European Foreign Affairs Review
Volume 28, Special Issue (2023) pp. 53 – 74

https://doi.org/10.54648/eerr2023014

Abstract

EU Regulation 2022/2560 on foreign subsidies distorting the internal market (the Foreign Subsidies Regulation, FSR) is a unilateral tool designed to fill a perceived regulatory gap in the existing EU and WTO rules on foreign subsidies. After a description of the new Regulation, this paper demonstrates that the FSR follows in the footsteps of a long European tradition of scepticism towards EU Member State subsidization in the internal market, but that it also arises in a context where the EU’s approach to subsidization as a tool in international trade has been more ambiguous, combining initiatives to fight government subsidies (the ‘defensive’ approach) with examples of the active use and promotion of subsidization (the ‘offensive’ approach). The paper subsequently aims to forecast how the FSR’s implementation will be affected by contextual factors, such as the perceived crisis of globalization and the crisis of the WTO, and the resurgence of industrial policy in the United States (e.g., the US Inflation Reduction Act) and in the EU itself (where various recent initiatives facilitate the granting of subsidies), as well as by factors internal to the Regulation, such as its dependence on policy choices and certain practical challenges to its application.

Extract

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