Public procurement in international trade

Abstract:

Ensuring that public procurement markets are transparent and open to international competition is one of the most challenging aspects of trade policy. Countries may have statutory or de jure preferences for national companies or more likely, purchasing entities exercise de facto discrimination in favour of local suppliers. The Single Market Programme has resulted in public procurement in the EU become relatively transparent and thanks to liberal investment policies foreign suppliers can freely established in the EU to serve procurement markets. The EU has also made commitments under the Government Purchasing Agreement (GPA) that are more or less in line with the coverage of the EU Directives. As a consequence it has sought to persuade other WTO members to make equivalent commitments, but with only partial success. Some progress has been made at the plurilateral level in the shape of greater coverage by existing signatories to the GPA. The EU has also managed to negotiate the inclusion of public procurement in recent free trade agreements (FTAs), but access to major emerging markets such as India, China and Brazil remains an issue.

After a good deal of debate the Commission has proposed the draft Regulation with the aim of harmonising the treatment of third country suppliers by EU purchasing entities and enhancing the EU’s leverage in negotiations. The Regulation will serve the purpose of enhancing EU leverage, but experience with previous efforts to open markets suggests that genuine competitive procurement markets requires ‘buy in’ on the part of key economic and political interests in the country concerned. It is not clear that this is the case in the emerging markets or developing countries. Although there are difficulties measuring how open markets, are issues of reciprocity for the EU arise in selected sectors rather than the EU procurement market being generally more open than other major markets. In terms of the Regulation the best outcome for the EU would be if its adoption serves to enhance EU leverage in negotiations without the EU having to actually use it. The more the EU uses the Regulation to pursue a policy of narrowly defined reciprocity, the greater the costs in the shape of potential retaliation against EU exporters and compliance will rise.

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