Foreign investment regimes: three things the West needs to better protect national security

As concern over strategic investments increases, many countries now seek to adapt their rules around foreign direct investment (FDI) and national security. Ashley Thomas Lenihan writes that consistent rules, open lines of communication, and institutional capacity are all needed to have an effective transatlantic coordination regime on FDI and national security that fully addresses the risks posed by strategic foreign investments from China, Russia, and beyond. This is the fourth in a series of blog posts summarising the new report ‘Protect, Constrain, Contest’, by LSE IDEAS, the foreign policy think tank at LSE.

 
Many countries throughout modern history have used state-backed or -influenced investments abroad to achieve their strategic goals. While the conversation currently focuses on China, investments from other countries have been blocked or unwound on national security grounds by Western governments – and our competitors will continue to use foreign investment as a tool of statecraft in future. Even investments from our closest allies can potentially threaten national security, especially if those allies have previously failed, for example, to adhere to export control laws designed to keep critical technologies out of competitors’ reach.

As concern over strategic investments increases, many countries now seek to adapt their rules around foreign direct investment (FDI) and national security. At least 11 jurisdictions made changes in 2020, amid fears over the security of depressed assets and supply chains raised by the pandemic. So, how do we ensure foreign investment regulations in the West are effectively screening out sophisticated and strategically motivated government-influenced or controlled FDI? I argue that there are three things we need to do to better secure the West against harmful foreign investment while remaining open to legitimate FDI.

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Πηγή: blogs.lse.ac.uk