No products in the cart.
Press the play button to listen to this article
Just as Joe Biden insists that the US government should “buy Americans”, Europe is on the verge of introducing a countermeasure that will increase pressure on EU member states to “buy Europeans”.
In recovering from the coronavirus pandemic, both Brussels and Washington emphasize the importance of domestic industry and job creation on the home front.
In an address to Congress just last week, the US President said that core technologies should be built in the US, adding that his plan to create more jobs “is guided by a principle:” Buy American. “American Tax dollars are used to buy American-made American products that create American jobs. The way it should be. ”
The mood hit Europe in a similar way. After nearly a decade of trembling, the EU will now move forward in the coming weeks with a new legal instrument that anchors the concept of “reciprocity” in major public contracts and strengthens the EU’s industrial champions. The European law aims to effectively exclude companies from countries where European companies are excluded from tenders and use the EU’s huge procurement market of 2 trillion euros for everything from highways and trains to public IT systems.
Originally, the law – known as the International Procurement Initiative – was intended to respond to protectionism in Asian markets such as Japan and South Korea. But Biden’s increased emphasis on “Buy American” is helping to overcome years of deadlock, as well as fears that China could ultimately become a major player in landmark tenders.
Berlin and the Nordic countries were originally reluctant to adopt the reciprocity law because they feared protectionism would rob Europe of the best technologies and the best prices. However, three diplomats and several members of the European Parliament now say that the northern blockade has collapsed. The EU countries, which are negotiating in a working group of the Council of the European Union, are about to reach an agreement on a legal text that the EU trade ministers will discuss at a meeting on May 20th. The Portuguese Presidency expects to receive approval to start negotiations with the European Parliament before the end of June.
“It’s a good sign that the council is finally getting closer to a conclusion,” said Daniel Caspary, a German center-right lawmaker and the man in parliament on the upcoming law.
While the timing of this new law is a clear warning shot for the US, the law has a much broader scope and would apply to any country that does not mutually open its procurement market to EU companies. In practice, it could indeed be used against Asian countries whose drivers are increasingly gaining a foothold in the EU.
“‘Buy American’ in the US has made European states and EU companies aware of the need to strengthen the instruments of our strategic autonomy,” said Marie-Pierre Vedrenne, a French MEP and the group’s centrist Renew Europe Punkt person on trade. “We have to make it clear to our partners that we are open and want to stay open, but it has to be mutual and fair. We have to avoid being squeezed between China and the US.”
EU companies are increasingly feeling the competition from China, not only abroad but also in their home markets. EU law already allows countries to exclude Chinese bidders from many tenders because Beijing has not signed up to the World Trade Organization’s public procurement agreement. Still, China could join in the future, and EU companies want to be ready.
“Ultimately, it depends on whether you have access to the third market or not,” said Inès Van Lierde, head of the industry association AEGIS Europe. However, many EU companies are already based in the US and have transparent access to the market, while in other countries such as China, procurement is largely discriminated against in favor of domestic manufacturers. ”
Washington has signed up to the WTO procurement deal, but EU trade chief Valdis Dombrovskis has suggested that Biden’s move violates US commitments.
In an interview with POLITICO and other media outlets in February, Dombrovskis said the EU, the world’s largest trading bloc, would closely monitor whether the preferential treatment of US contractors in public projects was in breach of international obligations.
The new instrument would give Brussels more power to force Washington to keep its market open. The law would mandate the European Commission to investigate whether certain sectors in countries outside the EU are closed to EU offers. If Brussels concludes that the market is closed, it would enter into consultations with the country’s authorities to open that procurement market, said diplomats and officials briefed on the negotiations.
Should this fail, the Commission would decide whether to propose a “score adjustment” to make offers from the penalized country more expensive through a points-based regime, or to completely exclude offers from companies based in that country.
Although the Council’s text is not finalized, some target areas appear for closure, according to diplomats. Under the Portuguese proposal, the decision to exclude tenders would apply to tenders for goods and services over EUR 5 million and over EUR 10 million for public works and concessions.
There is also a landing area to avoid circumvention, with an additional obligation for EU suppliers not to source goods or services or to offer offers to third parties for more than 50 percent of the total value of the offer.
In order to get the Nordic countries on board, the Council can agree to a clause that will allow countries to circumvent the Commission’s decision to exclude bidders. Under an exemption currently being discussed, the contracting authorities could ignore a contract from Brussels if this would lead to “disproportionately” higher procurement prices.
The European Parliament and EU industry are against such a broad price exemption. “It is important for us in Parliament that we want a minimum of exemptions. If the Commission decides to close the public procurement market, it should be closed and individual EU countries should not circumvent this,” said Caspary of the European People party.
Van Lierde, of the AEGIS lobby group, said the exception “is against the essence of the instrument”.
Do you want more analysis of POLITICO? POLITICO Pro is our premium news service for professionals. From financial services to commerce, technology to cybersecurity and more, Pro offers the real-time intelligence, deep insights, and critical information you need to stay one step ahead. E-mail [email protected] to request a free trial.