513-541, July.
    • Handle: RePEc:spr:revint:v:17:y:2022:i:3:d:10.1007_s11558-021-09436-y
    DOI: 10.1007/s11558-021-09436-y
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    Cited by:

    1. Sarah Bauerle Danzman & Sophie Meunier, 2023. "Naïve no more: Foreign direct investment screening in the European Union," Global Policy, London School of Economics and Political Science, vol. 14(S3), pages 40-53, July.

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    More about this item

    Keywords

    China; Europe; European Union; FDI; Investment; Screening;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements

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