Internal Market, Industry, Entrepreneurship and SMEs

Commission adopts white paper on foreign subsidies in the single market

Commission adopts white paper on foreign subsidies in the single market
Published on: 17/06/2020
The European Commission has adopted a white paper dealing with the distortive effects caused by foreign subsidies in the single market. The Commission now seeks views and input from all stakeholders on the options set out in the white paper.

The public consultation, which will be open until 23 September 2020, will help the Commission to prepare for appropriate legislative proposals in this area.

Executive Vice-President Margrethe Vestager, in charge of competition policy and responsible for the cluster Europe Fit for the Digital Age, said: “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. Today’s white paper launches an important discussion on how to address effects caused by foreign subsidies. The single market is key to Europe’s prosperity and it only works well if there is a level playing field.”

Commissioner for the Internal Market, Thierry Breton, said: “With today’s white paper we deliver a key element for our vision of Europe’s new industrial strategy based on competition, open markets and a strong single market. The level playing field in the single market is at the heart of this initiative and will help our companies operate and compete globally and thus promote the EU’s open strategic autonomy. As part of our single market rule book we need to prevent foreign subsidies from distorting procurement procedures and ensure that firms benefit from fair access to public contracts.”

EU competition rules, trade defence instruments and public procurement rules play an important role in ensuring fair conditions for companies in the single market.

Subsidies by EU countries have always been subject to EU state aid rules to avoid distortions. Subsidies granted by non-EU governments to companies in the EU appear to have an increasing negative impact on competition in the single market, but fall outside EU state aid control. There is a growing number of instances in which foreign subsidies seem to have facilitated the acquisition of EU companies or distorted the investment decisions, market operations or pricing policies of their beneficiaries, or distorted bidding in public procurement, to the detriment of non-subsidised companies.

Moreover, the existing trade defence rules relate only to exports of goods from third countries and thus do not address all distortions caused by foreign subsidies granted by non-EU countries. Where foreign subsidies take the form of financial flows facilitating acquisitions of EU companies or where they directly support the operation of a company in the EU, or facilitate bidding in a public procurement procedure, there appears to be a regulatory gap.

The white paper therefore proposes solutions and calls for new tools to address this regulatory gap. In this context, it puts forward several approaches. The first three options (so-called 'modules') aim at addressing the distortive effects caused by foreign subsidies (i) in the single market generally (module 1), (ii) in acquisitions of EU companies (module 2) and (iii) during EU public procurement procedures (module 3). These modules may be complementary to each other, rather than alternatives. The white paper also sets out a general approach to foreign subsidies in the context of EU funding.

Next steps

The white paper is now open for public consultation until 23 September 2020. In light of the input received, the Commission will present appropriate legislative proposals to tackle the distortive effects of foreign subsidies on the single market.

Background

The European Council in its Conclusions of the meeting on 21 and 22 March 2019 tasked the Commission to identify new tools to address the distortive effects of foreign subsidies on the Single Market.

In its Communication 'A New Industrial Strategy for Europe' of 10 March 2020, the Commission confirmed that by mid-2020 it would adopt a White Paper on an Instrument on Foreign Subsidies to address distortive effects caused by foreign subsidies within the single market.

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