The European Union continues to move towards a stronger defence of its trade interests. The European Commission presented its proposal for a regulation to combat foreign subsidies that distort competition in the internal market on Wednesday 5 May.
“The openness of our single market is its greatest strength. But openness requires fairness”, said Competition Executive Vice-President Margrethe Vestager.
With this new proposal, the Commission wants to give itself as much leeway as possible to investigate cases of distortion, while avoiding administrative overload.
For example, it proposes to require companies operating in the EU to notify the Commission only in the case of foreign support or turnover above a certain amount (see EUROPE 12711/9). This applies to company acquisitions, but also to public procurement, where companies bidding for a contract will have to declare sums received from abroad to the contracting authorities if the contract exceeds €250 million.
But the Commission also reserves the right to investigate any other potentially distortive foreign funding, including below the notification thresholds, where it suspects a distortion of competition.
“We can base our investigation on information that comes from the market, a complaint, or a suspicion, for example”, Vestager explained. This is what the European Commission refers to in its regulation as the ex-officio review.
In the case of proven distorting foreign subsidies, non-cooperation, or misrepresentation, the Commission may impose remedial measures or accept undertakings from the company concerned to rebalance the market.
“Unfair advantages granted through foreign subsidies [...] distort the market and provide a competitive advantage based on support received, not on the quality or innovation of the products concerned. Today’s proposal complements our international efforts on this issue”, said Vice-President for Trade Valdis Dombrovskis.
A generally well received proposal
The proposal for a regulation was generally well received by the various stakeholders, including MEPs from the EPP, Renew Europe, S&D and Greens/EFA groups in the European Parliament.
For the Chairman of the Committee on International Trade, Bernd Lange (S&D, Germany), “this Commission proposal is a necessary step towards fair competition”.
The chair of the European Parliament’s delegation for relations with China, Reinhard Bütikofer (Greens/EFA, Germany), “hoped that the European Commission, instead of continuing to dream about the China Investment Agreement (CAI), will now focus on equipping Europe with a toolbox to prevent third country competitors active in European markets from benefiting from unfair foreign subsidies”.
European companies are also asking for such a tool that could rebalance the market, but without bringing too much administrative burden. “Today’s legislative proposal includes many of the recommendations made by the European business community after the presentation of the White Paper. We need to move quickly towards the adoption of this comprehensive and effective instrument that tackles distorted competition while providing a reliable legal framework for economic operators”, said Markus J. Beyrer, Director General of Business Europe.
The European Trade Union Confederation (ETUC), on the other hand, has called for more to be done. It believes that foreign subsidies should include more unfair practices. “Companies using child labour, or illegally keep down wages should not be allowed to use their immoral profits by investing and even buying EU companies or winning public contracts”, said ETUC Confederal Secretary Isabelle Schoemann.
See the proposed regulation: https://bit.ly/3vGS4Hc (Original version in French by Léa Marchal)