Hostile takeover: US foreign investment in Europe

FDI and Europe

Usually framed as a positive and desirable phenomenon, FDI is in fact a mechanism that gives foreign economic actors the right to own or control resources in another country. When the investment, usually made by companies, is backed by a politically powerful country, FDI can become a means for exerting undue influence or a weapon to limit a nation’s (or region’s) autonomy. The EU should know this. For decades, European countries have vigorously protected and leveraged the influence of European multinationals and their investments across much of the Global South. They have deployed development aid and diplomacy, not to mention trade and investment treaties, to support European business interests, which are seldom in the interests of the host countries. Now the EU has found itself getting a bitter taste of its own medicine.

Embracing freedom of the market as a value to be held above all others, the EU has allowed investors to shape – and increasingly bully – Europe. A wake-up call came with Russia’s invasion of Ukraine, when EU exposure to Russian economic influence(opens in new window) was thrown into sharp relief.

Now, facing economic manipulation from US investors linked to the Trump administration, the EU appears paralysed, unable to respond. Officials do not seem able to process the seismic shift in geopolitical relations. Investment from the US was never benign, but the current administration and closely connected companies are now palpably hostile, and Europe’s policymakers are crumbling under the pressure. 

Perhaps the most obvious example is Big Tech. The vast market power of companies like Meta and Google, and the EU’s inability to deal with it, was widely lamented, even before the broligarchy cosied up to a clearly authoritarian and dangerously unpredictable US president. Now, these tech giants are unambiguously riding roughshod over Europe, leveraging US trade talks(opens in new window) to wring out even more concessions favourable to their business and detrimental to Europeans. 

While Big Tech may loom large, it is far from the only US investor now aggressively pushing Europe around. SOMO’s recent research on ExxonMobil showed the oil giant used its ties to Washington in its successful efforts to demolish a recently agreed EU sustainability law.      

US wealth allied with a dangerous US president

US investment that is closely allied with the current US administration is a threat to Europe. So why is Europe allowing itself to be pushed around? Partly, the answer lies in ideology. The EU has based its economic future on attracting inward investment. The belief that FDI drives prosperity runs deep in European policymaking. Since the early 2000s, the EU’s green and digital transition strategies have been built largely on foreign investment.      

A house divided

Another dimension of the EU’s inability to respond is political. There is no unified EU position on or even a common understanding of the risks posed by hostile US investment. The situation is complicated by far-right political actors like Italy’s Meloni(opens in new window) , who see Trump as an ally and therefore tow his line on US business interests in Europe. 

Member states also compete for FDI, which tends to undermine cooperation. Upcoming SOMO research exposes how a US company that is closely allied to the Trump administration is gaining control over critical energy infrastructure in multiple European countries with almost no regulatory or public scrutiny. A hostile takeover of Europe’s strategic assets is made easy by narrow national views and failures of communication and cooperation amongst states. 

Rules for investors – or just ‘investors rule’?

Europe has tools that recognise that FDI can come with problems. The EU’s FDI screening system, introduced in 2019, encourages countries to assess and share information about certain foreign investments. But the process is weak, and little has been accomplished. In 2023, the EU established an anti-coercion instrument with the explicit aim of protecting the EU and member states from third countries’ economic coercion. As Johnny Ryan(opens in new window) recently wrote in The Guardian, the instrument contains potentially hard-hitting provisions to push back, or push out, unwelcome investment. Yet, it requires member states’ agreement to use it, as well as a recognition that the US under its current administration is coercive.     

Championing European business is not a solution

Faced with growing unease about US dominance, European policymakers are turning to a familiar idea: promoting EU corporate ‘champions’ and supporting European business growth. But this is not a solution. The problem is US corporate power backed by a US corporate president. We cannot combat this by building European corporate power backed by European governments, captured by, or fronting for, business interests. That route only leads to funnelling public funds into private pockets and deepening inequality in Europe.

Moreover, this vision of European competitiveness rests on maintaining exploitative relations with countries in the Global South. Indeed, industries such as car manufacturing and defence(opens in new window) are pushing policymakers to secure access to the minerals of other countries in ways that drive human rights(opens in new window) violations just as they did during past mineral booms.   

A different direction

It is time to fundamentally restructure Europe’s economy, to embrace a post-growth and decolonial economic framework, and to make reparations to countries that Europe has exploited for centuries. This may sound utopian, but what is the alternative? Europe as a chew toy for the US, the broligarchy, China, and Russia. 

Europe must take a different path now, while it still can. We may yet find friends where we have little right to expect friendship, given this continent’s history. In any case, radical economic change is the only real alternative if Europe wants to avoid a hostile takeover that would see it become a wholly-owned subsidiary of USA Inc.