Business, EU – Baltic States, Legislation, Markets and Companies

EU companies are often subject to discrimination when selling their products and services to public institutions in other countries. Such restrictions affect competitive EU sectors such as construction, public transport, medical devices, power generation and pharmaceuticals. Only a quarter of the world's annual procurement market is open to international competition.

The 2015 Commission's trade strategy highlighted the need for an effective policy that tackles new economic realities and points at the need to ensure a level playing field in market access also for procurement.

The strategy also calls for more efforts to combat corrupt practices. Corruption is a world-wide problem and particularly relevant in the case of public procurement.

The EU’s efforts to overcome the existing trade barriers are twofold. On the one hand, the EU includes comprehensive procurement chapters into the free trade agreements that it concludes bilaterally with its partners. Also, it negotiates with countries willing to join the WTO Government Procurement Agreement (GPA) – for instance China and Australia – aiming at bringing more countries to the agreement and make it eventually apply to all WTO members.

The Commission, in March of 2012, made its first proposal to create incentives for EU trading partners to opt for more openness in public procurement. Today's proposal brings improvements to the initial Commission initiative, by allowing the EU to take proportionate and more targeted action – providing leverage in negotiations, without closing EU markets or adding any unreasonable burden for contracting authorities.

General notion and concept

Procurement, generally, is the act obtaining or buying goods and/or services; it includes and often involves several “procurement” stages: e.g. purchase planning; standards determination; supplier research and selection; value analysis; financing, price negotiation, supply contract administration, disposals and other related functions.
See more at: http://www.businessdictionary.com/definition/procurement  

Then, there is a government procurement, or public procurement, which is the procurement of goods and services on behalf of a public authority, e.g. a government agency. With 10 to 20% of GDP, government procurement accounts for a substantial part of the global economy. To prevent fraud, waste, corruption, or local protectionism, the law of most countries often regulates government procurement: it usually requires the procuring authority to issue public tenders if the value of the procurement exceeds a certain threshold (e.g. about €3-5 mln in EU).

Government procurement is also the subject of the Agreement on Government Procurement (GPA), a multi-lateral international treaty under the auspices of the WTO.

Apparently, closed procurement markets undermine competition and transparency, increase the costs of public goods and services for taxpayers and also increase the risk of corruption. Opening up non-EU markets for European companies would lead to public savings, creting a win-win situation for jobs and growth in the EU and the tender country in question.

Government procurement regulations normally cover all public works, services and supply contracts entered into by a public authority. However, there may be exceptions: most notably they cover military acquisitions, which account for large parts of government expenditures.

The GPA and EU procurement law does not apply, generally, where public tendering would violate a country's essential security interests. Additionally, certain politically or economically sensitive sectors, such as public health, energy supply or public transport, may also be treated differently.

Source: https://en.wikipedia.org/wiki/Government_procurement.

Commission’s opinion on a new “Procurement Instrument”

European Commissioner for Trade, Cecilia Malmström, underlined her firm believes that an open international trading system needs to include public procurement. She stressed that “openness is good for business, good for consumers, and leads to an efficient use of taxpayers' money”. Besides, she added that procurement also helped in combating corruption.

Thus, the new proposal will give the EU and the member states some means to show that the EU is committed to opening up procurement markets globally.

Another EU official, the European Commissioner for Internal Market, Industry, Entrepreneurship and SMEs, Elżbieta Bieńkowska, mentioned that government procurement around the world represented a huge market. Thus, the EU’s idea is provide the EU companies with some instruments to join international markets while ripping some benefits. The new proposal will open doors for European businesses and allow companies to compete on an equal footing.

Other advantages

The new Instrument would allow the Commission to initiate public investigations in cases of alleged discrimination of EU companies in procurement markets. In case such an investigation would find discriminatory restrictions vis-à-vis EU goods, services and/or suppliers, the Commission will invite the country concerned to consult on the opening of its procurement market. Such consultations can also take place in the form of negotiations on an international agreement.

As a last resort, the Commission could, after consultation with the EU states, apply the new tool in approaching the global markets. This means that bids consisting of goods and services from the country concerned would, while compared to other bids, be considered as offering a higher price than the one they have put forward, thus providing European and non-targeted countries' goods and services a competitive advantage. To avoid the application of this tool, third countries have only to stop such discriminatory practices.

The existing EU commitments – including in the WTO Government Procurement Agreement (GPA) and bilateral trade agreements (see above) – remain unaffected by this initiative. EU public procurement markets are open to foreign providers and increasingly transparent: the Commission's Tenders Electronic Daily (TED) database covering public procurement opportunities in the EU is now also equipped with a free translation tool, removing the language constraint.

The Commission is also currently negotiating market openings with some of the EU's major trading partners, in the context of free trade agreements or in the World Trade Organisation and expects these negotiations to lead to substantive market openings, making the future use of the new tool vis-à-vis these countries superfluous.

In addition, the proposal contains other elements to ensure its proportionality in achieving its objectives, safeguarding that it cannot be used as a tool to protect or close EU procurement markets.

Thus:

·         in order to avoid a negative impact on development, the proposed instrument will not apply vis-à-vis suppliers from least developed countries or the more vulnerable developing countries;

·         it will not apply to tenders made by EU small and medium-sized businesses, so as to facilitate their participation in the EU procurement market;

·         the application will be limited to contracts above a certain threshold;

·         the scope of possible action will be targeted to what is deemed necessary: the application can be limited to certain suppliers from the third country concerned, and its implementation to a select group of contracting authorities in each EU state.

Reference: European Commission, press release “European Commission Takes Action to Open Up International Procurement Markets”, Brussels, 29 January 2016. In:

http://europa.eu/rapid/press-release_IP-16-178_en.htm?locale=en.