In the ever-changing global landscape marked by geopolitical tensions and technological shifts, the European Commission is fortifying the economic security of the European Union with a series of new initiatives.
In October 2023, the EU revealed a list of ten critical technologies intrinsically linked to innovation and economic security, which we analysed in a previous blog. The list included advanced semiconductors, artificial intelligence, quantum technologies and bio technologies. This list informed the five new initiatives which the Commission announced on 24 January, and which dive deeper into crucial aspects of trade and research security.
- Improved screening of foreign investment into the EU;
- Better identification of potential risks of outbound investments;
- Improved European coordination for export controls of dual-use goods;
- Better support for research and development on dual-use technologies;
- A proposal for a Council Recommends enhancing research security at national and sector level.
These new initiatives are part of the 'protect'-pillar of the Economic Security Strategy, the other two pillars being ‘promoting competitiveness’ and ‘partnering with the broadest possible range of partners’.
Trade initiatives to safeguard against security risks
The Commission’s proposals on trade focus on intensifying the screening of foreign direct investment (FDI) into the EU on the grounds of security or public order (1). Introducing a legislative proposal to revise the EU Foreign Direct Investment Screening Regulation, the Commission seeks to improve its effectiveness and efficiency. As a vital step in preventing potential risks to the bloc’s security, this initiative involves implementing harmonised national rules to ensure all member states have effective screening mechanisms. The scope of investments subject to screening will be broadened, encompassing both inbound and intra-EU investments by companies under foreign control.
On outbound investments, meaning EU investments in third countries, the proposals introduce a process to identify potential security risks (2). The Commission has launched a consultation process to collect evidence on these potential risks to make an informed decision on whether further policy measures are required in this area.
The coordination of EU exports of dual-use goods, items with both civil and military applications, is another key element (3). This initiative seeks to prevent misuse by ensuring these goods do not fall into the wrong hands, contributing to a safer civilian and national security environment. In its white paper on export controls, the Commission proposes to improve coordination at political and technical level between Member States and EU institutions and to introduce uniform EU controls for designated dual-use items.
Better innovation through improver research security
Acknowledging the dual-use potential of certain technologies, the Commission will support research and development in a way that aligns with civil and defence purposes (4). The adopted white paper on ‘enhancing research and development support involving technologies with dual-use potential’ proposes to explore options for enhancing support for technologies with dual-use potential. This includes evaluating existing EU funding programmes and considering three potential paths forward: building on the current setup and including defence applications in existing funding schemes; adjusting the focus of new funding programmes on both civil and military applications; or creating a dedicated instrument for research and development with dual-use potential.
There is also a concerted effort to enhance research security across the EU. In an era of borderless collaboration, the Commission aims to reduce potential vulnerabilities arising from international research and innovation cooperation. A proposed Council Recommendation – a non-binding act – would provide guidance and support to Member States and the research sector, fostering consistency and mitigating risks (5).
Implications for businesses: between economic competitiveness and security
While these initiatives signify a robust commitment to bolstering economic security, they pose potential challenges for businesses. The requirement for more stringent screening of FDI may lead to increased regulatory scrutiny, potentially impacting the fluidity of international business transactions. Companies in sectors related to advanced technologies, including artificial intelligence, quantum computing, and biotech, could face heightened assessments.
The proposed coordination in export controls may necessitate businesses to adapt to a more unified regulatory framework. The call for more effective control of dual-use goods exports indicates a shift towards ensuring that businesses exercise greater responsibility in preventing the misuse of advanced technologies with both civilian and military applications.
Next steps: navigating complexity, embracing cooperation, and responding to global realities
The five initiatives unfold against a backdrop of heightened global tensions, emphasising the need for cooperation, research innovation, sustained investment and trade openness. In a complex geopolitical landscape, where the EU seeks to protect its innovation and economic interests from countries such as China, the European Commission has recognised that economic security is a shared responsibility by calling for stakeholder consultations.
As businesses navigate these changes, collaboration and open dialogue with policymakers will be key to shaping an environment that fosters innovation while safeguarding against potential threats. Stakeholders should consider actively engaging in the ongoing consultations, providing valuable insights that can influence the course of these initiatives in the face of evolving political and geopolitical considerations.
If you have any questions, or would like to discuss AI regulation further, please contact isabella.morgott@inlinepolicy.com.
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