Agreement on foreign subsidies: ensuring equal competition in the EU | Actuality
The new draft regulation will allow the Commission to investigate subsidies granted by non-EU public authorities to companies operating in the EU. If it finds that subsidies are distorting, it can apply corrective measures and prevent, for example, subsidized companies from outbidding EU competitors in public procurement procedures or from receiving funding Low cost.
More efficient tool
To enhance the effectiveness of EU action, EP negotiators ensured that state-owned companies – which often receive subsidies – are explicitly included in the scope of the regulation. MEPs also shortened the time the Commission has to investigate foreign subsidies that could lead to distortions in public procurement. In addition, Member States, businesses and other interested parties will be able to approach the Commission with information on possible distorting subsidies.
Guidelines and consultation
MEPs fought for more legal certainty and transparency of the process. Accordingly, the Commission will need to issue guidelines on how it assesses the distorting nature of foreign subsidies and judges the market-distorting effect of a subsidy against its potential benefits. They have also ensured that companies can consult the Commission to check whether they must disclose the subsidies received.
Maintain openness, seek multilateral solutions
In order to keep the EU open and promote dialogue, MEPs insisted on allowing the Commission to engage with non-EU countries which have repeatedly awarded subsidies with distortion. Negotiators stress that the EU’s overall objective is to improve multilateral rules on subsidies. MEPs successfully argued that once multilateral rules made the new tool redundant, it could be abandoned.
MEPs also introduced an annual reporting requirement for the Commission.
Finally, negotiators further defined the concept of distorting foreign subsidies and expanded the toolkit for remedial action.
“Our agreement allows us to address foreign subsidies that distort competition. It is not a question of protectionism, but of fairness: we need all operators in the internal market to compete under similar conditions. Along with the International Procurement Instrument, this regulation is an essential part of our growing toolbox. At the same time, we will also intensify our efforts to improve multilateral rules on subsidies. A detailed review clause, which was a key request from Parliament, will also allow us to adapt the instrument in due time,” said President Bernd Lange (S&D, DE), who led Parliament’s negotiating team. .
“While the objective of this instrument is to put an end to the regulatory scrum pitting European companies against subsidized foreign companies in the internal market, the European Parliament has accentuated its multilateral vision. Through the introduction of a dialogue with third countries, the Commission can now not only tackle the consequences of distorting subsidies in the EU, but can also seek to tackle their root causes in third countries,” said rapporteur Christophe Hansen (EPP, LU).
The compromise agreement must now be approved by the Parliament and the Council. This process begins with a vote in the Committee on International Trade.
The EU is a particularly open economy: it is one of the largest trading blocs in the world with 16% of world trade, and in 2021 it received $138 billion in foreign direct investment. There have been a growing number of cases in which foreign subsidies appear to have facilitated the acquisition of EU companies, influenced investment decisions or distorted trade in services, to the detriment of fair competition. The new tool aims to address these distortions until an effective multilateral solution to the problem is found.