Geoeconomics

Geoeconomics

Under this moniker we have grouped the issues associated with the at times uneasy interplay between national economic interests and wider geopolitical considerations. The EU’s unhealthy dependence on Russian energy is a case in point, as well as the highly controversial Nord Stream 2 pipeline, which took a war to get cancelled. By examining economic tools and resources, such as trade, investment, sanctions, and technological developments, Geoeconomics sheds light on how states leverage their economic strength to shape global dynamics and achieve geopolitical objectives—and how this can clash with the common EU interests.

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Cover of EconPol Policy Report 34

Investment Screening Mechanisms: The Trend to Control Inward Foreign Investment

Vera Z. Eichenauer (ETH Zurich), Michael Dorsch (Central European University), Feicheng Wang (University of Göttingen)

In an increasing number of sectors, concerns are rising that foreign firm participation may pose risks to public order. Many developed countries have adopted or extended their investment screening mechanisms to control inward foreign direct investment in strategically important sectors over the last years. This paper documents the development of investment screening in OECD and EU countries and provides the first discussion from an economic perspective. We review existing and propose new explanations for the adoption of investment screening. Our exploratory quantitative analysis suggests that countries with higher levels of technological development and with a stricter regulatory environment for foreign investment are more likely to introduce investment screening. Contrary to the popular wisdom, we do not find evidence that higher Chinese inward investments are associated with the implementation of investment screening.

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