New tool to protect internal market against distortive foreign subsidies

(Credit: Unsplash)

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


Parliament set its negotiating position on legislation designed to counteract market-distorting foreign subsidies granted to companies operating in the EU.

The new tool gives the EU Commission the power to investigate and counteract market-distorting foreign subsidies granted to companies set to acquire EU businesses or take part in EU public procurement.

The goal is to ensure fair competition among firms active on the EU market by establishing equality of opportunity; while EU countries have to abide by state aid rules, so far there has been no comparable regime in place for support granted by non-EU countries.

With 627 votes for, eight against and 11 abstentions, Parliament agreed on Wednesday that the Commission must be able to investigate and mitigate the effects of such support that can take the form of foreign capital injections, loans, fiscal incentives, tax exemptions and debt forgiveness.

Wider scope, less red tape

In its negotiating position, Parliament extended the scope of the new rules to a larger number of acquisitions, mergers and public procurements by lowering value thresholds that set in motion the obligation to inform the Commission about subsidies.

MEPs also reduced red tape for companies by, for instance, shortening the period the Commission has to investigate foreign subsidies given to companies.

More transparency and legal certainty for companies

To make the process more transparent, Parliament calls on the Commission to put forward guidelines on how it assesses foreign subsidies and balances market-distorting effects against potential wider benefits.

Finally, MEPs ensured that EU countries and companies can inform the Commission confidentially about potentially distortive subsidies, and that firms can consult the Commission informally on whether they need to notify it about their subsidies.

Quote

“With this Regulation we can finally end the longstanding regulatory free-for-all that pits European companies, subject to rigorous state aid control, against foreign companies that can benefit from distortive foreign subsidies on the internal market. From now on, the same rules will apply to everyone. Our aim is to let fair competition rule, and to give impetus to the global fight against distortive industrial subsidy schemes,” Rapporteur Christophe Hansen (EPP, LU) said.

Next steps

The adopted text serves as the mandate for negotiations to agree on the final version of the new regulation. The first such negotiation with the Council is set to take place on Thursday 5 May.

Background

With the EU market open to foreign investment, there has been a growing number of instances in which foreign subsidies seem to have facilitated the acquisition of EU undertakings, influenced investment decisions or distorted trade in services, to the detriment of fair competition. The new tool seeks to address these distortions until an effective multilateral solution to the problem is found.

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