Behind the Screen: Explaining Variation in Member State Support for an Investment Screening Mechanism in the European Union

: In November 2018, the European Union (EU) adopted its first common screening framework for foreign direct investments (FDI). This new policy resulted from the collision of two independent phenomena: the transfer of competence over FDI policy operated by the Lisbon Treaty in 2009 and the explosion of Chinese Outward Foreign Direct Investment (COFDI) in the world since the late 2000s. Though shaped in the shadow of the unique economic and political challenges posed by Chinese investment, the European screening mechanism adopted is non-binding and not very constraining, reflecting the lowest common denominator between the widely diverse positions of the EU Member States. This paper tries to explain such variation in national preferences over the EU-wide screening mechanism and analyzes several economic and political factors that contributed to how Member States reached their policy position on the desirability and shape of the common policy. Our main argument is that the direction of the impact of Chinese investment on support for a screening mechanism primarily depends on the technological intensity of the investment assets in the host country.