Brussels had announced the probe on February 16, with EU internal market commissioner Thierry Breton at the time saying CRRC Qingdao Sifang Locomotive was thought to have relied on subsidies to “submit an unduly advantageous offer” to try to win the tender for electric trains in Bulgaria.
EU internal market commissioner Thierry Breton said that Europe’s single market remained open “for firms that are truly competitive and play fair” but that Brussels will take “all necessary measures to preserve Europe’s economic security and competitiveness”.
The headline sounded odd considering EU countries aren’t exactly averse to subsidies, but the kicker is this:
The inquiry, announced last month, was the first of its kind and marked the maiden use of a foreign subsidies regulation designed to stop state handouts from distorting the EU’s single market.
So it’s protectionism that’ll apply especially to poorer and up-and-coming countries that don’t have established private megacorps (i.e. their companies depend on economic strategies like window guidance to grow).
I’m neutral about protectionism in general, but contextually it can have negative outcomes - e.g. the EU’s agricultural policies have not been good for poorer countries. At a time when poorer countries are bleeding money as we can see by tracking Net Resource Transfers (with China being one of the few exceptions), it’s a little tougher to be happy about policies like these.
The EU’s relevant rule here closes gap in the review of government support for companies doing business in the EU. While aid granted by EU states must comply with the EU’s rules, there has been no comprehensive EU mechanism preventing subsidies granted by non-EU countries from providing an unfair advantage to companies doing business in the EU’s internal market. The rule does not prohibit foreign subsidies per se, though, but it does prohibit, for example, that companies benefit from from zero-interest loans or below-cost financing.
The Net Resource Transfers from developing to developed countries are a much greater issue. The largest part of capital outflows from developing countries can be traced back to (often illegal) capital flight. For example, many corporations (from developed and developing countries alike) show false prices on their trade invoices to get money out of developing countries into tax havens. Or corporations transfer money from developing countries by shifting profits between two subsidiaries. For example, a subsidiary in country A might avoid local taxes by transfering money to a subsidiary in country B - a tax haven, where the tax rate is zero.
The beneficiaries of all this are large corporations and an often corrupted political elite.
To solve the Net Resource Transfer problem, we need to shut down the dozens of global tax havens which just a small global financial elite (of which most, though not all, are located in the West) is benefiting from.
The EU’s rule to protect its internal market has a minimal effect on the NRT. This is essentially a different issue.
Sorry for the long post.
