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15 June 2020
Client Alert | EU | Competition & International Trade
At a time when the European Commission's DG COMP is preparing to extend the control of foreign subsidies to the field of investment and services in the Union market, another arm of the Commission, DG TRADE, today confirmed in an unprecedented regulation the strict action that it intends to take against third countries' subsidies as soon as they have an impact on trade in goods.
Regulation 2020/776 of 12 June 2020[1] published today in the Official Journal of the European Union, puts an end to the suspense over the question of whether "transnational" subsidies granted by a third country to another third country, for the development of infrastructure for manufacturing products, which were then exported to the EU, could be subject to countervailing measures (import duties) upon entry into the Union.
In this regulation concerning imports of glass fibre fabrics from, inter alia, Egypt, the Commission notes, in fact, that both the subsidies granted directly by Egypt to companies carrying out activities in the China-Egypt Economic and Trade Cooperation zone (supply of land, tax incentives), as well as the subsidies granted indirectly to these companies by means of preferential financing by the Chinese public authorities, were liable to the imposition of countervailing measures pursuant to Articles 2 to 4 of the basic regulation.[2] The indirect subsidies are attributable to Egypt because it has recognized and adopted, as its own, the measures taken by the Chinese authorities, for example through the cooperation agreement, close bilateral cooperation and cooperation mechanisms at different levels.
Until now, the Commission has never taken into account the subsidies granted by a country to its companies for the manufacture of products abroad, outside the country from which the State aid originated. With this new decision, DG TRADE is clearly participating in the defense of European sovereignty.
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[1] Commission implementing Regulation (EU) 2020/776 of 12 June 2020 imposing definitive countervailing duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt and amending Commission Implementing Regulation (EU) 2020/492 imposing definitive anti-dumping duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt.
[2] Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union.
