EU Makes Moves to Defend Its Economic Interests

European Commission Looks to Correct Market Distortions

The European Union’s executive body, known as the European Commission, will implement restrictions on foreign companies in an attempt to correct market distortions resulting from foreign firms with state subsidies. The Commission is proposing measures to prevent foreign companies that have received a large amount of financial aid from buying up European companies or contending with them for certain EU contracts.

The pandemic revealed Europe’s heavy reliance on Chinese imports—especially when it comes to medical supplies. European countries scrambled to find masks and other equipment during the spread of coronavirus. Some countries even banned the exportation of supplies in order to keep their own hospitals stocked. In the wake of this crisis, the EU is revisiting their investment policies and thinking about how to become less reliant on foreign firms.

Chinese Companies Could Be Impacted

The restrictions were proposed as European countries such as Italy, France, and Germany took steps to protect their companies from damage related to the pandemic. The measures could impact US firms but would probably have more substantial implications for state-owned Chinese companies.

On Monday, the European Commission put a punitive tariff on some Chinese exporters based outside of mainland China. It was discovered that two Egyptian glass-fiber producers received state subsidies with intentions of underbidding European competitors. Despite the tariff, EU officials claim the new measures don’t specifically target China.

New Proposal Contains Penalties, State Aid Reporting, Regulatory Gap

The new proposals outline the possibility of the European Commission working with authorities to examine foreign companies that could be distorting the market. If distortions are found, companies could be ordered to sell assets, repay all subsidies, or provide access to licensed technology.

The proposals would also make it so companies which received any state aid from outside of the EU within three years before an acquisition would be required to pass that information along to the European Commission. Though these proposals have not yet been put in place, they would impact relationships between the EU and many companies around the world.

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