De Gucht and Barnier on collision course
By Joanna Sopinska | Friday 16 September 2011
Prompted mainly by increasing complaints about unfair competition from third-country companies, the European Commission has decided to revamp current rules governing access to the EU’s public procurement markets. The aim of this joint initiative of Commissioners Michel Barnier (internal market) and Karel De Gucht (trade) is to promote greater reciprocity between the EU and its biggest trading partners, such as the US, China, Russia and Japan. According to the Commission’s data, there is a great disproportion between access to the public procurement market in the EU and in other non-EU countries (see table). In principle, 85% of the EU’s public procurement is open to GPA partners’ firms (companies registered in countries participating in the WTO’s Agreement on Government Procurement). The respective proportion in the US is only 12%.While there has been a consensus that the EU has to defend itself against protectionism in third countries with regard to their public procurement markets in the wake of the autumn 2008 financial crisis, there have been significant differences among the Commission’s internal market and trade services on which measures to use to achieve this goal.“Substantial” differencesAccording to an internal Commission document seen by Europolitics, the two commissioners diverge “substantially” over the basic issue - the concept of the Union’s public procurement policy towards third countries. Known for his liberal approach to trade, De Gucht wants to keep the market as widely open as possible. However, irritated by the unbalanced market access between the EU and its trading partners, he wants new legislation to include an option of restrictions to be decided by the European Commission in case of procurement not covered by the EU’s international commitments. According to De Gucht, such measures should target “only specific sectors and specific trading partners in response to protectionist policies”. He believes that this “would provide the Commission with a wide range of flexibility in the launch and the conduct of the inquiries as well as for negotiations aimed at removing the market access barriers”. “The Commission would be left with an equivalent discretion when deciding upon the opportunity to take restrictive measures and the reach of such measures,” the document adds.Inspired by the French ideas, Barnier does not share this view. He has proposed that the member states’ procuring entities rather than the European Commission should be given the right to reject tender offers originating in third countries. Such an approach, according to DG Trade, “would de facto transfer to member states decisions relating to the common trade policy and confirm the possibility of diverging practices”. In other words, if adopted in this format, the new legislation would result in the renationalisation of trade policy, warns De Gucht.Impact assessmentPressed for time, the two services have recently reached “a middle ground,” EU sources say. But the final decision was left to be taken based on an impact assessment, including public consultations and a public hearing. The underlying idea is to allow the interested parties to express their views and decide between the two approaches providing for: 1. the closure of the EU market for procurement not committed internationally with a system of exemptions and waiver (eg urgency, disproportionate cost, non-availability); and 2. the development of new tools at EU level to create leverage for open markets and to permit the adoption of targeted restrictive measures, including two options: 1. allowing member states’ entities to reject - subject to notification to the European Commission - bids from third countries; and 2. providing the Commission with the possibility to impose restrictive measures when a trading partner maintains protectionist policies or refuses to negotiate. Two other options propose that the EU does not take any action (so-called ‘baseline scenario’) or provide for a guidance on EU market access commitments and use of WTO-FTA dispute settlement mechanisms.The public hearing held on 8 July gave a rather general answer to the outstanding questions. The participants were reluctant to speak in public in favour of any of the options proposed by the Commission. The European Construction Industry Federation (FIEC) openly supported the idea of closing the EU market for procurement not committed internationally with a system of exemptions and waiver (option 3A). Other participants spoke in favour of legislative action (without specifying details) and an intensive information campaign providing for guidance on EU market access commitments and use of WTO-FTA dispute settlement mechanisms (option 2). There was no support expressed for the so-called baseline scenario (option 1).The public consultation was closed on 2 August. Now, DGs Trade and Internal Market are analysing the responses received alongside the opinions expressed during the public hearing. They have until the end of 2011 to bring before the College of Commissioners a joint proposal. According to EU sources, there is still a chance that this deadline will be met.