The European Union is prioritizing increasing its defences against foreign companies which mark another step in economically separating itself from China and the United States to protect its interests.
The European Commission revealed overviews of options that it could take to address what it considers to be market distortions. The objective of the proposal is to prevent foreign establishments from seizing or competing with European companies, as reported by the Wall Street Journal.
Strict proposals
Multiple observers noted that the actions are focused on Chinese companies but say that it could also target US-based rivals of European companies.
Officials put forth the proposals after multiple European countries increased their restrictions on foreign-investors in an effort to shield companies that have been severely affected by the coronavirus pandemic from being seized by Chinese and American investors.
The proposals also act in accordance with changing perspectives inside the union on China for the past year, which it considers a rival in economics and politics.
Margrethe Vestager, the vice-president of the European Commission, said that they need the proper tools to keep foreign markets from impacting their market. She added in regards to their own companies; they have transparency and control of subsidies, which is not the case for foreign subsidies.
According to the Foreign Policy, the EU needs to prioritize becoming a more independent international player that is capable of holding its own against rivals and protect its values and interests.
Recently, the union's response to China's authoritarianism has been less of stellar but understandable. The relationship between China and Europe's economies provide crucial support to the European economy.
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Economical effects
Long before the spread of the coronavirus infection, China had leverage with its investments to have the support of several EU member states to deter criticisms of the Asian country's human rights history.
The coronavirus also showed how the bloc relied heavily on imports from China for use in its medical sectors. The move caused the reassessment of European investment policies.
The union's internal market commissioner, Thierry Breton, said that "The level playing field in the single market is at the heart of this initiative and will help our companies operate and compete globally." Breton added it would promote the European Union's open strategic economy.
On Monday, the commission made an unprecedented move of placing punishing tariffs on Chinese exporters that are baked outside of mainland China.
Officials of the commission have reassured that the new tools are fair and do not place bias on one particular country or one specific type of subsidy. The bloc said that China's subsidies would get treated the same way as United States companies.
The proposals state that any establishment that had received any kind of state aid outside the EU in the three years before the acquisition would have no notify the commission. The agency would then be the one to decide whether the company can proceed with the transaction or if there is an imposition that must be done.
A partner that specializes in competition with Norton Rose Fulbright LLP, Jay Modrall, said that the new methods are highly controversial. He noted that the full effects of the proposals would work along with merger and FDI rules.
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