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EU strapped for staff to combat Chinese subsidies

The EU wanted 145 staff to tackle global competitors with lavish subsidies, but only appears to have found a handful.

By Varg Folkman

October 5, 2023

The European Commission has only a handful of staff in place to enforce new rules on foreign state funding for companies as the European Union toughens its stance against what it sees as unfair competition from global rivals, particularly China.

The Foreign Subsidies Regulation (FSR) requires companies to notify subsidies they get from non-EU governments and, from next week, it will also oblige companies to flag deals involving foreign state funding exceeding certain thresholds. Most of the work is due to be handled by the Commission's competition department with some responsibilities handled by the trade department.

But the Commission's task force on foreign subsidies, also known as the competition department's unit A5, may only have as few as five people, three people have told POLITICO. LinkedIn shows that there are only five people working full-time in the unit in addition to a trainee. The Commission had originally asked for 145 staff to enforce the rules across both departments.

The rules are part of a wave of EU action to sharpen trade tools and act on complaints from European businesses that they risk being outcompeted by rivals, especially Chinese rivals, that get state funding and other help that allows them to sell for less. The Commission on Wednesday opened an anti-subsidy investigation into Chinese electric vehicles a day after it published a list of key critical technologies it wants to shield from strategic rivals.

"We knew that the Commission has been struggling to staff up the FSR function. If these numbers are correct, that only five people are working at the designated unit, it is really appalling," said Stefan Sagebro of the Confederation of Swedish Enterprise.

POLITICO has been pressing the Commission without success to clarify the number of staff in the unit since the new rules partly entered into force on July 15. Until earlier this year this information was available to the public via an online directory that showed the amount of Commission staff working in specific policy teams.

Commission spokesperson Arianna Podestà would say only that "the Commission is preparing for an effective enforcement of the FSR."

Senior officials have acknowledged that they're struggling to staff the unit, with Competition Commissioner Margrethe Vestager saying in June that "we will need more people" and Olivier Guersent, the head of the competition department, made a plea earlier this year for more government support to provide staff needed to enforce a wave of new regulation. Just last month, another official warned that regulators needed to prioritize and were focusing on notifications.

The unit risks being "completely overwhelmed" once companies start notifying mergers on October 12, said Sagebro. The reporting burdens of the new rules have been scaled back compared with the initial version but companies still worry about the amount that has to be reported.

The FSR is a step in the EU's wider push to turn around what has been perceived as a naive stance on China and the country's trade practices. Turning up the heat, the Commission officially opened an anti-subsidy investigation into Chinese electric vehicles on Wednesday and on Tuesday announced a list of key critical technologies it can't lose control of to its strategic rivals (i.e. China).

Looking into a deal in a comparable merger probe takes two or three people and the unit needs a certain expertise to do it efficiently, said Christopher Jones, a lawyer at Baker McKenzie.

"If you've only got half a dozen people dealing with it, you've got to ask yourself if the burden on industry and the level of effective control that the Commission is doing is proportionate," said Jones.



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