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26th Jan 2020

EU to restrict foreign firms' access to public tenders

Chinese, Russian or Brazilian companies bidding for public contracts in Europe may face restrictions if their governments do not open up their own state-run projects to European firms, the EU commission said Wednesday (21 March).

Under the new bill, local and state authorities in the EU overseeing tenders for public transport, railways, medical equipment or IT services amounting to more than €5 million can ask the EU commission to impose restrictions for a certain company coming from a country where EU firms have no access to public tenders.

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  • The EU may ban Chinese companies from bidding in road-building tenders (Photo: European Parliament)

"The EU opened up more than 80 percent of its public procurement sector through multilateral and bilateral agreements. But our partners apply a lot of protectionist measures - the US, Japan and emerging countries where we have no secure access to tenders for highways, urban buses, construction projects - all is closed," internal market commissioner Michel Barnier said during a press conference.

He noted that some 32 percent of US public tenders are open to EU-based companies, 28 percent in Japan and 16 percent in Canada.

But in China, Russia and Brazil the percentage is "zero." "These are completely closed markets. We are trying to open them up in a reciprocal, fair fashion," the French commissioner said. EU companies are estimated to lose some €12 billion annually due to these restrictions.

His Belgian colleague Karel De Gucht in charge of trade added that the proposal was about "encouraging - and that's a very diplomatic term - our partners to open up their public procurement markets."

"A carrot is always better received when the counterpart knows there can be a stick, too," De Gucht said.

Asked whether he did not fear retaliatory measures from other countries, the trade official quipped: "If you are afraid of retaliation, you have to do something different than politics."

If approved, the bill is estimated to trigger claims for market restrictions worth about €250 billion a year, with the EU commission bound to approve or reject them on a two-month notice.

China

China, whose officials are denying that their public tenders are closed to EU companies, is "a very special case," EU officials say.

Wu Hailong, China's new ambassador to the EU on Tuesday rejected claims of protectionism: "We treat companies from all countries equally. We do not exclude."

Any preferential treatment of Chinese companies is due to "consumption habits" - the fact people simply prefer domestic firms - he argued during a conference at the Madariaga Foundation in Brussels on Tuesday.

The EU is currently negotiating an agreement with China to grant European companies access to public procurement tenders, but Beijing is "very reluctant to open up," the EU official said. With this proposal, Brussels aims at having more negotiation leverage, the official added.

If the bill passes, Chinese companies will also have a hard time bidding much lower than their competitors in Europe, as national authorities will be allowed to reject "abnormally low" bids which cannot meet the required quality standards.

The EU already saw a case in Poland where a Chinese consortium won the bid for the construction of a highway at a price 40 percent lower than its competitors only to admit later on they could neither meet the deadline nor the quality standards.

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