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Do we know enough to cope with economic security? Investment screening mechanisms as a policy design and implementation problem.

Policy Analysis
Regulation
Security
Investment
Trade
Decision Making
Policy Implementation
Technology
Marco Di Giulio
Università degli Studi di Genova
Francesco Baraldi
Università degli Studi di Genova
Marco Di Giulio
Università degli Studi di Genova
Mattia Sguazzini
Università degli Studi di Genova

Abstract

Economic and societal transactions are experiencing a process of intense securitisation. As markets have become tightly integrated, policymakers must cope with risks concerning the viability of the infrastructures and supply chains that are critical for the functioning of contemporary societies. Accordingly, national governments (but this also apply to the European Union) created new institutions or adapted those already existing to address the economy-security nexus. In doing so, policy designers must balance different and sometimes divergent policy goals, such as pursuing prosperity and, at the same time, avoiding disruptions. De-risking is the key idea behind such a regulatory approach. However, while it is relatively easy to single out the goals of a regulatory framework, it is much harder to make rules work appropriately in practice. Formal and informal institutions shape how policymakers gather information about the phenomenon to be regulated and make sense of it. They affect the probability of government efficacy and efficiency, although not necessarily in the direction intended by policy designers. This paper explores this topic discussing primarily the case of Foreign Direct Investments (FDIs) regulation and, more specifically, with the emergence of Investment Screening Mechanisms (ISMs) as a de-risking policy instrument. However, our theoretical framework ideally applies also to other areas such export control and security of research and innovation. This paper is part of a larger empirical project on economic security policies in Italy. It uses original empirical evidence and findings as well as the literature concerning other cases and analyses released by institutions. In doing so, we claim that, although the literature on the subject has risen considerably in a decade, usable knowledge is still scattered and needs to be more appropriately systematized. Namely, the paper conceptualizes the dilemmas policymakers face when they design and implement institutions aimed at balancing economic and security goals.