Brussels Will Strengthen Its Defenses Against Chinese Subsidies

The EU and China are becoming increasingly separated. The sanctions imposed by both trading partners complicate the processing of the investment agreement that the European Commission and Beijing closed last December, after more than seven years of negotiation. The list of European grievances on the problems of the bilateral relationship is long. And the increased harmony on trade issues with the US administration of Joe Biden has also strengthened cooperation with Washington to address the challenges posed by China's authoritarian might.

Europe is trying to get China to conform to multilateral economic and trade rules through joint pressure with the US and other countries with similar priority like Japan, and also through the World Trade Organization.

But at the same time, the EU has been strengthening its trade defense instruments for five years and creating new tools to protect itself from China's growing power and abusive practices.

Next week, the Commission will continue to shore up its arsenal with a legislative proposal to avoid the disruptive impact of companies backed by public subsidies in the European market.

Among other objectives, the community initiative aims to avoid the risk that foreign firms, subsidized by their governments, may take over European companies whose valuation has sunk as a result of the impact of the crisis caused by covid-19.

Dombrovskis hopes to strengthen relations with China, which can give the world economic 'sorpasso' Foreign companies that acquire more than 35% of a European company with revenues of more than 100 million euros must report whether they have received State aid in excess of 10 million euros. For those that are already present in the EU, they must inform if they have received more than 200,000 euros over at least three years, according to a first draft of the proposal to which Reuters had access, and that it has been able to undergo changes during its processing. Foreign companies that do not report aid could be penalized with fines or banned for their purchase operations, or they could be forced to sell assets if they have gained a competitive advantage illegally.
"It is clear that we need to relate to China" and "find a way to manage the relationship" because in a few years it will be the largest economy on the planet, the Vice President of the Commission and head of Trade, Valdis Dombrovskis, recalled yesterday at a seminar. The Latvian announced that they will also present another instrument at the end of the year to address coercive practices in third countries.
Unbalanced relationship Dombrovskis insisted that the commercial relationship with China is "unbalanced", for example in the opening of the market. In addition, the EU and the US have long pressured China for the industrial subsidies it grants to their firms, or the forced transfer of technology that it imposes on foreign firms on its territory. During the same seminar, the managing director of the WTO, Ngozi Okonjo-Iweala, stressed that, to solve the problems with Beijing, "it is important that China does not feel the goal" or then there will be "a lot of resistance". But she was confident with making "some progress" if the negative impact of subsidies is proven with data. Of course, he raised a broader debate by recalling that, for some developing countries, it is very important that the issue of agricultural subsidies is also addressed, such as the European Common Agricultural Policy. He wants this matter to be addressed at the annual WTO meeting at the end of the year. Okonjo-Iweala explained that his intention is to tackle the challenge of subsidies as a whole, for which the WTO is cooperating with the World Bank and the OECD to have a clear x-ray of its impact.