The EU’s New Regime on Foreign Subsidies: Has the Time Come for a Paradigm-Shift?

Abstract

In December 2022, the EU introduced a comprehensive regulatory regime for foreign subsidies, which have so far largely remained under the radar of international trade law. The last couple of decades have seen a considerable increase in the economic import of foreign subsidies. Services and investments have grown from marginal importance to a major field of international trade and have been the subject to massive subsidization by state capitalist countries. The WTO’s enlargement to these economies internalized the problem but also undermined the solidity of the pristine paradigm shaped by the societal pattern of western democracies. The EU Regulation on Foreign Subsidies responds to this menace and ushers a paradigm-shift in the field. This paper provides an analysis of the Regulation in the context of its international framework. It identifies the regulatory gap the Regulation reacts to and inquires if it effectively responds to this; it examines if the Regulation complies with international disciplines and if it could serve as a role model to address the increasingly burning question of foreign subsidies.

Keywords: Countervailing Duties, EU Regulation on Foreign Subsidies, Foreign Subsidies, International Trade, State Aid, State Capitalist Countries, Protectionism, Transnational Subsidies, Unfair Trade

JEL Classification: K33, F1, F6