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EU targets unfair competition from China

The European Commission on Wednesday launched a proposal to limit the operation in the bloc countries of state-backed foreign companies, a response to the strengthening of China.

With this proposal, the Commission intends to develop the means to block acquisitions or access to a public market if a foreign company is heavily subsidized.

“The opening of the single market is our main asset, but it must be accompanied by a certain fairness”, explained the European Commissioner for Competition, Margrethe Vestager.

The official stressed that current legislation allows the European Union (EU) to control the aid granted by member states, but not that granted by third countries, which generates distortions of competition.

This proposal is part of a hardening of Europe in relation to China, its second largest trading partner, after the United States, and with whom it strives to maintain an economic and diplomatic balance.

On the one hand, Germany wants to keep open links with a privileged destination for its exports; on the other hand, several Member States are concerned about unfair competition from heavily subsidized Chinese companies.

The tension between the two blocs is also political: the EU has imposed sanctions against China, which it accuses of human rights violations in the Xinjiang Uyghur autonomous region.

China responded with sanctions to several European parliamentarians, academics and the German think tank MERICS.

According to the legislation presented this Wednesday, a foreign company that intends to acquire a European company with an annual turnover of more than 500 million euros (600 million dollars) must notify the European Commission “of any financial contribution it receives from a public authority of a third country “.

The same would apply to a group wishing to operate in a large EU public market, such as railways or telecommunications, worth more than € 250 million ($ 300 million).

Otherwise, the Commission could impose fines.

– “Too naive” –

In the event of distortion of competition, the Commission could require corrective measures, and in some cases even prohibit a concentration or the award of a public contract to the company in question.

Zero interest loans, preferential tax treatment or simply direct grants could be part of the aid that is seen as elements that distort competition.

The business organization BusinessEurope sees the proposal – which must now be considered by the European Parliament and member states – as “a step in the right direction,” according to a statement.

The text is not officially intended to counter any particular country, but European sources agree that China is at the center of concerns.

The initiative was launched after the surprise investment agreement concluded at the end of 2020 between Brussels and Beijing.

But Commission Vice President Valdis Dombrovskis told AFP on Tuesday that the “efforts” of his departments for that agreement were “suspended.”

“In the current situation … the environment is not conducive to the ratification of the agreement,” he said.

In response, this Wednesday the head of the German government, Angela Merkel, said that “despite the difficulties that will surely arise for the ratification [de ese acuerdo], I think it is a very important task. “

This agreement will be “mutually beneficial,” said the German leader, due to the commitments it contemplates on market access, compliance with international labor standards and trademark protection.

Brussels also released an update to its industrial strategy on Wednesday to help the EU reduce its dependence on foreign countries and, in particular, China.

Internal Market Commissioner Thierry Breton stressed that the EU had been “too naive” in its approach to certain strategic sectors, such as microchips, mainly produced in Asia.

The pandemic has taught the EU that “yesterday’s partner may not be today’s partner,” Breton said.

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