The EU suggested a raft of measures to protect its industries from the potential threat of takeovers by companies bankrolled by foreign powers.
EU Commissioner for Competition Margrethe Vestager on Wednesday unveiled plans to bolster local industries in fighting back against mergers and acquisitions, and unfair competition from rivals subsidized by foreign states.
The suggested curbs, which could be formalized in a draft next year, could eventually lead to a ban on some firms from making acquisitions, or force them to divest assets, and allow the European Commission to impose fines. They effectively extend Europe’s system of state-aid limits to businesses worldwide.
“We want to be in control within our own territory,” Vestager told reporters at a news conference. “When it comes to foreign subsidies, we have absolutely no control and no transparency.”
Europe is seeking to carve out its place in the global order. Its latest move comes just after it deployed tariffs to curb China’s Belt and Road Initiative, and just before new legislation on screening foreign-direct investment on national security grounds comes into effect.
In response to Wednesday’s proposals, China urged the EU to stick with WTO rules and “keep clear of protectionist moves, refrain from creating new trade barriers under the pretext of subsidies.”
Subsidies are a commonly used policy instrument, China’s Mission to the EU said in an e-mail to Bloomberg, adding that “developed countries such as those in Europe and the United States are the primary users of subsidy policies.”
Vestager said that the EU remains open for business and that “there is no specific country that we are thinking about” in the demand for “reciprocity” and a level playing field.
The 27-nation EU has been under pressure to better protect its local industries and repatriate supply chains after the COVID-19 pandemic caused the steepest recession in almost a century and spurred a rout in equity prices.
A post-pandemic rescue plan presented last month by German Chancellor Angela Merkel and French President Emmanuel Macron aims to fortify Europe internally, but also contains measures to equip it to better face outside threats.
The 750 billion euro (US$845 billion) recovery package would seek to help those countries most affected by the pandemic and includes a proposal that would allow the EU to take equity stakes in companies.
Governments are particularly alarmed at the prospect of European companies being bought by firms with unlimited credit lines or being forced out of business because rivals can afford to sell below cost.
Manfred Weber, a German lawmaker who heads the biggest European Parliament group, said in a statement that his Christian Democrats party are “extremely concerned that China will benefit from the economic recession in Europe.”
He urged the EU to move faster.
“China will not be impressed by a discussion paper. What we urgently need is legislative proposals to prevent outsiders from buying our strategic companies and know-how at a bargain price,” Weber said.
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