The EU’s trade commissioner has urged countries to toughen their vetting of foreign takeover bids, warning that the coronavirus pandemic had left the bloc’s “strategic assets” vulnerable to acquisition from abroad.
Phil Hogan encouraged trade ministers on Thursday to cooperate in screening merger bids, saying that Brussels was ready to take on a central role in coordinating monitoring and information sharing. “Economic vulnerability could result in a sell-off of critical infrastructure or technologies,” he warned.
“Remember, the acquisition of a company in your country may have a security effect in other member states or it may negatively affect a project of union interest,” Mr Hogan told a videoconference of the EU’s trade council.
“Today more than ever, the EU’s openness to foreign investment needs to be balanced by appropriate screening tools.”
The comments are one of Brussels’s starkest warnings yet that the Covid-19 crisis risks leading to a fire-sale of prized companies whose share prices have been hit hard by the economic fallout. Senior EU policymakers have argued that supply chain breakdowns during the crisis have underlined the importance of having domestic capacity to produce important materials.
Brussels’ fears are particularly focused on China, a source of concern since the takeover in 2017 of Kuka, a German robotics manufacturer, by the Chinese appliance maker Midea. Margrethe Vestager, the EU competition commissioner,told the FT last week that European countries should buy stakes in companies to stave off Chinese takeovers.
Mr Hogan highlighted the threat to Europe’s healthcare capacities, such as producers of medical supplies and research institutes developing vaccines, as countries compete for ammunition to fight the pandemic.
Brussels is looking to reinforce a system of information sharing on investment screening that governments agreed on last year. The system is set to come on line in October, but the EU commission now wants capitals to move further and faster.
“I believe that we can and should do more,” Mr Hogan said, according to a copy of his remarks published by the European Commission.
The EU’s formal powers in this area are limited, and the planned system cannot oblige member states to vet takeover bids. A total of 14 EU countries currently have national screening systems in place.
“I cannot but insist on the fact that, for a security screening mechanism to be effective, we need the involvement and co-operation of all member states, including by having in place the required tools and access to information in your respective territories,” Mr Hogan said.
A joint statement issued after the meeting by the Croatian EU presidency and the commission said that ministers “welcomed” guidelines on investment screening that the commission published last month.
The push for more rigorous monitoring of takeovers is part of a broader EU shift towards shielding its companies and reducing reliance on international trade for essential goods. Ursula von der Leyen, Commission president,said on Thursday that the crisis had demonstrated that the EU should “reduce dependencies by shortening and diversifying our supply chains”.
EU diplomats said that Peter Altmaier, German economy minister, pushed at Thursday’s meeting for greater protection for European steel producers — a stance supported by other steel-producing countries including Italy, Poland and Greece.
Ministers also backed plans to prolong a version of the EU’s temporary restrictions on exports of personal protective equipment to countries outside of the bloc.
The current authorisation regime is set to expire on April 25, and Brussels has proposed that it be succeeded by a narrower set of restrictions focused on exports of protective masks. The revised rules, which will last for 30 days from April 26, will also exempt exports to the western Balkans and have a clearer exemption for humanitarian aid.
Member countries of the European Free Trade Association – Iceland, Liechtenstein, Norway, and Switzerland – are already exempted from the curbs.
Despite much of the meeting focusing on how to protect domestic medical supplies and producers, Mr Hogan also mooted options for minimising tariff barriers to trade in much-needed healthcare equipment. The trade commissioner suggested that the EU and its trading partners could agree to temporarily suspend tariffs on “COVID-19 related products”.
Mr Hogan said that another, more far-reaching, option would be for a coalition of countries to agree on a “permanent liberalisation of tariffs on medical equipment”.
“Such a course of action would require some further analysis and careful calibration in terms of ensuring that it has the intended effect,” he said.
Source: Economy - ft.com
