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State Capitalism and Level Playing Field: journal article

The Need for a ‘Third-Country State Aid Instrument’ to Restore a Level Playing Field in the EU’s Internal Market

Jürgen Kühling, Philipp Reinhold, Thomas Weck

European State Aid Law Quarterly, Volume 19 (2020), Issue 4, Page 403 - 417

Globalisation has contributed to an increasing number of companies from third countries, such as China, operating in the EU. In the system of a ‘socialist market economy with Chinese characteristics’, however, the Chinese State intervenes in the economy in a variety of ways, including the provision of subsidies. The growing importance of China in the global economy has led to fears that such interventions are increasingly having a negative effect on the competitiveness of European companies. Although companies in the EU receive State support as well, the provision of this support is subject to European State aid control which does not apply to aid granted by foreign States. This creates an imbalance in relation to unregulated government support in China, but also in other countries. The effects of foreign subsidies on competition are not currently addressed by other means of European competition law. European trade rules do indeed provide instruments for reacting to ‘unfair’ trade practices. However, they do not guarantee comprehensive protection of competition in the EU internal market. Moreover, current proposals to reform existing European competition and trade law sometimes go beyond the goal of a level playing field and lead to protectionism and, at worst, damage to effective competition as a central element of the internal market. According to the authors of this article, a targeted new instrument is needed instead. This new ‘Third-Country State Aid Instrument’ (TCSI) should focus on filling the existing gaps and should lead to an equal treatment in relation to Member State measures under European State aid law. Keywords: China; State capitalism; anti-subsidy rules; third-country subsidies; White Paper


The Effectiveness of R&D&I Subsidies to Young Innovative Companies in Belgium journal article

Diego Andres Olaya Lasso, Caroline Buts

European State Aid Law Quarterly, Volume 17 (2018), Issue 2, Page 177 - 191

Innovation is of crucial importance in modern knowledge and information driven economies. Small and medium-sized enterprises (SMEs) are relatively dynamic and thus essential in the generation of inventions. However, SMEs’ innovative performance is not uniform and a particularly interesting subgroup has been identified: Young Innovative Companies (YICs). While YICs’ favourably influence also the macroeconomic competitiveness of a country, little research has been carried out regarding the effects of diverse support policies. This article hence aims to contribute to the literature by examining the role of subsidies on the innovative performance of YICs. We build a dataset of all Belgian companies and monitor firm level microdata from 2010 until 2015. The empirical analysis aims, in a first stage, to identify the population of YICs in Belgium and the main industries where they operate. In a second phase, we then evaluate whether YICs have a superior innovative performance relative to other types of businesses and especially whether support policies have been effective in stimulating their innovations. From the negative binomial model, we conclude that subsidies prove to be an essential policy instrument favouring the creation of inventions by YICs. It is important for policy to promote and support YICs’ entrepreneurship before as well as during their way towards innovation. Keywords: Innovation; Subsidy; R&D; Young Innovative Company; Count Models.

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