Statement by Executive Vice-President Margrethe Vestager on the Commission’s proposal for a new Regulation to address distortions caused by foreign subsidies in the Single Market

Margrethe Vestager, Executive Vice-President of the European Commission in charge of Europe fit for the Digital Age. Co-operators:
Photographer: Aurore Martignoni

European Union, 2021
Source: EC – Audiovisual Service

This article is brought to you in association with the European Commission.

“Check against delivery”

Today, the European Commission has adopted two initiatives that will help build a stronger and more resilient European economy. We’ve put forward legislation that will give us the power to tackle foreign subsidies that harm fair competition in the Single Market. And we’ve updated the Industrial Strategy that we adopted last Spring. Both initiatives are firmly based on our European strengths – openness to trade, fair competition and diversity in size.

Let me start with our proposal on foreign subsidies.

Europe is a trade and investment superpower. In 2019, the stock of foreign direct investment in Europe was worth more than 7 trillion euros. That’s a quarter of all the foreign direct investments in the world. And that openness to investment is good for us. It supports growth and innovation – and 16 million European jobs.

But openness requires fairness. When you open your home to guests – and let’s hope we will soon be able to do that again – you expect them to treat your furniture and belongings with as much care as you do. It’s the same with our Single Market: we want every company that operates in Europe, no matter where it comes from, to respect the house rules.

One of the oldest rules we have is that we don’t allow subsidies which harm fair competition. For more than sixty years, our State aid rules have made sure that aid from European governments doesn’t undermine fair competition on our market. But until now, companies have been free to use foreign subsidies to buy up businesses here in Europe. Some have been able to undercut their competitors in public tenders, not because they’re more efficient, but because they get financial support from foreign countries.

That’s not fair on companies that don’t get those subsidies. It’s not fair on European workers and consumers, if subsidies drive the best companies from the market. And it has to stop.

That’s why, last June, we published a White Paper, with ideas about how to fix this problem. And today we’re presenting our proposal for a new regulation to stop foreign subsidies harming fair competition in Europe.

This regulation means that companies, which get foreign subsidies, will need our approval also under this framework, before they implement big mergers in Europe. Companies will have to tell us what subsidies they’ve received when they bid in large public tenders – and they won’t be able to win those tenders without our OK. And we’ll have the power – on our own initiative – to investigate any company, to see if it has received foreign subsidies that harm fair competition in Europe.

To do that investigation, we’ll have similar powers to the ones that we already have in competition cases. We’ll be able to demand information from companies – and inspect their premises if need be. And we’ll be able to fine companies that don’t cooperate with us, or don’t tell us the truth.

With that information at hand, we’ll be able to judge if a foreign subsidy harms competition – and whether, on balance, that harm outweighs any benefits to the single market.

We’ll give companies the chance to fix the problems we find, by submitting binding commitments that compensate for the harm the subsidy does. But if companies are not willing to do that, we will impose redressive measures ourselves or, in case of large tenders and acquisitions, we won’t let them complete the transaction, or win the bid.

We’ll be able to make companies sell parts of their businesses, or give fair access to the subsidised infrastructure such as a port or an airport. We’ll have the power to order a company to pay back the subsidy, if we can make sure such repayment will be effective in practice. And we’ll have the power to enforce these decisions with fines that can go up to 10% of the company’s turnover.

So this new regulation – together with our State aid rules – will make us the first trading bloc in the world with tools against harmful subsidies, from both inside the Single Market and from Non-EU countries. And that, in turn, will help make our markets more fair and contestable.

Europe’s economy is open and closely interlinked with the rest of the world.

And we are committed to keep it that way, focusing on international cooperation, based on fair and effective competition. At the same time, we will act assertively when that’s needed to keep our economy working well. Because, if our openness is to remain a strength, we must stay vigilant to ensure a fair competition for all companies operating in the European Union.

We are also presenting today the Update of our Industrial Strategy that we launched just a year ago. The aim of the strategy is to help Europe’s industry lead the twin transition towards climate neutrality and digital leadership. It builds on our strong European industrial base, the diversity and the talent of people and their innovative capacity – to enhance our competitiveness.

We are relaunching it now, updating it with what we have learnt during the pandemic. I would encourage you to have a look at the three Staff Working Documents that offer a lot of important analysis, sound evidence and facts as a base for our policy-making.

People in many businesses have suffered. This goes for a number of sectors, including tourism, cultural and creative industries, textiles or mobility. At the same time, this past year has shown our societies and economies at their best. We have seen health care professionals and front line workers continue doing their jobs despite very difficult circumstances. Essential services from our electricity grid, our internet infrastructure, waste collection have continued to deliver throughout the crisis. It shows fundamental resilience of our economy.

Businesses have quickly adapted to changes, moving work online and changing production patterns. Many companies, including SMEs, have switched production to help meet urgent needs, whether for personal protective equipment, hand sanitisers or more recently vaccines. Many others have made the shift to e-commerce or used digital tools to find new suppliers.

The past year has also shown us how blockages to the free movement of persons, goods and services can harm our economies. Disruptions in supply chains leading to lack of essential products, high volumes of non-compliant goods, and poor coordination have challenged us heavily. We felt stronger than ever that the Single Market is our most important asset and that we have to make sure it works well.

So we will propose a Single Market Emergency Instrument to help us react more quickly in the event of future crises. It will offer solutions to facilitate circulation of persons, goods and services, and improve transparency on intra-EU export and services restrictions. It will also lead to faster product availability and enhance market surveillance. That can be done through standards setting and sharing or strengthened public procurement co-operation.

Some of the disruptions I have referred to are of a more global nature. Indeed, they have at times put at risk our access to products that we cannot do without. As it’s important to base our policies on facts, we have carried out a bottom-up mapping and we have identified 137 products where the EU can be considered dependent on imports from third countries. My colleague Valdis will tell you more about this. The point is that we need to strike a careful balance. A balance between strengthening our own capacity in strategic areas and ensuring that the EU reinforces its position in global value chains by diversifying external trade and co-operating with our international partners. This is what open strategic autonomy is about.

Because partnership is always the best recipe for success. A genuine dialogue with industry and other stakeholders is crucial to us. So I’m happy that we have launched the Industrial Forum, even within the pandemic, because it will help us shape future directions. We are building on the productive experience of the Battery Alliance led by my colleague Maros Šefčovič. So, we are developing similar initiatives in the areas of raw materials and clean hydrogen. And we’re preparing the launch of alliances on processors and semiconductor technologies, as well as Industrial Data, Edge and Cloud.

Finally, we continue our review of the competition rules, to make sure they support the green and digital transitions while staying firm on the core principles of fair competition in an open Single Market, to the benefit of all Europeans.

Thank you.

Please see here the video on ebs.

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