foreign subsidies, including chinese, tend to distort competition in Europe. After years of stagnation, the Commission is launching finally a "white paper" for the frame and restore fairness in the competition rules. For the moment, it is not an open consultation until 23 September. "We could lead to a legislative proposal in 2021 ", hope to Margrethe Vestager, commissioner for Competition, backed up in this folder by Thierry Breton, its counterpart in the internal Market.
All of this does not fall like a hair on the soup, but takes support on a first communication on China, published in march 2019 and qualified at the time of " rival systems. In point 8 of this text, the Commission planned to " fully address the distorting effects of state ownership and foreign funding of the state in the internal market ". The EU needed to fill gaps in the law of the Union " before the end of the year." It took more time than expected...
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Subsidies are harmful or beneficial
However, there we are. Margrethe Vestager has outlined the approaches of the " white paper ". The case of foreign subsidies that benefit businesses active in Europe, the Commission proposes to make a distinction between those which are harmful and those which would be profitable.
For example, subsidies that help a company to produce it more cleanly, or those which help to support employment in Europe would be admitted. But, if the disadvantages exceed the advantages, the Commission would be in a position to" impose corrective measures, " warns the commissioner Vestager. For example : share with other companies the benefits of the subsidies, notably in research and development.
The second case covers the subsidies of a foreign power to the EU to buy a european company. Here, foreign States would be required to notify their entry to the capital beyond a certain threshold. The lack of notification would be considered by the Commission as a lack of good faith in a sanctioning procedure which would be undertaken. Again, in case of notification, the Commission may take action by proposing solutions in order to respect the principles of fairness (level playing field). If it's not, "the Commission could block the purchase," says the commissioner Vestager.
public Market : to block an offer that is too low
Thierry Breton has detailed the third case : a company-subsidised, in its bid for a tender in a public market, a european and who, because of the state aid received, is found to be the best evaluated bid. This is no small challenge since, as pointed out by Thierry Breton, " 250 000 entities launch of the european public procurement for a total amount of 2 000 billion euros, or about 14% of the european GDP ".
There is already a rule that makes null and void a public contract when the bid of any bidder is found to be too low. "But it is very little implementation because it is too heavy, is unclear," reported Thierry Breton. There should be more flexibility with the surveillance and the "white paper" proposes to give the national supervisory authorities of public procurement as a means to check in advance if the foreign offers from companies benefiting from grants undue. "The competition would be blocked and an investigation would be conducted in parallel," says the commissioner. It is obviously necessary to examine the case fast enough and the Commission shall organize its services accordingly...
" everyone is welcome, but it must respect our rules ", stresses Thierry Breton, who had already had the opportunity to implement this principle in the case of Huawei and 5G through a "toolbox" of europe. Our rules on State aid are very strict : a business in the EU may not benefit from grants of up to € 200,000 over three years. In China, the three operators of 5G have received 19 million euros each by the only mega-city of Shenzhen (12 million inhabitants)... According to the Wall Street Journal article of December 25, 2019), Huawei would have received $ 75 billion of State aid through various channels, figures denied by the company. The State capitalism of China raises the obvious question of the unfairness of the world competition...
The Commission does not follow Merkel
On may 18, Angela Merkel, announcing the franco-German agreement on the stimulus funds, has drafted a major evolution compared to the German position in terms of competition. To say it in a word, everything that could restrict the trade was viewed by Berlin as disguised protectionism. Germany is the only country to record a trade surplus with China, which has long been able to explain this reluctance to strengthen the defenses of commercial Europe.
But, on the 18th of may, everything has changed : "We will try to create european champions, she said. In the past, there may be applied a competition law which was still quite focused on the competition law within the european Union and it was found that South Korea, China, the United States, etc were placing a bet, as to them, on champions world. [...] We must have the courage to create champions at the global level and this is what we're going to do. "
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The direction of the Commission through the "white paper" is not it. The Commission does not seek to copy the chinese model of promoting european champions subsidized. It does not deny its position in the folder Siemens-Alstom. Margrethe Vestager has been very clear on this point : "What we ask is a reciprocal and equal conditions. [...] We're not going to sacrifice the benefits of competition to do the same thing that others do, namely, to subsidize the companies. Not because we sacrifierions the idea that the market is there to serve the consumers with fairness and equity, and a fair price. "
on The side of the Elysée palace, it welcomes this initiative of the Commission, which comes to complete the panoply of defences of the Union. "They are changing concepts and software which are fundamental in Europe, comments on the entourage of the head of State. They do not need to be that defensive. "China has been refused by Europe the market economy status to Beijing just abandoned his complaint in this regard at the WTO. It is a small victory that legitimate the EU in its approach to the chinese giant. The chinese authorities have also acknowledged in November last year to protect 100 geographical indications agri-food and undertake not to counterfeit them.
For information, the Commission has launched, in the past year, 16 investigations, compared to 10 in 2018) to the facts of dumping and imposed 12 new measures of commercial defence (compared to 6 in 2018). So that by the end of 2019, the EU had put in place 140 trade protection measures, which is 5 % higher than the previous year. "These measures included 121 anti-dumping measures, 16 measures, anti-subsidy and 3 safeguarding measures ", says the Commission. China, with 93 of the anti-dumping and anti-subsidy existing, dominates the charts, ahead of Russia (10 measures), India (7 measures) and the United States (6 measures).