Brussels, 21/03/2012 (Agence Europe) - The European Commission has unveiled plans for a system to encourage fair opening up of public procurement markets overseas to match the EU's open economy and to tackle the segmentation of national markets and ensuring protection within the Single Market.
It took 18 months for the European Commission to table the system to encourage openness in non-EU countries where there is little or no opening of public procurement markets to European businesses. The draft regulation unveiled on Wednesday 21 March 2012 had been the subject of intense talks among civil servants working for EU Internal Market Commissioner Michel Barnier and Trade Commissioner Karel De Gucht to strike a fair balance between the need for fair competition and avoid the introduction of protectionist measures that would be damaging to trade. Behind the scenes, France has been working hard to obtain protectionist measures, with French President Nicolas Sarkozy busy campaigning ahead of the country's presidential elections on a slate including a call for a Buy European Act along the lines of the Buy American Act in the United States, to reserve a percentage of European public procurement contracts for European companies. The idea is disliked by free trade nations like the United Kingdom and Scandinavian countries. At the European Commission, Liberal commissioners Catherine Ashton (UK), Neelie Kroes (the Netherlands), Cecilia Malmström (Sweden) and Stefan Füle (the Czech Republic) worry that the legislation will be interpreted by the EU's trading partners as a protectionist measure that might justify retaliation, pointing out that the Commission's legal department is opposed to the idea.
Under the public procurement agreement at the World Trade Organisation and separate agreements with individual countries, the EU has opened up 90% of its public procurement market to companies based overseas (the WTO deal was updated late last year, see EUROPE 10517), but the fact that other countries' public procurement markets are closed to EU companies leads to a potential loss of €12 billion a year for the EU, said Commissioner Barnier at a press conference on Wednesday where he described the measures designed by himself and Commissioenr De Gucht. There is a very uneven playing field for public procurement in the EU and outside, whether in terms of developed countries like the United States, Canada and Japan,which only open 32%, 16% and 28% respectively of their procurement markets, or emerging economies like the BRICs (Brazil, China, India and Russia), none of whose public contracts are available to European companies. Restrictions by trading partners apply to industries where the EU is highly competitive, like construction, public transport, medical devices, electricity generation and pharmaceuticals, explains the European Commission.
Commissioners Barnier and De Gucht are suggesting a pragmatic system to encourage the EU's trading partners to open up their markets to bids from the EU on an equal footing with local companies for such contracts within the EU. The system would fully respect the EU's pledges under the WTO public procurement deal and other trade agreements with individual countries, listing the binding international rules by which the European adjudicating authorities would be bound.
The draft regulation will now be examined by the Council of Ministers and European Parliament. It takes a two-pronged approach. On the one hand, European adjudicating authorities would be able to ask the European Commission to not allow bids from companies registered in countries applying protectionist measures to public procurement contracts, but only for contracts worth €5 billion or more. The Commission would decide on cases using a procedure and criteria set out in the regulation (Article 6).
On the other hand, if a non-EU country repeatedly discriminates against European companies for the award of public contracts, then that country could see public contracts in the industry in question closed off to it in all 27 Member States. Prior consultations would be required before any such measure was taken. Restrictions would be targeted on bids from a particular country or could introduce price penalties (Articles 8 to 10).
The draft regulation includes measures to increase transparency on very low bids to tackle unfair competition and price-cutting from non-EU countries on the European market. Bidders would have to justify their prices if they are lower than those of potential competititors. (EH/transl.fl)