The European Commission’s Economic Security Strategy was big on promises of future instruments of economic resilience but short on actual tools ready to go.

Almost two years later, some of the instruments envisioned by the Commission are starting to take shape. At the same time, we are getting a glimpse into the initial workings of existing export controls on dual-use items.

In January, the Commission published its recommendation to member states for outbound investment review. The proposal suggests that member states should track such investments in the coming year, especially zeroing in on risks of technology leakage, to provide the Commission with more data on whether such a tool is necessary.

Of the tools proposed by the Commission in its 2024 package of initiatives, outbound investment review was the most controversial, seemingly lacking a clear justification. During the consultation on the White Paper on Outbound Investments, business groups were highly sceptical of it. BusinessEurope found the public debate about the need for a new tool too truncated, while Germany’s BDI rejected it outright.

At the core of BDI and BusinessEurope’s critique is the opinion that export controls and foreign direct investment screening (FDI) already cover what outbound investment screening is aimed at.

However, there does seem to be an unplugged hole in the EU’s economic security infrastructure that the outbound investment initiative would fill. Sensitive technology need not be exported to end up in hostile hands – sharing of skills, technology and techniques through investments could also do the trick. The monitoring recommended by the Commission will hopefully reveal how big a problem this is – if a problem at all.

Around the same time as the outbound investment screening recommendation appeared, the European Parliament published its draft amendments report to the Commission’s revision of FDI screening rules. While only a draft report, it marks a significant willingness in the Parliament to shift competencies from the national to EU level.

Under the revised rules, member states retain control over FDI screening as it is a key national security concern. Other member states and the Commission should be notified of screening decisions and due consideration given to their opinions on the matter, but that’s about it.

The Parliament amendments upend the situation. Where they to be approved, which is unlikely in the face of inevitable member state pushback, the Commission would be granted wide-ranging powers to investigate FDI itself and overrule member state decisions. A greater emphasis is also put on making sure that greenfield investments in the EU secure value-added production in the bloc.

With Chinese manufacturers increasingly investing in the EU, often to bypass tariffs, making sure that not only the least valuable parts of the value chain get based in Europe has become important. In this regard, one amendment suggests “commitments by the investor to maintain or create local added value” as a remedy to suspect investments.

The current FDI screening mechanism lacks bite and leaves too much to be decided by member states with varied interests and understanding of risk. Unlikely as they are to become reality, the proposed amendments would help to remedy this weakness.

Finally, the Commission recently published its first report on export controls on dual-use items. With additional export control measures being tabled as part of the economic security package, interest is high in how widespread the need for such controls is.

In 2022, the total amount of authorizations and notifications for dual-use trade was 138,764, according to the Commission, amounting to €57.3 billion worth of goods. Of these, 813 requests for dual-use trade were denied. This amounted to less than a billion euros in trade.

The numbers aren’t staggering but show a non-negligible stream of problematic dual-use trade. The question is whether additional levers for export control are needed, as proposed in the Commission’s White Paper on Export Controls. What is slipping through the cracks?  One can always argue that it’s good to have tools ready to go but recent American examples of tech export controls have shown their limits. Nevertheless, in turbulent times it may be better to over-prepared than lag behind.