Why the coronavirus stirs up economic patriotism

Audio 04:04

By: Dominique Baillard Follow

Like many other advanced and emerging economies, France is strengthening the surveillance of foreign investments. This was announced yesterday by Bruno Le Maire, the Minister of Economy and Finance. This wave of defensive measures is partly supported by the coronavirus.

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At the end of March, Margrethe Vestager , the European Commissioner for Competition, warns the Twenty-Seven against foreign predators who could grab the nuggets of the continent, weakened by the economic crisis. Donald Trump tried to get hold of CureVac, a promising German biotech working on a coronavirus vaccine project. This affair amazed all of Europe.

From now on, a foreign player who wants to acquire a 10% stake in a French company must obtain the green light from the State. This threshold was 25% since January 1, 33% previously. France, like Germany, Japan, Australia and many others, raises the barriers to defend businesses. And this in a growing number of sectors.

Until now; the states, and especially the United States , were very picky about intellectual property and defense industries. But with the shortage of masks, gloves or medicines, the so-called advanced countries realize that it can also be useful to protect their production tool to keep control of their supply. The list of sectors considered to be sensitive is growing in many countries, and health is now prominent in most of them.

Is China the main country targeted by these new barriers ?

It is the most feared and most offensive country. Germany became aware of this in 2016 when the Chinese Midea got its hands on its robot manufacturer Kuka. Since the target of this increased surveillance cannot be named, India has just adopted a curious foreign investment surveillance system targeting all those from neighboring countries, including China, but also Bouthan and Nepal , two countries not really known for their investments abroad.

And we discover that Hong Kong, the archipelago, and therefore not quite a neighbor of India, is nevertheless included in this decree with a priori geographical contours : and for good reason, it is through this territory that transits the majority of Chinese investments made in India. European countries are also seeking to protect themselves from China . However, they do not apply this enhanced surveillance to third countries, with the exception of Italy. The government of Giuseppe Conte has decided to scrutinize all foreign investors, whatever their nationality and on a very wide range of activities. Understandable distrust, many of the Italian industrial flagships have come under the control of large French, Chinese or American companies.

Could this increased vigilance reduce the flow of foreign investment?

It is first of all the recession that will dry up these flows. According to UNCTAD , the United Nations Conference on Trade and Development, foreign direct investment could fall from 30% to 40% this year. A drop comparable to that which followed the 2008 financial crisis - foreign direct investment fell by 37%. Measures taken by states to protect their economic heritage will no doubt accentuate this trend, but no country has an interest in drying up this source of funding. Foreign investments are a growth accelerator, they are welcome to participate in the global recovery of the economy. In France, they represent two million jobs.

IN SHORT

Global energy consumption is expected to drop 6% this year, unheard of since the Second World War . This is the largest drop in volume as a percentage according to forecasts published today by the international energy agency. Demand will drop 11% in Europe, 9% in the United States.

France's GDP fell 5.8% in the first quarter according to the first figure provided this morning by INSEE . Another record in negative, it is the biggest drop ever recorded since the institute began to produce evaluations, in 1949.

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