COVID-19 emergency government support and ensuring a level playing field on the road to recovery

Abstract

The COVID-19 pandemic has triggered necessary large scale emergency government support for businesses and industries. The design and implementation of this support is crucial in avoiding domestic and international market distortions in the medium-and long-term. This brief considers ways to ensure that short-term crisis responses do not result in unintended negative implications for competition and trade in the medium-and long-term. It highlights the competition and trade policy tools governments can use to effectively balance the needs of the COVID-19 pandemic response while ensuring that this response does not undermine efforts to maintain a level playing field, domestically and globally. COVID-19 emergency government support and ensuring a level playing field on the road to recovery  COVID-19 EMERGENCY GOVERNMENT SUPPORT AND ENSURING A LEVEL PLAYING FIELD ON THE ROAD TO RECOVERY © OECD 2021 Key messages While measures supporting businesses may continue to be needed in the short term, there will come a time when they should be retired or retargeted to avoid emergency measures becoming longer-term structural support. Structural support has implications not only for ongoing distortions to global markets and competition, and for medium-and long-term economic resilience post-crisis, but also for jobs and, ultimately, for public support for open global markets. Attention should be paid both to the design of support given now and to plans for the eventual unwinding and exit from this support, notably for emergency state support measures such as loans and equity injections which have the potential to become means of long-term structural support. From a competition perspective, state support measures should be aligned with the principle of 'competitive neutrality', whereby emergency support to otherwise viable firms is transparent, time-limited, should not distort competition in the domestic market and is consistent with longerterm objectives. From a trade perspective, state support is disciplined under a variety of WTO agreements, in particular the Agreement on Subsidies and Countervailing Measures (ASCM), with a view on not distorting competition in international markets. It will be important for governments to ensure sound design of future programmes to avoid distortions; review existing programmes to ensure a timely phase out; and promote international co-operation on transparency, policy guidance and disciplines to ensure today's emergency measures do not create tomorrow's structural support and distortions. Ultimately, open and competitive global markets are underpinned by open and competitive domestic markets, and vice-versa. With its multidisciplinary expertise and engagement by policy makers, the OECD is well placed to foster mutual learning and co-operation between the trade and competition policy communities, building on their complementary roles  3