In a speech to US officials inWashington DC on 8 November 2007, PeterMandelson, the EU Commissioner for Trade, indicated that new transparency rules should be applied to foreign state investments into EU and US assets of strategic importance. This is in contrast to commentsmade in July when he seemingly endorsed state-backed funds, and could lead to regulatory action at the EU level.

There is a growing concern that some countries (eg, Russia, China, and the Gulf States) have bought, or are looking to acquire, assets for political or strategic gains rather than for simplymarket investment reasons. There are also worries that foreign states acquiring US and EU assets could lead tomarket instability if they buy and sell.

Responding to this increasing unease,Mandelson declared that, “I believe there is a place for oversight of sovereign investment in the genuinely strategic parts of our economies – although determining which sectors thosemight be is hard enough…[w]hat we need is a set of principles agreed internationally – a sort of code of conduct for investors and recipients of investment – that will establish the ground rules for the global investment of sovereign wealth.”Mandelson added that this should include full disclosure of asset ownership by state funds.

Mandelson’s speech is viewed as a departure from his defence earlier in 2007 of a Chinese project to purchase a stake in Barclays’ takeover bid for ABN Amro. At that time, he was perceived to be reluctant to advocate regulatory intervention to thwart state-backed funds. Mandelson’s apparent shift in tone towards foreign state investments may arise from difficulties European investors are confronted with as they attempt to penetrate the growing Indian and Chinese markets. Stringent regulations in these two countries often act as a formidable barrier for foreign investors hoping to secure significant holdings in the industrial and financial sectors. According to Mandelson, “I think that we can legitimately expect those who want to invest in our economies to reciprocate by giving access to our capital in their own markets”.

However, Mandelson warned that the EU and US must act with caution when considering a code of conduct for investors and recipients of foreign investment: “The EU and the US are the biggest exporters of foreign direct investment in the global economy, and some US$300 billion of our own investments depend on the argument that such capitalmovements pose no threat…We have nothing to gain froma protectionist turn in global investmentmarkets”.