Europe Needs Competition More Than Industrial Giants

Posted by Bloomberg

Europe Needs Competition More Than Industrial Giants

By Editorial Board

Many of Europe’s politicians are far from impressed with the European Commission’s recent ruling against the proposed rail merger of Alstom SA and Siemens AG. Some are now calling for the EU to change its whole approach to competition policy. What they want instead is “industrial policy” — a strategy that dethrones competition as a goal and promotes European economic champions.

Competition Commissioner Margrethe Vestager was right to block the merger, and her critics are mistaken. The last thing Europe’s consumers need is EU firms with greater monopoly power, especially if they’re shielded from foreign as well as domestic competition. The best spur to economic growth and higher living standards in Europe is rivalry within the EU’s single market.

National competition agencies in Belgium, The Netherlands, Spain and the U.K. had criticized the Alstom-Siemens deal. But politicians in France and Germany took a different view. “Railbus,” as the doomed linkup had been christened, was touted as necessary to defend European producers from a predatory China — in the same way that Airbus was intended to counter U.S. dominance of the aviation industry. But the commission ruled that the merger would have dominated Europe’s rail market in signalling technology and high-speed trains, leading to higher prices and less innovation. And Vestager noted that China’s state-controlled giant CRRC is not a player in those EU markets anyway.

Continue reading…