French President Nicholas Sarkozy has proposed that European nations create sovereign wealth funds to protect national companies from foreign “predators.” This column says that idea is protectionist and without merit. Emerging economies establish sovereign wealth funds to invest foreign reserves or commodity revenue – not to bail out domestic firms and stifle global competition.

In a hard-hitting speech to the European Parliament in Strasbourg on October 21, French President Nicolas Sarkozy proposed that European countries create sovereign wealth funds to protect national companies from foreign “predators.” “I’m…