Commission calls for fines against protectionist trade partners

The EU says its market is open, but many of its major trading partners apply restrictive practices.

The Commission wants to slap fines on countries that discriminate against European companies in bidding for public projects.

Under a legislative proposal, the EU could retaliate when foreign companies bid for lucrative deals in Europe, if their home countries do not grant EU firms similar conditions for doing business.

“Government procurement around the world represents a huge market,” said EU Internal Market Commissioner Elżbieta Bieńkowska on Friday. “We want EU companies to be able to tap into this market outside the EU just as companies from outside the EU are able to benefit from our market.”

The aim: Forcing those countries to open their public procurement markets to international competition. While the EU says its market is very open, it claims that many of its major trading partners — notably the United States — apply restrictive practices.

In the U.S., which is currently negotiating an ambitious trade deal with the EU, the Buy American Act gives U.S. companies and products an advantage over their foreign counterparts.

Public procurement is a sticking point in that deal, the Transatlantic Trade and Investment Partnership. The 12th negotiation round will start in two weeks in Brussels.

Under the draft law, which still needs approval from Parliament and Council, the Commission could launch a public investigation whenever EU companies claim to be discriminated.

If the suspicion is confirmed, the EU would engage in talks with the country concerned to reduce the barriers or try to negotiate a free trade deal.

“Openness is good for business, good for consumers, and leads to an efficient use of taxpayers’ money,” said Trade Commissioner Cecilia Malmström. “It also helps in the fight against corruption.”

If negotiations reach no satisfying outcome, the EU could as a last resort slap a tax of up to 20 percent on proposals made by companies from the concerned country, with the effect of making it much harder to win.

However, this tax would remain virtual: should the foreign company still win the bid even after being penalized, the 20 percent tax would not be applied.

The Commission argues the “tax” would still have its effect, even though all sides know it won’t apply.

Commission officials said it would not apply the virtual tax to the world’s poorest countries, nor to small and medium-sized companies with a branch in the EU.

The new pitch is a revamped version of a legal proposal from 2012, which contained harsher retaliatory measures, but met resistance from some EU countries in the Council who called it too aggressive.

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