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Brexit punishment: EU plans to block UK businesses with weapon used to crackdown on China

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The European Commission yesterday announced plans for a weapon to combat firms with excessive support from non-EU governments in a bid to stamp out the unfair competition by Beijing and other capitals. Eurocrats will attempt to block non-European businesses from bidding on procurement projects within the single market or even scupper takeovers by firms benefiting from third-country government subsidies. The regime is not targeted as specific countries, however, it is widely considered that they were designed as part of a defence against China’s expansive foreign policy drive.

European Commission vice-president Margrethe Vestager said: “These tools are for everyone, there is no specific countries we are thinking of.”

But the EU’s single market commissioner Thierry Breton also claimed that British firms could fall foul of the new rules.

The Frenchman suggested Brussels could target businesses with UK-state subsidies that are operating inside the bloc.

“You’re welcome but here are our rules… especially when a major partner has decided to leave us,” he said.

Brexit negotiators are currently locked into a battle over the so-called “level-playing field” on state aid, environmental and workers’ rights standards.

Brussels has recently dropped its demand for the EU’s state aid regime to be applied in UK law, but the two sides are still working on a compromise to prevent unfair competition.

Companies granted subsidies of more than €200,000 from a foreign government while operating within the single market could face investigation.

EU firms are already subject to the bloc’s strict state aid rules, while third-country firms can receive foreign subsidies and still participate in public tenders or buy another European business.

The Commission’s proposal would add four different protections that would act against subsidised firms that “harm” the single market.

Eurocrats will assess the potential damage and benefits brought by the firm, such as job losses or creation.

They would then decide on a package of remedies to correct any harm done, including financial or structural implications for the company.

Brussels could even move to block foreign firms from buying European rivals if they are receiving state subsidies.

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Mr Breton told the FT: “It is obvious that some non-European companies bidding for procurement contracts have been benefiting from government subsidies – and we cannot permit this distortion of the internal market to continue.

“This is a market that amounts to €2 trillion a year, and it will be particularly sensitive in the post-crisis era… When it comes to ensuring reciprocity in access to procurements China still has some progress to make.”

Beijing has become a target for senior European Union figures, including France’s Emmanuel Macron, who believe the bloc should have more powers to enforce competition rules for third countries.

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German MEP Manfred Weber, who leads the European People’s Party in the EU Parliament, said: “Reciprocity is not there.”

He warned that China is a threat to Europe’s economic interests and the western “way of life”.

“In some fields China is a partner,” he added.

“But in the economic field it is a clear competitor.”



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