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Acquisition blocks and redressive payments: what's in the EU's new foreign subsidy action plan?

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By Luke Hurst
Visitors walk under flags of European Union and China in front of The Tiananmen Gate in Beijing Friday, April 25, 2008
Visitors walk under flags of European Union and China in front of The Tiananmen Gate in Beijing Friday, April 25, 2008   -   Copyright  ANDY WONG/AP   -  

The EU has drawn up proposals to tackle foreign subsidies for EU companies, which it says are having an increasingly negative impact on competition in the single market.

There is currently a regulatory gap, with the EU unable to step in to stop the flow of money from foreign countries used to buy EU companies, directly support their operation, or help them to bid for public contracts.

The bloc is facing increasing investment competition from Chinese state-owned enterprises, and recent investments in EU companies from China have raised eyebrows amongst some leaders of member states.

One such example is China’s ‘Belt and Road’ plan, a key part of China’s foreign policy strategy, which saw Italian and Chinese companies signing a number of deals last year, during a visit by Chinese President Xi Jinping.

Italy was the first G7 country to sign up to the plan, with the two countries agreeing to more economic cooperation, especially in the areas of trade, transport, infrastructure, and connectivity.

A spokesperson for the Chinese mission to the EU in Brussels told Euronews, that their attitude on subsidy policy is very clear - to abide by World Trade Organisation rules

The European Commissioner for Competition Margrethe Vestager explained: “Europe's economy is open and closely interlinked to the rest of the world. If this is to remain a strength, we must stay vigilant. That is why we need the right tools to ensure that foreign subsidies do not distort our market, just as we do with national subsidies.”

In a White Paper published today, which is the document containing the proposals for new EU laws, the EU set out its plans for adopting new tools to address the regulatory gap. These include:

  • The establishment of a supervisory body, which could act upon any indication or information that a company in the EU benefits from a foreign subsidy
  • That body could then impose measures to remedy the likely distortive impact, such as redressive payments and structural or behavioural remedies
  • The blocking of acquisitions of companies if they are facilitated by a foreign subsidy and distorts the Single Market
  • The option to prevent such unfair advantage in bidding for EU funding if a foreign subsidy is involved