Foreign subsidies: the next gap case

Over the last few decades, Europe has focused on consumer benefits from a more and more globalised economy. Imports from countries with cheaper production costs directly benefit European consumers. Even subsidies that other countries may pay to their companies can ultimately benefit the European economy, as they lead to more investment and value being channeled to Europe in the short-term.

Tough competition at home and a low subsidies environment were seen as the best platform for European companies to maximise efficiency and to outperform rivals on global markets. In the same vein, Europe has been reluctant to support European Champions through subsidies or monopoly rents on the domestic market. This thinking has heavily influenced merger control (Siemens/Alstom etc.) and state aid enforcement.

Until recently, Europe was not too worried about some foreign countries taking a radically different approach. Why would one worry about foreign governments reducing incentives for their companies to become more efficient? Or making imports cheaper through subsidies? Certainly, in the long run, this can only benefit Europe and antidumping tools will safeguard a healthy market structure?

In line with a generally more protectionist environment , the discourse in Europe is changing dramatically. It has moved away from a focus on consumer welfare driven by competition and towards considerations like industrial policy, fairness, security of strategic supply and sustainability.

Yesterday's white paper is yet another indication that the EU is serious about putting these objectives higher up on its priority list. Despite a sense of urgency, it will take a while for legislation to come into force. But the thinking that underpins the white paper will also influence enforcement of the existing rules on trade, competition law and foreign direct investment.