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Just as Joe Biden insists the US government ‘buy American’, Europe is poised to deploy a countermeasure that will put pressure on EU member countries to ‘buy European’.
In the resumption of the coronavirus pandemic, Brussels and Washington stress the importance of local industries and job creation on the home front.
In an address to Congress last week, the US president said basic technologies should be built in the US and added that his plan to create more jobs would be “guided by one principle: ‘Buy American’. American taxpayer money is going to be used to buy American made products in America that create jobs in the United States. Like it should be. ”
The sentiment also hit Europe. After hesitating for almost a decade, the EU is now ready to move forward in the coming weeks with a new legal tool that will enshrine the concept of “reciprocity” in large public procurement, thus strengthening the champions. industrialists in the EU. At its heart, the EU law aims to effectively exclude companies in countries where EU companies are excluded from tendering, by leveraging the giant EU public procurement market of € 2 trillion in everything from highways and trains to public computer systems.
Originally, the law – known as the International Government Procurement Initiative – was intended as a way to respond to protectionism in Asian markets such as Japan and South Korea. But Biden’s increased focus on “Buy American” is helping break out years of lockdown, as are fears that China will eventually become a major player in historic tenders.
Berlin and the Nordic countries were originally reluctant to the law of reciprocity, fearing that protectionism would deprive Europe of the best technologies and the best prices. However, three diplomats and several members of the European Parliament now claim that the blockade in the north has collapsed. EU countries negotiating in a Council of the European Union working group are now close to agreeing on a legal text, which EU trade ministers will discuss at a meeting May 20. The Portuguese Presidency of the Council hopes to obtain approval to start negotiations with the European Parliament before the end of June.
“It is a good sign that the Council is finally approaching a conclusion,” said Daniel Caspary, a center-right German lawmaker and parliamentarian on the upcoming law.
East and West
While the timing for this new law is a clear warning to the United States, the law is much broader in scope and would apply to any country that does not reciprocally open its supply market to EU companies. . Indeed, in practice, it could be deployed against Asian countries, whose train manufacturers are increasingly establishing themselves in the EU.
“Buy American” in the United States has sensitized European states, but also EU companies, to the need to strengthen the tools of our strategic autonomy, “said Marie-Pierre Vedrenne, French MEP and centrist Renew Europe. trade group contact. “We have to make our partners understand that we are open and want to stay open, but it has to be reciprocal and fair. We must avoid being stuck between China and the United States “
EU companies are increasingly feeling competition from China, not only abroad, but also in their domestic markets. EU law already allows countries to exclude Chinese bidders from numerous tenders because Beijing has not joined the World Trade Organization’s government procurement agreement. Still, China could join in the future and EU companies want to be ready.
“At the end of the day, it’s a question of whether you can access the third market or not,” said Inès Van Lierde, head of the industry association AEGIS Europe. “It is true that under Buy American policies one has to move there to a certain extent. But many EU companies are already established in the United States and are able to access the market in such a way. transparent, while in other countries like China, there is wide discrimination in government procurement to favor domestic manufacturers. ”
Washington joined the WTO government procurement deal, but EU trade chief Valdis Dombrovskis suggested Biden’s push violated 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 given to US contractors on public projects violated international commitments. .
Points and penalties
The new instrument would give Brussels more leverage to force Washington to keep its market open. The law would task the European Commission with checking whether certain sectors in countries outside the EU are closed to EU offers. If Brussels concludes that the market is closed, then it will begin consultations with the country’s authorities, with the aim of opening up that buying market, diplomats and officials briefed on the negotiations said.
If this was unsuccessful, the Commission would then decide to propose a “score adjustment” – essentially making the penalized country’s bids more costly thanks to a points-based regime – or to completely exclude bids from companies based in it. country.
While the Council text is not yet finalized, some target areas for the conclusion are emerging, diplomats said. According to the Portuguese proposal, the decision to exclude bids would apply to bids for goods and services over 5 million euros and over 10 million euros for public works and concessions.
There is also a landing zone to avoid bypass with an additional obligation for EU suppliers not to source any goods or services or to subcontract bids for more than 50 percent of the total value. of the offer.
To involve the Nordic countries, the Council can agree on a clause which would allow the countries to bypass the Commission’s decision to exclude bidders. As part of an exemption currently under discussion, contracting authorities could ignore an order from Brussels if it led to a “disproportionate” increase in purchase prices.
The European Parliament and EU industry are opposed to such a price exemption. “What is important for us in Parliament is that we want minimum exemptions. If the Commission decides to close the public procurement market, it should be closed and individual EU countries should not bypass this, “said Caspary of the European Citizens’ Committee. Party.
Van Lierde of the AEGIS lobby group said the exception “goes against the very essence of the instrument”.
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