The EU Commission vies to screen Chinese investment in Europe

Last week, Jean-Claude Juncker, the head of the powerful European Commission, the executive arm of the European Union, announced a plan to screen foreign investments. The idea is to hold back or even effectively block business acquisitions or other investment plans financed by third country companies, in key sectors allegedly considered to be sensitive from a security perspective or being economically strategic. Juncker said it plainly: “If a foreign, state-owned, company wants to purchase a European harbor, part of our energy infrastructure or a defense technology firm, this should only happen with transparency, with scrutiny, and debate”. It’s as if the President of the Commission described the Chinese investments in Greece, Spain and Portugal in details. The Chinese maritime conglomerate COSCO group has recently acquired the company operating the largest part of the port of Piraeus, the largest Greek sea harbor and one of the largest in the Mediterranean Sea. All analysts agree that the new Commission plan directly aims at controlling or even blocking the Chinese investments in the Union. The idea is to create one more layer of foreign investments checks and controls, on top of the rigorous screening schemes which 15 member states of the EU already operate. Aiming at Chinese investments According to Brussels sources, the new Commission scheme will be initially enforced – if ever – to foreign investments in the sectors of infrastructure, energy, transport, space, artificial intelligence, robotics, semiconductors and financial settlement. These sectors practically account for more than half the entire European economy. It’s absurd or rather deceptive to call all those business activities either economically strategic or security sensitive. There are more problems in this respect. Under the Juncker proposal, Brussels will be challenging the sacrosanct right of private property, protected by the constitutions of all and every EU member state. When contradicting the right of the shareholders of a company to sell it to whomever they choose, the Commission will be committing a major blunder, even if it comes in the form of non binding Commission ‘advice’. There is a lot to discuss about all that in practical, historical, ethical and ideological levels. Let’s try. Is it a liberal idea? What Juncker indirectly accepts with this proposal is that Europe is in favor of the free economic play and the unimpeded international transactions but only in one way; Europe’s implication in overseas business activities is allowed, but not the other way around. The West has for centuries been exploiting the resources of the rest of the world. Now, however, that some third countries have achieved a high level of economic and technological development, they are impeded from operating freely in the West’s internal markets. During the past many decades, trade protectionism options and foreign investment screening or even blocking by second and third world countries was anathema for the West. Related action was politically exorcised by Europe and the US and even militarily reversed, together with the daring government. Africa, Latin America, the Middle East and other parts of the world have bitter and bloody experience of that and still suffer from western aggression. The United States and many European countries, thirsty for natural resources, have been strongly opposing with all available political or unspeakable means – including outright military interventions – any attempt of a second or third world country to obstruct free trade or investments. Rediscovering neo-colonialism This colonial and neo-colonial practice was also being dressed with economic theorizing, about free trade making all the parties richer, the well known win-win rig, usually advertised as an equitable pact. As history has proved though, never has there existed such a thing as a fair contract – regarding natural resources exploitation – between the western powerful nations and second or third world countries or regions. Just count the recent destructions of Somalia, Niger, Mali, Chad, the bloody aftermath of the South Sudan ‘construction’, not to say anything about the invasions and the obliteration of Afghanistan, Iraq, Libya and Syria to mention only the recent West’s ‘interaction’ with the rest of the world. On many occasions, where there was a blatant invasion in other people’s countries and lives, the western powers justified their multifaceted interventions on ‘democratic’ grounds or invoking local economic development needs, allegedly served only by West’s ‘growth supporting investments’ and free trade. How much the West values democracy in the rest of the world is questionable, to say the least. For example, the US and Europe embrace the harshest dictatorship of the world in Saudi Arabia, where people are publicly beheaded just for having attended a protest rally. By the same token, they threaten Iran, where at least there are regular legislative and the presidential elections. It may be true, though, that Saudi Arabia doesn’t know and never exercised any other governance mode other than their own. In some respect, the West may be right not to question that. Europe and the US have to recognize the same right to others. Trump’s US and Germanic Europe Unfortunately it seems, in Trump’s America and in Germanic Europe the time has come for the West to repudiate even its sacrosanct ideas about economic freedom and equal opportunities. The US and the European Union in parallel moves are currently trying to block the Chinese and other foreign presence in their economies. For centuries, both those economic powers have been taking advantage of lagging behind countries, and now that China has acquired the means to invest all over the world, the US and the EU are erecting walls. At the same time, they accuse China of not recycling the reserves she has accumulated through exports, amidst a conjuncture when this country is actually doing exactly that in a large scale, by investing all over the world. The ‘One Belt One Road Initiative’ does exactly that. The West argues that some Chinese companies get government subsidies or other forms of state support, so they are better equipped than others, when competing for a major business buyout overseas or plan an investment abroad. Europe and of course the US are forgetting that the wealth the Chinese businesses are creating is the product of an entire nation, based on the contributions of labor, capital and natural resources. The Wealth of Nations As Adam Smith taught us, the wealth of all nations is the outcome of their own historically developed way of doing business. It’s absurd to accuse the Chinese or any other nation of the world for not having had an economic, social and even political history similar to the West’s. If one accuses China of having just one political party, one shouldn’t forget what the vast majority of voters say about elections in the US and Europe; ‘if things could change with elections they would have been outlawed’. Coming back to today’s problems, last week, Juncker in his speech about the “State of the Union” has only opened a discussion about this Commission proposal, to scrutinize foreign in all member states. As mentioned above, his scheme amounts to an additional level of screening foreign economic presence in Europe, in this case operated by the Brussels bureaucracy. Given that, it will be rather difficult for the President of the Commission, to secure a qualified majority of member states in favor of it. Not many in favor The reasons for that are many. For one thing, many EU countries wouldn’t accept the Brussels bureaucracy telling them how to treat foreign investments on their soil. Already, many member states have strong bilateral relations with China and in general they strongly favor foreign investments. Greece, Spain, Portugal and the central European countries would never agree to the introduction of a Brussels ‘passport’ for foreign investments. They badly need a strong foreign growth push for their economies. The second reason is that many EU countries won’t accept Juncker’s proposal in this affair, because he is clearly and openly following a ‘dictum’ from Germany and France, plus the always uncertain Italy, at times complementing the hated ‘Le directoire’ of the EU. Stupidly enough, the three corresponding ministers of Finance rushed to noisily applaud Juncker’s ‘initiative’. The majority of the EU countries won’t accept the Brussels authority in this subject, despite that Juncker meant it as non-binding procedure. Everybody knows that the EU Commission has the redoubtable expertise, to turn a non-binding procedure into shackles for the smaller member states. The obvious source of Juncker’s idea was Berlin and Paris, and this will make things difficult to pass it through the EU Council of 27+1 member states, the highest authority of the club. Finally, there is one more crucial reason why the Juncker proposal will be ill-fated. At the time of Brexit, the closely avoided Grexit, a reemerging Italexit and the growing resentment of the Brussels bureaucracy by the hard working and badly paid Europeans, the Commission’s authority is fading fast. The part of Europeans who feel left behind is growing and they tend to vote for centrifuge political forces. In such an environment the Commission shouldn’t be seen as vying to further strengthen the Brussels’ autocracy, and Juncker’s idea falls into this category.