The EU as a geoeconomic actor? A review of recent European trade and investment initiatives

The so-called “geoeconomic” turn in global trade policy making – recently notable in the US-China “trade war” – has changed the context in which Europe positions itself as an economic actor. This proclaimed turn stands for the increased tendency of states to use economic policy instruments to promote or defend national interests vis-à-vis trading partners or rival powers. Scholars note a similar shift in the EU’s trade and investment policies. However, there is so far insufficient systematic treatment of empirical evidence to examine whether this proclaimed shift at the policy level adds up to a coherent strategy that is reflected in outcomes. Against this background, this paper examines three recent cases of EU economic policy initiatives that seek to defend European interests against the geoeconomic policies of certain trading partners, in particular China. We focus first on the European Investment Screening Regulation (ISR), which enables the EU and its Member States to scrutinize and block critical purchases of strategic assets (i.e. foreign direct investments, FDI) by non-European entities. While the EU is one of the world’s most open destinations for FDI, the ISR indicates a partial retreat from investment liberalisation. Our second case concerns the European trade and investment agreements with non-European partners. A relatively new feature in these agreements is the inclusion of Most-Favoured-Nations (MFN) clauses, which protect the EU from the possibility that another country negotiates more favourable market access. The underlying reasoning behind their use, as well as their enforcement and economic repercussions are yet unexplored. Finally, we analyse Europe’s response to the Belt and Road Initiative (BRI), a major infrastructure investment project launched by China in 2013. While EU-level reactions remain cautious, several Member States have been quick to sign bilateral Memoranda of Understanding on the planned investments without policy coordination with Brussels. This might suggest conflicting interests within the Union. In each of the cases, we apply an interdisciplinary approach to systematically assess the underlying rationale as well as the legal challenges and economic implications that shape their outcomes. Doing so allows us to explore variation across economic issue areas, as well as to critically assess whether this proclaimed “geoeconomic” shift adds up to a coherent European strategy with any effective outcomes. Our paper contributes to conceptual debates on the EU as a global actor, and our interdisciplinary perspective that draws on political science, law and economics sheds new light on the different dimensions of the geoeconomic turn.