In a March 18, 2019 paper entitled “EU industrial policy after Siemens/Alstom: Finding a New Balance Between Openness and Protection,” the Commission’s think tank, the European Political Strategy Centre, responds to the “significant backlash against EU competition policy” stemming from its prohibition of the Siemens/Alstom merger in February (reported in the EU Competition Law Newsletter of February 2019).[1] Many prominent voices, French and German politicians in particular, condemned the decision for blocking the emergence of a “European champion” to meet the threat of Chinese competition. The report defends the decision, warning that weakening merger control enforcement would lead to economic inefficiency and political arbitrariness. The Commission also accepts that Europe’s industrial policy is in need of reform, however, and proposes certain solutions to the challenges posed by rising competition, particularly from China, and by digitization of the economy.

The report details Europe’s sluggishness in responding to digitization, noting that the world’s largest tech companies are predominantly American and Chinese, while only 28 “Fortune 100” businesses are now European (versus 42 in 2007). The Commission also loudly sounds the alarm on the threat posed by asymmetric Chinese competition, underpinned by “generous state subsidies, significant market protection and a lengthy track record of unfair trade practices, commercial espionage and intellectual property right infringements.”

The Commission advocates a two-pronged response: lobbying to level the global playing field, whilst strengthening European industrial policy. On the former, the paper suggests engagement with the WTO to remove China’s preferential treatment under its “developing economy” status, improving the EU’s defensive tools (including anti-dumping measures and scrutiny of foreign direct investment) and updating its reciprocal market access agreements. In this regard, on March 19, 2019, the EU adopted the FDI Screening Regulation (Regulation (EU) 2019/452), which sets out minimum standards for Member States’ existing screening mechanisms and creates a system of cooperation and information exchange between Member States and the Commission (including the Commission’s right to opine on FDI screening cases under certain circumstances).[2] In terms of industrial policy, the Commission pitches for Member States to coalesce around a common strategy. It proposes greater harmonization of digital regulations and taking a more active role on the global stage in promoting standards, as well as norms promoting good governance, transparency and accountability. Finally, it argues for greater funding at European level for strategic industries, including the creation of a European Sovereign Wealth Fund.

[1]      Siemens/Alstom (Case COMP. M.8677), decision not yet published. See Commission Press Release IP/19/881.

[2]      The Regulation will come into force on April 11, 2019, though its provisions will apply from October 11, 2020.