Abstract
In recent years, there has been an increased concern that companies receiving foreign subsidies may have an unfair advantage when they perform economic activities in the EU, which undermines fair competition in the EU internal market. Different from aid granted by Member States, which is subject to EU State aid control, foreign subsidies currently go largely unchecked. To launch a debate on possible solutions to address this regulatory gap, the European Commission published in June 2020 a ‘White Paper on levelling the playing field as regards foreign subsidies’. After an extensive consultation of the ideas proposed in the White paper, the European Commission adopted in May 2021 a proposal for a Regulation on foreign subsidies distorting the internal market. This article explores the subject of these two documents, describes the development of the legislative proposal and explains the rationale behind the proposed actions.
The information and views set out in this article are those of the authors and do not necessarily reflect the official opinion of the European Commission.
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Notes
- 1.
European Commission, White Paper on levelling the playing field as regards foreign subsidies, COM(2020) 253 final, 17 June 2020.
- 2.
European Commission, A New Industrial Strategy for Europe, COM(2020) 102 final, 10 March 2020.
- 3.
European Commission, Summary of the responses to the public consultation on the White Paper on levelling the playing field as regards foreign subsidies. October 2020, https://ec.europa.eu/competition/international/overview/WP_foreign_subsidies2020_summary_public_consultation.pdf.
- 4.
European Commission, Commission Work Programme 2021, COM(2020) 690 final, 19 October 2020, Annex 1.
- 5.
European Commission, Feedback received on: Trade & investment – addressing distortions caused by foreign subsidies, October 2020, https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12621-Trade-investment-addressing-distortions-caused-by-foreign-subsidies/feedback?p_id=8607947.
- 6.
DG Competition (2021).
- 7.
European Commission, Proposal for a Regulation on foreign subsidies distorting the internal market COM(2021) 223 final, 5 May 2021.
- 8.
European Court of Auditors (2020), p. 47.
- 9.
European Parliament, Report on competition policy – annual report 2019, A9-0022/2020, 25 February 2020.
- 10.
European Parliament, Resolution on the EU Trade Policy Review, P9 TA(2020)0337, 26 November 2020.
- 11.
Council of the European Union, Conclusions on a deepened Single Market for a strong recovery and a competitive, sustainable Europe, 10698/20, 11 September 2020.
- 12.
European Council, Special meeting of the European Council (1 and 2 October 2020) – Conclusions, EUCO 13/20, Brussels, 2 October 2020.
- 13.
DG Trade Statistical Guide, August 2020, excluding intra-EU trade, https://trade.ec.europa.eu/doclib/docs/2013/may/tradoc_151348.pdf.
- 14.
European Commission, EU trade agreements: delivering new opportunities in time of global economic uncertainties, Press release IP/19/6074, 14 October 2019.
- 15.
UNCTAD (2020).
- 16.
Eurostat (bop fdi main, bop fdi flow), accessed on 24 March 2021.
- 17.
World Bank (2021), p. 7.
- 18.
Evenett and Baldwin (2020).
- 19.
European Commission, Impact Assessment accompanying the Proposal for a Regulation on foreign subsidies distorting the internal market, SWD(2021) 99 final, 5 May 2021.
- 20.
Business Europe (2020).
- 21.
European Commission, Impact Assessment accompanying the Proposal for a Regulation on foreign subsidies distorting the internal market, SWD(2021) 99 final, 5 May 2021.
- 22.
European Commission, Summary of the responses to the public consultation on the White Paper on levelling the playing field as regards foreign subsidies, https://ec.europa.eu/competition/international/overview/WP_foreign_subsidies2020_summary_public_consultation.pdf.
- 23.
- 24.
DG Competition (2021).
- 25.
Agreement on Subsidies and Countervailing Measures (SCM Agreement), April 15 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1869 UNTS 14. [Not reproduced in ILM].
- 26.
European Commission, Fitness check of the 2012 State aid modernisation package, SWD(2020) 257 final, PART 1/4, p. 56.
- 27.
European Commission, Fitness check of the 2012 State aid modernisation package, SWD(2020) 257 final, PART 1/4, p. 77.
- 28.
European Commission, Fitness check of the 2012 State aid modernisation package, SWD(2020) 257 final, PART 1/4, p. 78.
- 29.
Commission Directive 2006/111/EC of 16 November 2006 on the transparency of financial relations between Member States and public undertakings as well as on financial transparency within certain undertakings, OJ L 318 17.11.2006.
- 30.
Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings, OJ L 24, 29.1.2004.
- 31.
General Agreement on Tariffs and Trade (GATT) 1994, April 15 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1867 UNTS 187, 33 ILM 1153.
- 32.
WTO, Chair cites “chronic” low compliance with subsidy notification requirements, 27 October 2020, https://www.wto.org/english/news_e/news20_e/scm_27oct20_e.htm.
- 33.
WTO, Council for Trade in Goods, Procedures to enhance transparency and strengthen notification requirements under WTO Agreements, JOB/GC/204/Rev.4, 24 November 2020.
- 34.
Joint Statement of the Trilateral Meeting of the Trade Ministers of Japan, the United States and the European Union, Washington, D.C., 14 January 2020, https://trade.ec.europa.eu/doclib/docs/2020/january/tradoc_158567.pdf.
- 35.
General Agreement on Trade in Services (GATS), April 15 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1B, 1869 UNTS 183, 33 ILM 1167.
- 36.
Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union, OJ L 176, 30.6.2016.
- 37.
Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, OJ L 79I, 21.3.2019.
- 38.
European Commission, Amended proposal for a Regulation of the European Parliament and of the Council on the access of third-country goods and services to the Union's internal market in public procurement and procedures supporting negotiations on access of Union goods and services to the public procurement markets of third countries, COM(2016) 34 final, 29 January 2016.
- 39.
Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts, OJ L 94, 28.3.2014, p. 1–64. Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC, OJ L 94, 28.3.2014, p. 65–242. Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC, OJ L 94, 28.3.2014, p. 243–374. Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC, OJ L 216, 20.8.2009, p. 76–136.
- 40.
Communication from the Commission, Guidance on the participation of third country bidders and goods in the EU procurement market, C(2019) 5494 final, 24 July 2019.
- 41.
The White Paper also covered the issue of EU funding, which is partially addressed in the proposed Regulation. If a company competes for support from the EU budget, it needs to demonstrate the financial viability of the proposed project. By having received a foreign subsidy, the company may be in a better position to obtain that funding compared to its competitors. Where EU funding is distributed through procurement procedures under shared management, the mechanisms developed in the Regulation would also apply. EU funding distributed through direct or indirect management, however, is not addressed by the proposed Regulation. In order to deal with the issue, the Commission will explore the possibility to propose amendments to the Financial Regulation (Regulation (EU, Euratom) 2018/1046, OJ L 193, 30.7.2018, p. 1–222).
- 42.
Guidance on the notion of “control” can be found in the Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings, OJ C 95, 16.4.2008, p. 1.
- 43.
Article 107(2) and (3) TFEU.
- 44.
Regulation (EU) 2019/712 of the European Parliament and of the Council of 17 April 2019 on safeguarding competition in air transport, and repealing Regulation (EC) No 868/2004, OJ L 123, 10.5.2019, p. 4–17.
- 45.
Regulation (EU) 2016/1035 of the European Parliament and of the Council of 8 June 2016 on protection against injurious pricing of vessels, OJ L 176, 30.6.2016, p. 1–20.
- 46.
Agreement respecting Normal Competitive Conditions in the Commercial Shipbuilding and Repair Industry, OECD/LEGAL/0277.
- 47.
Council Regulation (EEC) No 4057/86 of 22 December 1986 on unfair pricing practices in maritime transport, OJ L 378, 31.12.1986, p. 14–20.
- 48.
See Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ L 1, 04.01.2003, p. 1.
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Krenek, F., De Smijter, E. (2021). From a White Paper to a Proposal for a Regulation on Foreign Subsidies: Filling a Regulatory Gap in Protecting the EU Internal Market. In: Chi, M., Bungenberg, M., Bjorklund, A.K. (eds) Asian Yearbook of International Economic Law 2022. Asian Yearbook of International Economic Law, vol 2022. Springer, Cham. https://doi.org/10.1007/16517_2021_3
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