With an example from Germany, Christophe Hansen shows why the EU law is necessary: ”In a tender for the Elbe deepening, a Chinese state-owned company recently made an offer that was 30 percent cheaper than its European competitors,” says the MEP from Luxembourg. “That’s only possible with subsidies – and it’s unfair to EU companies.” The Commission in Brussels will soon be able to exclude such nurtured companies from large public tenders or ban them from acquisitions in the EU. This determines an explosive regulation that is to come into force before the end of this year. The main addressees of the regulation are Chinese corporations.
The bill presented the Commission last year. On Monday evening, the responsible trade committee in the EU Parliament adopted its position on this – without dissenting vote. The Christian Democrat Hansen is responsible for the regulation. The Council of Ministers, the legislative chamber of the member states, could also agree on its position as early as next week. Negotiations between parliament, i.e. Hansen, and representatives of the Council of Ministers are to begin immediately afterwards. If both sides agree, the ordinance will be passed, possibly as early as this summer. “The positions are not far apart,” says Hansen.
The law closes a loophole: So far, the Commission’s competition watchdogs can only intervene if EU governments pay their companies subsidies and thus distort the internal market. In addition, the authority can impose punitive tariffs if manufacturers on other continents collect subsidies and therefore export their goods to the EU at junk prices. So far, however, there has been no way of preventing corporations in their home country, for example China, from being subsidized and then taking part in tenders in the EU or bidding on company takeovers. Thanks to the friendly support from Beijing, these corporations can submit very favorable offers or pay moon prices for takeovers.
Hansen says suspiciously low offers are not only written by Chinese companies, but sometimes also by Indian or Russian companies. The Christian Democrat finds it very dangerous when subsidized corporations from Asia buy European technology companies at unbeatably high prices in order to acquire the know-how in this way. “It’s a geostrategic challenge; we’re becoming dependent on it,” he says.
Brussels can ban acquisitions
The regulation now stipulates that corporations must first have takeovers approved by the Commission if they have received a total of 50 million euros in subsidies from non-EU governments within three years. In addition, bidders in large state tenders must inform the Brussels authorities about such aid. After weighing up the advantages and disadvantages, the Commission can impose countermeasures – up to and including a ban on purchasing or participating in the tender.
The draft law specifies threshold values from which transactions must be reported. In their negotiating position, MEPs are calling for these lower limits to be lowered so that the regulation covers more cases. According to them, tenders with a value of 200 million euros should be considered; Takeovers should be examined if the target generates at least 400 million euros in sales annually. In addition, the Commission can take action at any time if it sees fair competition at risk – even if the threshold values are not reached.
This regulation is not the only law with which the EU wants to arm itself against dubious practices by China. It was only in March that Parliament and the Council of Ministers agreed on a regulation that would allow the Commission to block corporations from government tenders if their home country does not grant EU companies similarly good access. European companies have long complained that they are not getting a chance in China – now the EU can threaten Beijing with paying back Chinese suppliers in the same coin if the country does not open up.
In addition, the Commission presented a draft law in December that would enable Brussels to quickly introduce counter-sanctions if an economic power imposed unjustified penalties on an EU state. Another example is China, which imposed a trade boycott on Lithuania. Later in the year, the authority wants to introduce a law against forced labor: In the EU, no more goods may be sold in the production of which forced laborers are involved. There is no doubt that this will also affect China. page 4