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European Commission considers ban on non-EU contractors

Foreign contractors will be excluded from tendering for European projects where European suppliers get no reciprocal access to the contractors’ home market under bold plans unveiled by the European Commission.

Foreign contractors putting in bids considered “abnormally” low would also be obliged to explain their pricing under proposed new regulations.

The Commission hopes the move would level the playing field for European businesses in international markets where the EU is “highly competitive” such as construction, public transport, water treatment and power generation.

The Commission has calculated that the public sector market is worth €1,000bn (£830bn) per year, but that worldwide only a quarter is opened up to international competition. The value of tenders advertised across the EU is approximately £350bn per year

“The EU should no longer be naïve and should aim for fairness and reciprocity in world trade,” said European Commissioner for internal markets and services Michel Barnier. “We are open for business and we are ready to open up more, but only if companies can compete on an equal footing with their competitors. The Commission will remain vigilant in the defence of European interests and European companies and jobs.”

Key aspects of the proposal regulations are:

  • Openness of the EU’s public procurement market is retained
  • The Commission may approve that EU contracting authorities, for contracts above €5M, exclude tenders comprising a significant part of foreign goods and services where these contracts are not covered by existing international agreements.
  • In the event of repeated and serious discrimination against European suppliers in non-EU countries, the Commission will have at its disposal a mechanism allowing it to restrict access to the EU market, if the country outside the EU does not engage in negotiations to address market access imbalances. Any restrictive measures will be targeted, for example by excluding tenders originating in a non-EU country or imposing a price penalty.
  • The proposal increases transparency on abnormally low offers in order to combat unfair competition by non-EU suppliers on the European market.

Proposals welcomed

European rail industry association Unife welcomed the proposals.

“This proposal marks an important step towards a fair competition on the global rail market,” said UNIFE director general Philippe Citroën. “We are absolutely ready to face the competition from the Far East and elsewhere, but in a framework of fair and reciprocal market conditions.”

The European rail industry supplies more than 50% of the worldwide production of rail equipment and services, but contractors and suppliers are still blocked from operating in many markets.

Unife cited Japan, which has long hindered European firms by applying a so-called “Operational Safety Clause” which results in the de facto exclusion of virtually all foreign bidders.

The proposed regulations will now be passed to the European Council and the European Parliament. The Commission hopes that the proposal could come into effect in the second half of 2013.

Currently the EU can only be closed to foreign bidders for work in the utilities and defence sectors. In all other sectors, the EU’s markets are de facto fully open.

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