In Beijing, “we ask for reciprocity and a level playing field,” says EU Commissioner for Competition and Vice-President of the von der Leyen team, Margrethe Vestager, in a press conference with European Commissioner for the Internal Market Thierry Breton. But “we don’t have it in a specific country,” Vestager adds, when asked about China.
However, the document drawn up in March of last year by the European Commission then led by Jean Claude Juncker (‘Foreign direct investment in Europe’, dated 13 March 2019) is clear on who the suspects of the new European ‘hunt’ are to those who distort the market. Acquisitions by foreign companies with state subsidies “have grown in recent years,” says the study by the Commission. In particular, they grew at the turn of the 2008 crisis: “China, Russia and the United Arab Emirates stand out for a total of 18 acquisitions in 2017, triple compared to 2007.” And, although “traditional” investors such as the United States, Switzerland, Novergia, Canada, Australia and Japan still control 80% of European assets in foreign hands – continues the document – “new investors” have emerged “. Among them, China is the one that has invested the most, especially “in the construction of specialized aircraft and machinery”. And there is also India: “in the pharmaceutical industry”.
So today Palazzo Berlaymont is churning out this ‘White Book’, which remains fairly generic on the way to go. It serves to open a consultation with the Member States, which will run until 23 September. In 2021, the formal legislative proposal should arrive, a sort of European ‘golden power’ to fill the legislative vacuum that allows non-European companies subsidized by public aid to shop in the old continent and distort the internal market. So far, in fact, Brussels has given itself rules to limit state aid by member countries to their national companies: it is clear that this is not enough, now that new world superpowers (China, Russia, India) have emerged with expansionist aims in Europe and now that the historical relationship between Europe and the USA is in crisis.
Three paths are identified in the White Paper. The first proposes the creation of a general tool to identify all possible situations in which foreign subsidies can create distortions. Responsible authorities – those at national level or the Commission – can impose ‘remedies’ such as fines or the imposition of conditions on companies. The second is dedicated to foreign subsidies which facilitate the acquisitions of EU companies. The Commission proposes that companies benefiting from aid from a non-EU government should notify their acquisitions of EU companies above a certain level (€ 100 million). The Commission reserves the right to ban the operation. The third concerns public procurement: participants must notify financial contributions received from non-EU countries, with the risk of exclusion from a tender.
And then the White Paper provides a series of stakes for non-EU companies that benefit from foreign subsidies and that require funding from the EU, the European Investment Bank or the European Bank for Reconstruction and Development.
The move of the Commission was strongly desired by Angela Merkel and Emmanuel Macron. In particular, Germany is suffering a lot from Chinese competition in the production of solar panels, batteries, electric bikes. Not to mention the German robot industry Kuka, acquired by the Chinese from Midea in 2016.
But the acquisition of Pirelli by the Chinese ChemChina, a state-owned company that in Europe has also acquired the Swiss Syngenta (pesticides), as well as the French companies ‘Adisseo’ (feed) and ‘Rhodia Global’ has also ended in the Brussels viewfinder Silicone ‘(silicone). “In a recent investigation of state subsidies – the March 2019 report reads – the Commission found clear and evident evidence on various ways in which the Chinese government facilitated the acquisition of Pirelli by Cnrc, the ChemChina subsidiary in production of tires and rubber “.
In short, the European Union seeks its shield to protect its industrial jewels. In covid times, the old idea of a European ‘golden power’ has become a necessity. Of course, but they are times of crisis and the acquisitions of European companies by the Chinese have also become a necessity for many entrepreneurs and also for employees worried about their jobs. Consultation between Member States starts now and, as usual, will not be easy.