How do you open markets worldwide, for the benefit of taxpayers, companies and jobs?
Europe’s answer to that question is short: We lead by example.
We are the world’s largest single market and our foreign trade policy is actively focused on further liberalizing trade through both multilateral and bilateral negotiations.
However, what happens if others do not follow our example? What incentives do our partners have to open their markets to our businesses when their own businesses have full access to ours?
As negotiators, that is a question to which there are no short and simple answers.
Take public procurement, a sector of major economic importance.
In the EU, purchases by governments correspond to about 19 percent of GDP and companies whose business directly depends on procurement represent more than 30 million jobs. It is also a booming sector in emerging economies and one in which European firms are very competitive.
The European public procurement sector is the most open in the world. Outside contractors are able, welcome even, to compete in our market, subject to the same conditions as European companies. Between the EU’s 27 member states, procurement markets are also liberalized, and rightly so. This has driven down prices, increased the competitiveness of our firms, and offered more value for money to authorities and taxpayers across Europe.
Yet we are far ahead of other countries in this approach. Other economies, though they enjoy access to the EU market, are far more reluctant to open their own markets.
While about 352 billion euros (US$470 billion) of European public procurement is included in the WTO Government Procurement Agreement (GPA) and therefore open to bidders from member countries of the GPA, the value of US procurement offered to foreign bidders is just 178 billion euros and for Japan that figure is only 27 billion euros. China and India have not yet committed any part of their fast-growing procurement markets, with foreign companies winning only a fraction of Chinese and Indian contracts.
At the end of last year, the EU was at the forefront of efforts to renegotiate the GPA. We were happy to come to a new deal among the 15 WTO members, among them Taiwan, that are party to the agreement to improve discipline for this key sector of the economy and expand market access coverage by up to 100 billion euros a year. There can be no doubt about our free-market credentials, but we cannot accept that imbalances grow ever larger between those that push for market opening and those that refuse to do so.
In cases of serious and repeated discrimination, if a country continues to bar European companies from its market, the European Commission may close a certain sector of the EU procurement market as a whole. Naturally, the EU will fully honor its commitments to the WTO GPA or a free-trade agreement. This is the case for Taiwan, and Taiwanese firms have benefited from additional market access to other GPA members in the past three years. The measure is designed to be used as a carrot, rather than as a stick.
Our proposal will also clarify the rules of access to the EU’s public procurement market, and in doing so bring more legal certainty for both international suppliers and public entities that need goods or services. It will confirm that the EU market is basically open and that we want to keep it that way.
However, the door of free trade has to open both ways — otherwise the demand to shut it could well gather strength.
Karel De Gucht is European Commissioner for External Trade. Michel Barnier is European Commissioner for the Internal Market and Services.
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