EU seeks tougher rules in market for public contracts

Member states could get powers to bar firms from outside the EU from competing for public contracts.

The European Union is preparing legislation that would allow member states to bar firms from outside the EU from competing for public contracts. The draft regulation is supposed to induce foreign governments, especially China’s, to open up their procurement markets to European bidders. 

The proposal, prepared by Michel Barnier, the European commissioner for internal market and services, and Karel De Gucht, the commissioner for trade, is expected to be adopted by the European Commission on Wednesday (21 March).

According to an official, the new rules would empower the Commission to take “targeted” measures – loosely modelled on anti-dumping measures – against foreign governments that routinely exclude EU companies from public tenders. Those measures would allow governments of EU member states to retaliate by barring firms from the country in question, and in the sector in question, from public procurement.

WTO agreement

China is not party to the Government Procurement Agreement (GPA) of the World Trade Organization (WTO), which sets down rules that governments have to follow in awarding public contracts. But China is not the only country to restrict access to government tenders, according to the Commission. It says that €352 billion of public procurement inside the EU is open to the other signatories of the GPA, whereas the corresponding figures for the United States and Japan are €178bn and €27bn, respectively. The EU’s €2 trillion public-procurement market represents 19% of EU gross domestic product.

Wu Hailong, China’s ambassador to the EU, has disputed the claims of major imbalances in access to public-procurement markets in the EU and China. “Despite all those complaints about market access, European companies are making profits in China and the profits are increasing,” he said.

Zhang Kening, a trade councillor in China’s EU mission, said that the Chinese government will “do its best” to meet EU requests, but that it is focusing its efforts on joining the GPA.

Zhang said that the “so-called reciprocity” demanded by the EU was meaningless given the vastly different levels of development in the EU and China.

Nicolas Sarkozy, France’s president, strongly backed the proposed legislation after a summit of EU leaders on 1-2 March. He said the new rules would create “reciprocity, not protectionism”. However, other member states fear that the proposal could lead to spiralling retaliation between the EU and China.