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Brussels is drafting new legislation to reduce foreign aid costs


Brussels is on the verge of finalizing new legislative powers that will help curb money that could disrupt markets from foreign governments, as the EU seeks to protect itself from unfair competition from headquarters including Beijing.

The legislation, which was summarized by the Financial Times, represents the strongest stance on the bloc’s stance on foreign-sponsored competitions.

The proposed law, which is due to be unveiled next week, will be read as particularly difficult in China during the crisis over EU-Beijing relations. This comes after the EU and China signed a first trade agreement at the end of last year – although the ratification of the agreement will take some time.

The EU already has a number of foreign exchange reserves, in addition to defensive weapons and foreign exchange monitoring to address the potential risks.

But its foreign policy is based solely on the financial resources of European countries. Officials are concerned that this has left a gaping hole in the issue of employment from non-EU countries that facilitates European purchases or supports what companies are doing.

Under this law, which follows Brussels white paper released last year, the European Commission will be empowered to intervene in EU companies or public donations with the help of governments from outside the bloc.

Under the new system, large donations that may be distorted or requests for purchase should be notified to the committee in advance. This includes the acquisition of companies with a minimum of € 500m, or a purchase agreement worth 250 euros, according to two people familiar with the negotiations.

The commission may choose to answer questions on other issues, with the power to ask more questions and conduct local investigations, but the available foreign currency of less than € 5m appears to be unlikely to affect a single EU market. Companies can be fined if they fail to comply with the requirements or are ordered to leave the cash collection system.

Due to the lack of transparency in foreign exchange, the agency will use a number of “indicators” to evaluate the size of a single market, including the size of each currency based on a given market size or its acquisition value. Other types of support, such as unlimited warranty, will look particularly misleading.

Resolutions may include ethical or binding measures – such as terminating a contract or selling property – and reimbursing the proceeds received, along with interest.

The rules apply to Margrethe Vestager, vice-chancellor of the competition committee.

“In recent years, foreign exchange reserves have appeared in some areas to disrupt the EU’s domestic market, creating opportunities for competitiveness,” said a report in the Financial Times.

In some cases this has led to the acquisition of EU companies or the sale of goods, disrupting competition. Government subsidies include zero-interest loans, unlimited government guarantees, or tax incentives.

Legislation will soon be reviewed by member states and the European Parliament. However, it may take several years before this law becomes law and those involved warn that attitudes may change.

EU officials say the move will also affect European companies if they are found to be receiving foreign aid. “The start of the investment is crucial, even with a European company,” said one official who is well aware of his views.

The commission said it had “no comment” on its decision.


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