The European Commission is considering a reform of its public procurement policy with regard to non-EU countries in order to increase opportunities for European businesses and to retaliate against countries that exclude European firms from public contracts. The European Union defends open international public procurement and has offered access to 85% of its public contracts to companies from outside the EU in the framework of the WTO’s Agreement on Government Procurement (GPA) and bilateral and regional free trade agreements (FTA). Some of its partner countries are still reluctant to do likewise, though, and even erect protectionist barriers (China, India and the United States, for example - see following articles). It is vital to develop this sector, considered a key driver of sustainable economic growth and worth nearly €4,000 billion globally, through a policy that strengthens the EU’s position in international or bilateral negotiations.

The goal is to obtain greater openness from third countries and to clarify agreed access conditions for both European public entities and foreign suppliers.

RECIPROCITY

In the wake of the European Parliament’s adoption, on 12 May, of a resolution calling for reciprocity in public procurement, the Commission launched, on 7 June, a consultation of stakeholders from all EU member states to obtain input for its reflection on a legislative initiative set to be presented by the end of 2011. The initiative was announced in April 2011 as one of the 12 flagship measures of the Single Market Act.

Two tools are being considered. They reflect the different approaches of the two Commissioners in charge, Michel Barnier (single market) and Karel De Gucht (trade).

First, the European contracting authorities could exclude - with notification to the Commission – foreign tenders if there is no international commitment for the sector in question with the non-EU country or in the absence of an international agreement (eg China, India, Russia) with the country and evidence of discrimination against European companies, which would have to be demonstrated by a reciprocity test conducted by the Commission. This option is thought to be defended by Barnier.

The second tool being studied is wider in scope and is backed by De Gucht. It would enable the Commission to initiate a procedure to shut a country out of the entire European market in a given sector in the event of demonstrated non-reciprocity, either in application of negotiated (but not implemented) restrictions or in the absence of an agreement with the country in question that does not wish to open up its own market. With this tool, the EU would have powerful negotiating leverage, particularly with China (see below).

In parallel, the Commission is conducting an impact assessment of ways to attain the objective of ‘symmetrical’ access to public procurement, studying three possibilities: the status quo, the use of soft measures, ie recommendations based on existing legislation, and the use of new legislation. If the latter option should be chosen, it would be modelled on the public procurement directives applicable to the EU and could include services concessions.

The recent EU-Japan summit, on 28 May, provided an illustration of the Union’s new determination to obtain respect for reciprocity. The Commission and Council made the opening of free trade negotiations with Japan conditional on the waiving of obstacles preventing European firms from participating in Japanese public procurement.

The goal is to obtain greater openness from third countries and to clarify agreed access conditions for both European public entities and foreign suppliers

Background

The Agreement on Government Procurement (GPA), signed in Marrakesh, Morocco, on 15 April 1994, is the main instrument used by the World Trade Organisation (WTO) to provide a framework for international trade in the area of public procurement between participating countries. It entered into force on 1 January 1996 and concerns 41 WTO members. Participants include: Canada, South Korea, the EU including its 27 member states, the United States, Hong Kong, Iceland, Israel, Japan, Liechtenstein, Norway, the Netherlands with regard to Aruba, Singapore, Switzerland and Taiwan. Negotiations are under way to improve its coverage and the EU is defending the elimination of remaining discriminatory measures against its companies by parties to the agreement. It presented, in December 2010, a second revised offer based on strict reciprocity.

Other countries are currently negotiating to become parties to the GPA, including China, which began its negotiations in late 2007. Beijing presented its first revised offer in July 2010, which concerned only an expansion of its initial coverage at national level. It will work until the end of 2011 on a second revised offer that is expected to include proposals for commitments at province and city level.