Bulgaria: Chinese rail maker CRRC withdraws from public tender after EU launched probe into it over suspected state subsidies

honey_im_meat_grinding, 2 months ago (edited 2 months ago)

The headline sounded odd considering EU countries aren’t exactly averse to subsidies, but the kicker is this:

The inquiry, announced last month, was the first of its kind and marked the maiden use of a foreign subsidies regulation designed to stop state handouts from distorting the EU’s single market.

So it’s protectionism that’ll apply especially to poorer and up-and-coming countries that don’t have established private megacorps (i.e. their companies depend on economic strategies like window guidance to grow).

I’m neutral about protectionism in general, but contextually it can have negative outcomes - e.g. the EU’s agricultural policies have not been good for poorer countries. At a time when poorer countries are bleeding money as we can see by tracking Net Resource Transfers (with China being one of the few exceptions), it’s a little tougher to be happy about policies like these.

spacedout, 2 months ago

Indeed. Seems like EU is dead set on joining the US economic war on China.

0x815, 2 months ago

<a href="">@honey_im_meat_grinding</a>

The EU’s relevant rule here closes gap in the review of government support for companies doing business in the EU. While aid granted by EU states must comply with the EU’s rules, there has been no comprehensive EU mechanism preventing subsidies granted by non-EU countries from providing an unfair advantage to companies doing business in the EU’s internal market. The rule does not prohibit foreign subsidies per se, though, but it does prohibit, for example, that companies benefit from from zero-interest loans or below-cost financing.

The Net Resource Transfers from developing to developed countries are a much greater issue. The largest part of capital outflows from developing countries can be traced back to (often illegal) capital flight. For example, many corporations (from developed and developing countries alike) show false prices on their trade invoices to get money out of developing countries into tax havens. Or corporations transfer money from developing countries by shifting profits between two subsidiaries. For example, a subsidiary in country A might avoid local taxes by transfering money to a subsidiary in country B - a tax haven, where the tax rate is zero.

The beneficiaries of all this are large corporations and an often corrupted political elite.

To solve the Net Resource Transfer problem, we need to shut down the dozens of global tax havens which just a small global financial elite (of which most, though not all, are located in the West) is benefiting from.

The EU’s rule to protect its internal market has a minimal effect on the NRT. This is essentially a different issue.

Sorry for the long post.

MrMakabar, 2 months ago

The EU just looked into the potential for dumping. They were not finished with the process and therefore did not punish CRRC at all.

Also China is not that poor. GDP per capita is only a third less then that of Romania.

honey_im_meat_grinding, 2 months ago (edited 2 months ago)

The EU just looked into the potential for dumping. They were not finished with the process and therefore did not punish CRRC at all.

What’s your point here? There are actual quotes in the article claiming the pull-out as a result of the regulation, meaning they didn’t pull out because they wanted to.

Also China is not that poor. GDP per capita is only a third less then that of Romania.

But both are “up-and-coming” as I said alongside “poorer” so I’m not sure why you’re arguing semantics here. China is one of very few exceptions when it comes to actively losing money to richer countries (Net Resource Transfers). This regulation is not about China, it targets any foreign company, and if you understood my post, you’d know that the vast majority of them are being drained and in need of economic help.

Dasus, 2 months ago

Isn’t there a Simpsons episode based on this?