EU Committee

Foreign Subsidies

Location: Online Webinar
Access: Members only
Fee for members: 0
Fee for non-members: 75
The Internal Market Committee welcomed Mr de Smijter, from the Commission’s Directorate-General for Competition, for our first event after summer to discuss the new proposed EU regulation on ‘Foreign Subsidies’.

Globalisation has made world trade become inextricably connected. The openness of the EU’s Single Market has been a great source of foreign investment. Whilst this has historically delivered high economic growth, it has also caused distortions within the Single Market. Member states’ subsidies are always subject to scrutiny, whereas susbidies coming from third countries are not. Therefore, firms active in the internal market that have received non-EU financial contribution have had competitive advantage over their competitors. Furthermore, there is no international agreement that oversees financial contributions. In May 2021 the Commission issued a legislative proposal on Foreign Subsidies to address this discrimination.

With this new regulation, the EU aims to address the regulatory gap existing between EU and non-EU subsidies. The proposal will restore level playfield in the internal market by introducing three tools. Firstly, a notification- based tool to investigate any sort of merging activities- where the turnover is equal or exceeds €500 million and the foreign financial contribution is at least €50 million. Secondly, another notification- based tool to scrutinise bids in public procurements involving a foreign investment by a non-EU government, where the expected value is equal or higher than €250 million. Lastly, a general tool to investigate all other market situations, such as public procurement procedures or smaller concentrations whereby the Commission can start its own initiative and request to be notified. This is also known as exofficio instrument.

During the Q&A session, partipants raised concerns arising from this new regulation. When drafting the proposal, it will be difficult to establish a standard threshold which pleases every member state. Member states are worried that a regulation on foreign subsidies might diminish foreign investment. Moreover, EU states are concerned that their trading relationship with the UK will change- as any sort of financial contribution coming from the UK will be subject to scrutiny.

In conclusion, the Commission has adopted a new legislative proposal whereby foreign subsidies will be regulated the same way EU subsidies are. Although this may change EU’s trading relationships with other countries, it will boost EU’s strategic autonomy and ensure that firms active in the internal market will compete on the merits of the product. The EU will follow the non-discrimination WTO principle, and offer guidance when applying the regulation to Member states. This unilateral measure will help to restore distortions in the Single Market.

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Confirmed Eddy De Smijter

Eddy De Smijter

Head of Unit "International Relations" DG Competition, European Commission
Eddy De Smijter is Head of the International Relations Unit in DG Competition at the European Commission. He joined the European Commission in 2001 as a member of the team that negotiated Regulation 1/2003 on the implementation of the EU competition rules. After the adoption of the Regulation, Eddy De Smijter stayed within the unit responsible for the European Competition Network until his move, in 2005, to the team that is responsible for the Commission's policy on private enforcement of the EU antitrust rules. In that capacity, he was leading the team that on behalf of the Commission negotiated with the European Parliament and the Council, the Directive on antitrust damages actions.