Brussels prepares new rules to clamp down on foreign public subsidies

Brussels is close to finalising new legislative powers that would enable it to crack down on market-distorting subsidies from foreign governments, as the EU seeks to defend itself from perceived unfair competition from capitals including Beijing. 

The proposed rules, a summary of which was seen by the Financial Times, represent a significant hardening in the bloc’s approach to state-backed competition from overseas. 

The draft legislation, which is set to be unveiled next week, will be interpreted as a challenge in particular to China at a tense moment for EU relations with Beijing. It comes after the EU and China struck a preliminary agreement for a landmark investment treaty at the end of last year — though ratification of the accord will take some time. 

The EU already has some tools to address foreign subsidies, including trade defence instruments and foreign investment screening to address potential security threats.

But its state aid rules only directly…