Friday, June 2, 2023

The Twenty-Seven want to regulate foreign subsidies

A non-European state which subsidizes directly, or via a guaranteed loan, one of its national champions to help it take control of an EU company. Or another third country which benefits one of its spearheads in a European call for tenders. This is the kind of distortion of competition that Europeans no longer want.

The Twenty-Seven agreed on Wednesday on a new text which will regulate foreign subsidies likely to distort the internal market. It will enable the Commission to examine any economic activity benefiting from a subsidy from a third country in the context of a concentration operation or a large-scale public contract. It puts an end to an irritating paradox for European companies: while the subsidies granted by EU member states are subject to scrupulous control by Brussels, there is no instrument to verify the subsidies non-Europeans.

The new regulation (the equivalent of a decree in European law) introduces an alert mechanism which will allow member states to report suspicions of problematic subsidies. It sets the notification thresholds at 600 million euros for mergers and 300 million euros for public contracts. The investigations will be limited in time to avoid slowing down the procedures.

Commercial strategy

The Council Presidency will soon start final negotiations with the European Parliament, once the latter has adopted its position. A final agreement would add a second stone to the trade strategy decided by the EU to correct what has been called its “naivety”. In March, Parliament, Commission and Council concluded on a reciprocity mechanism which makes it possible to penalize in European public markets companies from countries which close theirs.

Another so-called ‘anti-coercion’ instrument is being negotiated to deter third countries from restricting trade or investment – or threatening to do so – in order to bring about a change in the political orientation of the EU or the one of its members. This is to be able to respond to threatening behavior such as China adopted by refusing to import certain Lithuanian products after Vilnius opened a representative office of Taiwan on its territory.


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