At the beginning of March and in advance of this summer’s parliamentary elections, Emmanuel Macron set out his vision for the future of the European Union, in an open letter published in newspapers across Europe.
The French President made his pitch in response to threats the Union is facing – Brexit was of course high on the list, highlighted by Mr Macron as the symbol of a European “crisis”.
Among other reforms, Macron spoke out in support of reforms to security and defence, and increased regulation of Big Tech.
But two of the key areas addressed were trade policy and competition rules. Potential reforms to both areas would be, in part, a response to threats currently presented by China.
There are strong indications that changes to European trade policy are likely, but the general response to French calls for reform of antitrust rules has been less than enthusiastic across the EU.
Reciprocity in Trade
The French President advocated for the introduction of “European preference in strategic industries and our public procurement”.
It is an obvious response to the approach adopted by China, which restricts market access for foreign companies, and provides support to certain national businesses with government subsidies.
Yet Macron’s suggestion of a “European preference” is somewhat more protectionist than expected. It is relatively radical in comparison with other ideas from around Europe and is therefore unlikely to receive much support in Brussels.
However, there does appear to be scope for reform in trade policy through the introduction of greater reciprocity, particularly when it comes to China.
This would mean restricting the ability of companies from third countries, where there are restrictions on market access for European businesses, from obtaining public procurement contracts in the EU.
This type of reform has received recent support in Germany’s proposed industrial strategy, which provides that the EU “must take action against distorted competition from other countries more actively than it has done in the past”.
Its aim would be to provide the EU with greater leverage when negotiating with third countries, and help to reduce the imbalance that currently exists.
Within that same theme of rebalancing, France and Germany have been outspoken in their desire to see changes to antitrust regulation.
Competition Policy
Macron’s calls to introduce reforms in this area are reminiscent of recent Franco-German industrial policy proposals, published following the EU Commission’s rejection of a mega-merger between two of the world’s most successful rolling stock manufacturers, Siemens AG and Alstom SA (see last month’s edition of La Revue).
Paris and Berlin were both strongly in favour of EU rules allowing for the creation of national and European ‘champions’, and in particular the Commission changing their merger control and market share assessment procedure to account for competition at the global level.
In Siemens/Alstom, this would have required the Commission to account for the presence of the world’s biggest train manufacturer from China.
Additionally, France and Germany proposed giving EU leaders the ability to overrule a Commission antitrust decision, to promote certain ‘champion’ businesses who would be able to compete with Chinese or US giants.
Numerous responses have however dampened French and German hopes for such reforms.
EU Competition Commissioner, Margarethe Vestager, who blocked the rail merger and is now running for the presidency of the EU Commission, has discussed the idea of a new European industrial policy, but emphasised that it needs to benefit the whole market, not only select companies.
The proposals have also failed to receive much support in smaller EU nations that do not have large pan-European companies.
Several of these Member States view Paris and Berlin as attempting to prioritise the interests of their industrial giants, despite the fact that it could mean limiting competition throughout the continent.
Conclusion
Regarding both trade and competition policy, there has been much debate about how the EU should respond to international threats, particularly on those stemming from China.
Emmanuel Macron’s calls for an EU ‘Renaissance’ were wide reaching and ambitious. Whether or not they will progress further may depend on the outcome of this summer’s elections.
And while France and Germany are likely to have a significant voice on any suggested reforms following the EU parliamentary elections, it could prove difficult for them to bring about meaningful change if they fail to convince other Member States.
