The foreign subsidies rules must be fixed
The new rules on foreign subsidies have become exactly the administrative giant we warned about. However, there are several powerful measures the Commission can now take to address the problem, writes Stefan Sagebro, expert on industrial policy, competition and state aid.
For roughly two years, the new rules on foreign subsidies have been fully in force. The idea is sound – companies should not be able to receive unlimited subsidies from third countries and then operate freely on the EU’s internal market. A framework is needed to ensure at least a reasonably level playing field in that respect. But the EU’s new rules have brought with them an unpleasant downside. A huge amount of administrative burden has fallen on companies – companies which, in most cases, do not even receive any subsidies, yet still have to report virtually all economic interactions with public entities in third countries.
As the Commission now conducts a review of the rules, it is therefore the administrative burden that we are putting in the spotlight, just as we did before the framework was introduced. We warned back then that the Commission underestimated the number of companies that would be affected by the rules, and unfortunately we were right.
Swedish Enterprise: European Commission’s estimates on administrative burden
Strong measures are now needed to remedy this excessively heavy regulatory burden. Ideally, the Commission should take a major step back. Either by completely removing the requirements for mandatory notifications of so-called “foreign financial contributions” in the context of large corporate concentrations or public procurements. Or by ceasing to require the collection and reporting of such foreign financial contributions – which capture an extremely large number of transactions – and instead focusing specifically on subsidies. If such a far-reaching change is not desired, much can still be achieved through smaller adjustments, for example by raising certain thresholds.