Sant calls Brussels plan to target companies with non-EU subsidies ‘premature’

Labour MEP Alfred Sant has expressed reservations on a proposal for an EU regulation to counter foreign subsidies that distort the European market.

Sant was speaking during an exchange of views in the EP’s economic and monetary affairs committee, where he is the S&D’s rapporteur on the ECON commitee’s opinion for the proposed regulation.

The proposal is for the EU to disallow firms benefiting from non-EU state aid to compete in the European market, where European firms are already subject to rules that prohibit state aid.

Under the proposal, the European Commission would scrutinse investments and procurement tenders to ensure that foreign subsidies do not create unfair conditions for European companies. The tool could ensure European and foreign companies compete on an equal footing.

Sant said that while the proposal identified was an important issue, he was not convinced that the regulation would be the best way to tackle it. “To be honest, I am unconvinced that the method chosen to counter foreign subsidies and how it is being proposed to deploy that method are the right approaches.”

Sant agreed that state aid or subsidies from outside the Union had a competitive impact in the single market, but pointed out that the European Commission had a lack of hard data on foreign subsidies. “The regulation will apply to what has happened in foreign jurisdictions over which the EU has no say. If the belief is that a regulation in our arsenal will deter the deployment of foreign subsidies, then would it not have been better first to push for a multilateral deal on the whole issue rather than start with a regulation?” Sant asked.

But the MEP also warned that attempting a global reach for EU state aid rules could easily give rise to tit-for-tat reponses from economic power like the United States, with allegations that eurozone exchange rate policies are used as hidden subsidies to EU exporters and investors.

Sant even poked the Commission’s eye by highlighting the reality of large COVID state subsidies: “As of now, due to COVID, both inside the single market and worldwide, governments are pumping out aid and subsidies to keep economies afloat. We are proclaiming the need to boost investment right across economies. So is this a good time to unilaterally take action over perceived or real foreign subsidies?”

Sant said called the investigative tools at the Commission’s disposal “extremely blunt”, saying giving such powers to Brussels could exclude national authorities from scrutinsing the foreign subsidies to companies operating in the single market.

“All these factors could have an inhibiting effect on investments, including greenfield ones. I realise that my reservations may not be shared by colleagues, and I will of course play along with all efforts that will be made, on a majority basis, to improve the text before us.

“However I believed it useful to signal that while the Regulation does identify an important problem, it might not be proposing the correct solutions.”