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From Competition to Co‐Operation? FDI Screening in the EU

Floor Doppen

Published 2025 in Journal of Common Market Studies

ABSTRACT

In an increasingly geopoliticised environment, EU states are preoccupied with remaining competitive and portraying an attractive market for foreign investors and exporters, whilst simultaneously adopting geoeconomic policy tools that restrict trade (through export controls or sanctions) and investment flows (inbound and outbound investment screening). This tension between economic and security needs is rarely analysed. In light of the EU's recent ‘geoeconomic turn’, this article advances a theoretical approach to analyse policy‐making in the trade–security nexus that has thus far been overlooked in research on the EU's new geoeconomic toolbox. It argues that in order to understand the evolution of Foreign Direct Investment (FDI) screening specifically, and export controls and outbound investment controls more broadly, it is necessary to pay attention to the strategic decision‐making environment states find themselves in, that is, the games they play. States pay attention to, and their policy preferences are impacted by, the actions of other states. Applied to the case of FDI screening in the EU, I contend that the interplay between a state's focus on competitiveness vis‐à‐vis economic competitors combined with the need to co‐operate on security issues has at different points in time both undermined and advanced co‐operation on FDI screening, shedding light on future challenges as well as opportunities for policy‐makers that seek to link national security to trade and investment policy.

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