What happens when subsidies are granted by non-EU states to companies operating in the single market?

The EU has strict rules about when and how member states are permitted to provide subsidies or aid, whether in the form of cash grants or other financial contributions, to private companies.

The rule stems from the EU’s single market which allows for the free movement of goods, services, people and capital across 27 member nations with the aim to provide a single economic market across the entire bloc.

So, what happens if a non-EU government, for instance China, provides a subsidy to a private company operating within the EU single market? Such governments are not bound by the same EU state aid rules, which has given rise to complaints by private industry that the recipients of non-EU state aid are being given an unfair advantage, thereby causing a distortion in the single market.

Indeed, in June of this year, the European Parliament and the Council announced they had reached a provisional political agreement on what is being called the EU Foreign Subsidies Regulation.

The European Commission (Commission) published an extensive white paper in 2020 stating that foreign subsidies in recent years may have distorted the EU internal market. 

With the FSR, the EU aims to close the regulatory gap between EU Member States and non-EU countries by granting the Commission the power to investigate financial contributions granted by public authorities of a non-EU country which benefit companies engaging in economic activities in the EU.

Malta Enterprise to host debate

Malta Enterprise will be hosting an event on the Foreign Subsidies Regulation on Friday 16th September at 09:00hrs at Malta Enterprise Conference Hall in Pieta’.

The event; The Impact on the European economy of the EU Regulation on Foreign Subsidies, will be presided over by Minister for Environment, Energy and Enterprise Miriam Dalli and Malta Enterprise CEO Kurt Farrugia. The panel discussion will see the participation of Eddy De Smijter, from the European Commission’s DG Competition, MEP Dr Alfred Sant, the Malta Chamber President Marisa Xuereb among others.

The Foreign Subsidies Dossier aims to address distortions created by subsidies granted by non-EU governments to companies who are operating in the EU’s single market. The Regulation establishes a framework which will allow the European Commission to investigate, monitor and remedy to these instances.

The event will consist of a debate based on the practical implementation and potential outcomes of the Foreign Subsidies Dossier. The discussions will aim to address questions and concerns regarding the dossier, amongst which the prevalence of a level playing-field in the EU’s internal market, the potential impact on the EU’s attractiveness for FDI and how the dossier was perceived by non-EU countries.

It is being organised as part of a series of discussions designed by the EU Affairs Unit at Malta Enterprise to keep the industry and stakeholders abreast on leading EU dossiers.  Interested stakeholders should send an email on euaffairs@maltaenterprise.com to register participation.