EU procurement rules

As readers of this blog may be aware, the European Commission has put forward a proposal to regulate the access of third-country goods and services to the EU procurement market.

Under the terms of the draft Regulation, local authorities will be able to restrict access to procurement contracts if more than 50% of the value of goods/services in a tender comes from countries outside the WTO’s procurement agreement. The Commission thinks that this approach—often termed “negative reciprocity”—will encourage countries such as China, India and the US to open their markets to EU firms.

A flawed approach?

Well intentioned though they may be, the proposals suffer from a number of flaws. First, recent research seems to suggest that the EU procurement market is not as open to international competition as the Commission’s analysis suggests. Indeed, it may well be the case that the EU’s procurement markets are increasingly less open than those of key East Asian trading partners—such as Korea and Taiwan.

Second, our consultations within the ICC network have cast real doubts over the workability of the proposals. How would the Commission calculate the value of goods and services from non-covered countries? What about the concept of “value added trade”? Has the Commission considered the cost implications of non-EU suppliers out of key procurements? These questions are particularly germane when looking at sectors which rely on integrated global supply chains—textiles and IT equipment both being prime examples here.

Finally, the proposals—which have been dubbed the “Buy Europe Regulation” by some commentators—place a significant question mark next to the Commission’s commitment to open markets and free trade. This could be hugely damaging at a time when the Commission’s own analysis shows that protectionism is on the rise globally.

Making the business case

Ten ICC national chapters recently wrote to the Commission calling for the proposal to be withdrawn at the earliest opportunity. We are also currently working with our members to develop a number of working papers on the costs that might be associated with the proposals.

For more information on this work please contact Dorothée Heinze or Andrew Wilson.