EU Has a Plan for Industry -- But No Help for Champions

(Bloomberg) --

The European Commission’s new industrial strategy promises companies support managing climate change, navigating the digital transition and competing with global rivals. But there’s no mention of easing the competition rules to boost so-called national champions, a key demand from Germany and France.

The EU plan, unveiled in Brussels Tuesday, is a key plank of the new executive’s determination to make the bloc more self-reliant as well as a more prominent geopolitical force. But it skirts the thorniest issue of how to help European companies gain the scale required to compete against U.S. and Chinese giants, without undermining protection for consumers at home.

Instead, the commission is focused on making European companies less dependent on potential rivals and addressing what it sees as unfair competition from Asia.

“It’s clear that European companies are working in a situation of fierce global competition and they need to be able to compete on an even footing,” European Commission Vice President Valdis Dombrovskis told reporters before the announcement. “This means tackling unfair competition rules both within the single market and abroad.”

The imperative to defend Europe’s interests and beef up its economic sovereignty has been reinforced by trade aggression from the the U.S., increased competition from China and concerns over security.

Competition Rules

Besides overhauling the 27-nation bloc’s industrial policy, Commission President Ursula Von der Leyen has also vowed to strengthen the international role of the euro -- a nod to the EU’s ongoing efforts to challenge the dollar dominance which gives the U.S. added leverage in international affairs.

There’s little in reference, however, to the EU’s competition rules, with the plans just noting an upcoming review of how EU antitrust regulators assess industries. That process will aim to update guidelines dating back more than two decades on how enforcers define markets that companies operate, a move that follows criticism that they’ve been too rigid in fining truck-makers and blocking mobile-phone, steel and rail deals.

The commission also mentioned ongoing work by antitrust officials on tackling takeovers or pricing by state-owned firms that may lead to unfair competition in the region, efforts that come on the heels of concerns by some member nations that the EU does too little to take on Chinese rivals.

But there’s no mention of national or European champions -- code for government support for home-grown corporate powerhouses as a way to give them an edge over outside competitors and create jobs, drive exports and fuel economic growth. The push for fostering such companies was reignited last year, after the EU blocked a bid by Siemens AG and Alstom SA to combine their rail operations. French and German politicians had promoted the deal as crucial to compete with China.

Industry Commissioner Thierry Breton, a Frenchman, refused to comment directly on whether he backed the French government’s call for European champions. “I don’t use the word champion except for sports, never for companies,” he told reporters. “It doesn’t mean we don’t believe it’s important to have leaders in Europe.”

Instead, the plans said the commission would “systematically analyze risks and needs” of so-called industrial ecosystems -- or clusters of companies in key sectors that the bloc will seek to nurture.

Virus Threats

As for unfair competition from abroad, the bloc said it is looking into addressing the lack of reciprocity for procurement. That means pushing for European companies to have access to foreign markets where they currently can’t do business.

The commission said it will suggest new rules next year that could target foreign subsidies that affect competition within Europe -- which could stop Chinese or other state-backed firms from undercutting or buying up European companies. Regulators will set out their options in that area by June.

The recent coronavirus outbreak, which has severely disrupted global supply chains, is yet another example of why Europe needs to do more to become less dependent on others, officials say.

The plan includes removing barriers within the bloc’s single market so that companies can get equal access and treatment when doing business across the continent. There are also strategies to better enforce laws that make the single market work, and proposals to help small- and medium-sized companies getter better access to finance.

The commission suggested reviewing subsidy rules so that governments can pool money for certain priority research projects, such as hydrogen power and industrial cloud computing. The EU also vows to work with industry to secure access to raw materials.

To contact the reporters on this story: Viktoria Dendrinou in Brussels at vdendrinou@bloomberg.net;Aoife White in Brussels at awhite62@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Flavia Krause-Jackson

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