Impacts of the International Procurement Instrument must be thoroughly assessed

The EU has always been an open market that welcomes businesses and investors from third-party countries. This is also the case with the public procurement market. The EU is a signatory of WTO Agreement on Governmental Procurement (GPA) that should ensure that European companies enjoy the same conditions when it comes to procurement on third-party markets. However, a significant part of EU public procurement goes to bidders from countries that are not signatories of the WTO GPA, and in many countries European companies don’t enjoy the reciprocity in terms of openness of the procurement market.

Therefore, the European Commission proposed to create an International Procurement Instrument (IPI). The initial proposal, published in 2012, opened the possibility, under certain conditions, to start a European Commission investigation, focused on bidders from third-party countries, to determine the practices regarding public procurement in the third-party country, and whether the European companies are available to participate in it. If the investigation found that European companies are discriminated against on the third-party market, the EU Member State could introduce penalties for the bidders, or even exclude them from the tender.

Despite a number of concerns from the stakeholders, the European Parliament managed to find a common position in 2014. However, the Member States weren’t able to agree on a position. In 2016, the Commission published an amended proposal that only left the possibility to increase the price for foreign bidders as a restrictive measure. The rules would apply for contracts of at least 5 million EUR, where 50% of the total value would be made up of goods originating in the third-party country concerned. Furthermore, the price for the bidders from the third-party country could be increased by up to 20%, which would give a competitive advantage to companies from the EU. As in the case of the initial proposal, the consensus hasn’t been found among the Member States in the Council and the proposal hasn’t yet been approved. However, the new Trade Commissioner-designate, Phil Hogan, said that the situation might change in the Council and, during a hearing in the European Parliament; he also expressed his support for the idea.

Czech businesses welcome the overall idea of opening third-party countries’ procurement markets to companies from the EU. It is true that in some sectors competition from the countries, where market conditions aren’t equal to the EU, isn’t fair and European companies can’t compete. However, it is necessary to thoroughly asses the impacts of such a proposal. The proposal must come up with very specific rules on how the instrument could be used, as a vague formulation would only bring legal uncertainty. Furthermore, it is important to assess whether the 20% increase in price for foreign bidders would have a desired effect, as for some companies a significant presence on the EU market would be more valuable than the price increase.