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Document 52012SC0058
COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing rules on the access of third country goods and services to the European Union's internal market in public procurement and procedures supporting negotiations on access of European Union goods and services to the public procurement markets of third countries
COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing rules on the access of third country goods and services to the European Union's internal market in public procurement and procedures supporting negotiations on access of European Union goods and services to the public procurement markets of third countries
COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing rules on the access of third country goods and services to the European Union's internal market in public procurement and procedures supporting negotiations on access of European Union goods and services to the public procurement markets of third countries
/* SWD/2012/0058 final - COD 2012/0060 */
COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing rules on the access of third country goods and services to the European Union's internal market in public procurement and procedures supporting negotiations on access of European Union goods and services to the public procurement markets of third countries /* SWD/2012/0058 final - COD 2012/0060 */
Disclaimer: This executive summary commits
only the Commission's services involved in its preparation and does not
prejudge the final form of any decision to be taken by the Commission. Background Public procurement is about how public
authorities spend taxpayers' money in public purchase and investment decisions.
Public procurement is considered to be a key driver of
public policies. In economic terms, public procurement
affects a substantial share of world trade flows. Purchases of goods and
services by public authorities account for roughly 17% of the EU’s GDP. Public
procurement impacts at least 22 key markets of goods and services in which the
customers are exclusively or mostly public purchasers, or for which public
authorities are large clients. All in all, the turnover of firms operating in
these procurement markets may exceed 25% of the EU's GDP and represent some 31
million jobs. In its negotiations with third countries,
the EU has advocated an ambitious opening of international public procurement
markets. However, EU companies have to deal with an unlevel playing field in
that respect as many trading partners are reluctant to further open their
procurement markets to international competition – which considerably limits
their business opportunities. Stakeholder's
consultation This impact assessment report has been prepared taking into
consideration the views expressed by a wide range of stakeholders, including
Member States, civil society, industry, and NGOs. In order to gather those
views, the Commission organised an internet consultation, a public hearing, and
other consultation mechanisms. Respondents to the
internet consultation generally welcomed the European Commission's initiative
and agreed on the description of the problems faced, but held diverging views
on the options to choose. A significant majority of stakeholders appear to
support a legislative initiative, while an important minority prefer the option
'nothing happens'. There are also divergent opinions as to what that
legislative option should be. Although there is large support for the
legislative option with approach A[1],
there are a significant number of respondents in favour of an alternative
approach that is neither A nor B[2].
It is worth noting that, although the least preferred legislative option,
approach B also received support from a considerable number of respondents. 1. Problem Definition 1.1. The limited openess of
public procurement markets worldwide Public
procurement is excluded from GATT and GATS, which govern world trade in goods
and services. Industrialised countries, among them the EU and 14 other
countries (including USA, Japan, Canada and Korea), have become parties to the
WTO Agreement on Government Procurement (GPA). Parties to the GPA commit
themselves to mutual opening of their markets for certain types of purchases of
certain public entities above specific values. The EU and other countries such
as Korea or Chile have also committed themselves to opening their public
procurement markets through free-trade agreements outside the WTO. The EU is directly concerned by the global
opening of public procurement but in reality, only 25% of contestable public
procurement markets have been committed internationally in either the GPA or
FTAs. Although, the GPA/FTAs only secure 5 billion EUR of EU exports (0,4% of
all EU exports), the opening of public procurement affects some other 5 billion
EUR taking place in non-committed procurement markets, altogether affecting the
international trade of industrial sectors active in 22 selected markets, whose
turnover amounts to 25% of the EU GDP and some 31 million jobs. In total, more
than 50% of contestable public procurement markets are closed through
protectionist measures such as price preference mechanisms or local content requirements.
In addition, some 25% are de facto open, but can be closed at any
moment. This leaves the EU with some 12 billion EUR of untapped exports.
Furthermore, the EU has so far no agreements on public procurement with
countries such as China or India, although it is currently negotiating market
access commitments with both. The opening of public procurement markets
has been prevented by strong national agendas driven, in industrialised
economies, by domestic pressures and, in emerging economies, by the need to
climb the technological ladder.. 1.2. The EU lacks negotiations leverage
to foster the globalisation of procurement The EU has given wide commitments on its
public procurement market when compared to other GPA parties. As a result, the
strategic economic interests of several GPA parties are satisfied by the
current state of affairs. Also, since the GPA is not part of multilateral trade
negotiations, market access in public procurement can only be traded in
negotiations against market access in public procurement (and not against lower
tariffs, for example). Also, the fact that several high-profile contracts have
been awarded in types of procurement not covered by commitments fuels the
perception that the EU public procurement market is open even beyond the level
of its international commitments. 1.3. Some Member States take national
measures to regulate access to their public procurement In this context, several Member States have
taken measures to regulate access to their public procurement market. Others
have informed the Commission – informally – that they intend to introduce
measures. Since regulating the access to the EU procurement market for
suppliers from third countries clearly falls under the remit of the EU's
exclusive competence for the common commercial policy, Member States are not
entitled to legislate in this area on their own. More practically, because of the absence of
EU guidance or legislation on the access of foreign tenderers to the EU public
procurement market, contracting authorities in the EU are at a loss when trying
to understand the scope of the EU's international commitments in the area of
public procurement. 28% of all contract award notices contain erroneous
assessments of the coverage of the GPA – sending wrong signals to foreign
bidders. 1.4. Overarching problems Overall, most public procurement markets in
third countries remain closed to EU businesses. EU companies are being denied
access to some 12 billion EUR of potential exports. If third countries were
able to accept withdrawing protectionist measures only in those sectors where
they themselves have strategic offensive interests, they would open access to
up to 4 billion EUR of exports for the EU. This impacts on the capacity of EU
firms to create economies of scale. In addition, EU companies supplying goods
and services in the 25% of procurement markets that are de facto open
can be hit at any moment by protectionist measures. Current protectionist policies may distort
business investment decisions, and could also lead to jobs being shifted artificially
outside the EU. The same could be said of technology transfers that are
undertaken for reasons of industrial policy (e.g. China's "indigenous
innovation" policy) rather than on purely commercial grounds. In the medium-term,
access problems may even extend to those sectors where the EU has a competitive
edge to bypass existing barriers (e.g. pharmaceuticals). EU companies, goods and services do not
enjoy from a level playing field. From a sectoral perspective, Chinese
construction companies and Japanese railways have been given the opportunity to
sell to EU contracting authorities, while sales in the opposite direction are
impossible. In several instances, state-supported companies (for example, from
Russia and China) have been able to submit abnormally low tenders. 1.5. Analysis of subsidiarity The question of subsidiarity does not arise
in the context of this initiative, as the rules and negotiations on access to
the EU's public procurement market fall within the scope of the common
commercial policy, an exclusive competence of the EU under Article 207 of the
TFEU. Therefore, any action that sets a framework for the implementation of an
international trade agreement must be taken at the EU level. . 2. Objectives Fair competition and
access to public procurement markets are key instruments for economic growth
and job creation, in particular in the context of the recent economic crisis. Against
this background, the present legislative initiative would serve as a trigger for further opening of public procurement markets in third countries
in order to improve business opportunities for EU firms. In doing so, it is believed that the
initiative will: increase the competitiveness of EU businesses, both in the EU
and internationally; boost the internationalisation of SMEs in a globalised
economy; and increase employment and promote innovation in the EU. These general objectives have been
translated into specific and operational objectives in the impact assessment.
The specific objectives include: boosting the exports of EU goods and services
in public procurement markets outside the EU; giving the EU greater leverage in
international negotiations on procurement; increasing legal certainty in
respect of third countries' access to the EU's public procurement market; and
ensuring that commitments on public procurement given to the EU as part of its
international agreements are respected. 3. Policy Options 3.1. Baseline scenario:
"Nothing happens" (Option 1) The baseline scenario shows how the
problems described in the problem definition will most likely evolve without
any further action by the EU. Under this scenario, the EU would not undertake
any new action; the present EU legal framework and the corresponding practices
would remain in place; and the EU would continue to negotiate additional market
access (accession of China to the GPA, FTAs with India and Japan, bilateral
procurement openings with USA) and to rely very largely on current market
opening commitments secured in the GPA or in FTAs, together with those that
might be secured in the future. In reality, however, there is considerable
uncertainty about the likely extent and rate of progress in the current GPA
market access negotiations, and about the outcome of ongoing bilateral
negotiations. 3.2. Non-legislative option
(option 2): 3.2.1. Soft-law and dispute
settlement/ infringement mechanism (Option 2A) Under this option the Commission would
clarify in explanatory documents the scope of the EU's international
commitments and would provide guidance on the enforcement of existing
instruments such as articles 58 and 59 of Directive 2004/17 (procurement by
energy, water and transport entities). The Commission would also consider making
more active use of existing tools such as its own infringement procedures and
existing WTO/FTA dispute settlement mechanisms where trading partners infringe
their commitments. 3.2.2. Reinforcement of ongoing
negotiations (Option 2B) Under this option, the EU would
systematically encourage trading partners to join the GPA, require public
procurement chapters in all FTAs (and re-open the Customs Union with Turkey so
as to include a procurement chapter), start new negotiations and further extend
the procurement chapters of existing FTAs (Chile, Mexico). 3.3. Legislative option with
supervision by European Commission (option 3) This legislative option would define and
regulate access to public procurement covered and not covered by the EU's
international commitments and establish "procurement rules of origin"
(PROs) to identify the origin of goods and services. In line with the concerns
expressed by NGOs, it would also grant full access to goods and services from
least developed countries. Beyond these core elements of a legislative policy
response, it is possible to distinguish three alternative approaches
described in options 3A, 3B and 3C. 3.3.1. Approach based on an
overall access restriction for not covered procurement at the EU level (Option
3A) Under the first approach, Member States'
contracting entities would be required, in principle, to exclude third country
goods, services and companies not covered by the international commitments of
the EU. However, in order to avoid obstacles to the procurement of goods and
services unavailable in the EU and/or needed in cases of emergency and/or of
overriding reasons of general interest, the initiative would establish legal exceptions
to the obligation to exclude, and provide the Commission with the possibility
to issue additional derogations through waivers when required by special
circumstances. 3.3.2. Approach based on
individual decisions by the EU procuring entities and a Commission driven
mechanism in case of not covered procurement (Option 3B) 3.3.2.1. At the level of MS:
individual procuring entities' decisions under the supervision of the European
Commission (3B1) For not covered procurement, EU contracting
entities would have the option either to admit
or to exclude goods or service providers originating from third countries from
the tendering process. The decision to exclude foreign bids would be subject to
an ex ante notification to the Commission (through the contract notice).
This would allow the Commission to monitor the situation and ensure consistency
throughout the EU. 3.3.2.2. At the EU level: the
Commission-driven mechanism (3B2) At EU level, based on a determination of
market access difficulties and/or specific complaints, the Commission would
decide to open investigations on protectionist measures and other trade
barriers imposed on EU suppliers or on bids in third countries. The Commission
could then (1) invite the trading partners concerned to enter into negotiations
to dismantle the existing trade barriers, and/or to provide reciprocal market
access commitments in order to secure access to the other party's public
procurement markets and (2) adopt restrictive measures against bids originating
in these third countries, if the trading partner concerned refuses to engage in
negotiations. 3.3.3. Option 3C: Option for
contracting entities to accept companies, goods and services not covered by the
EU's international commitments, subject to notification of the Commission and
Commission option to impose access to the EU's public procurement market This option would give contracting entities
the possibility, subject to clearance of the Commission, to accept companies,
goods and services that do not benefit from international market access
commitments. They would need, first, to have announced in the contract notice
their willingness to accept these companies, goods and services. If they were
actually to receive offers of such goods and services they would then have to
notify the Commission. The Commission would take a decision based on
'substantial reciprocity' within take 6-8 weeks. 3.4. Legislative approach
without supervision by European Commission (extension of Article 58 to the
whole scope of the directives) To avoid burdening contracting authorities
with the need to notify the Commission, the provisions of Article 58 and 59
would be extended to services, works, bodies governed by public law, central
and local authorities. Guidance on the application of these articles would be
provided through explanatory documents (as per option 2). Finally, this
initiative would use the same core elements as option 3. 3.5. Option 5: 'Buy Europe' To level the playing field with main
trading partners such as the USA and China, the EU could create a system of
price preferences with a 25% margin in order to mirror the existing "Buy
American" and "Buy China" policies for non-covered procurement.
However, by doing so, the EU would be giving implicit approval to the sorts of
price preference mechanism across the world to which it is adamantly opposed.
This option should therefore be discarded from the outset and will not be
analysed. 3.6. Option 6: correcting
unfair 'abnormally low tenders' (complementary option) The options mentioned above could be
complemented by an option that would aim at remedying the problems arising when
suppliers from certain third countries offer (very) low prices since they
receive subsidies or benefit from other unfair competition practices. 4. Assessment of Impacts The impact of each option is assessed
taking into account a set of 9 criteria including impact on trading flows, leverage
effect of trading partners in international negotiations and impact on
administrative burden. These impacts have to be measured against a
potential increase of exports of 4 billion EUR (which represents about 60,000
jobs), if the 12 largest non-EU trading partners open those procurement markets
for which they have corresponding offensive interests in the EU. To determine
the efficiency of each option, the costs of each of them will be compared to
this benchmark. The possibility of retaliatory measures by trading partners
should also be taken into account when measuring the costs and benefits of each
of the envisaged options. Option 1 (baseline scenario) and Option 2B
(further negotiations) are expected to deliver 1 billion EUR of additional
exports (12.000-18.000 jobs). Under option 2A (legal clarification and
enhanced use of existing mechanisms), increased use of the existing
restrictions laid down in Directive 2004/17/EC (article 58.2) is likely to
produce most of the effects in terms of rules clarification and legal clarity.
Guidance on the scope of committed and non-committed procurement indeed
improves the level of legal certainty when rejecting offers of foreign goods
and services during tendering procedures. Option 2A is not expected to have any
significant impact on any other criteria. Option 3A (overall restriction of access for
not covered procurement at EU level) should significantly improve legal
certainty as it should avoid the problems caused by incorrect implementation of
symmetric reciprocity clauses. A large majority of the procurement markets
concerned would be able to apply restrictions, but waivers would probably be
applied in the procurement of fuel, pharmaceuticals, medical equipment and
computers. The potential impact on trade flows is far-reaching as this option
could block up to 4 billion EUR of imports of goods and services. This option
might have large retaliatory effects (1 billion EUR) and an important leverage
effect. The impact on public finances and administrative burden would remain
very limited. Under option 3B (individual entities, under
the supervision of the European Commission, may exclude bids from third
countries (3B1), and a Commission-driven instrument to conduct enquiries about
the market access situation for EU goods, services and companies in third
countries (3B2)), a greater degree of legal certainty would be obtained as the
Commission would have the final word on potential discriminatory measures. This
option would cover all relevant sectors of the economy. The initiative could
realistically lead to market openings worth 4 billion EUR of additional exports
and create 60.000 jobs. The leverage potential of this option would be slightly
better than option 3A thanks to the possibility to target offensive interests
of third countries under option 3B2. The retaliation risk of this option would
be limited since closure of the EU procurement market would itself be limited
and targeted. The impact on public finances would be limited, but the
administrative burden on contracting authorities, businesses and even the
European Commission would be relatively large because of the 6-8 week
notification system. Option 3C and 4 would present similar
impacts as option 3A. Yet, option 3C would cause the largest administrative
burden of all options (notifications instead of waivers) and option 4 would not
improve the level of respect for international commitments as much as options
3A or 3B. Option 6 (correcting unfair abnormally low
bids) would come as a complement to the other options and would only affect
foreign bids. Impact on the administrative burden and public finance would be
minor but would depend on the number of cases. However, the risk of retaliation
exists, because companies excluded on the basis of abnormally low bids are most
likely to be state-owned. 5. Comparison of Options The proposed policy options have been
compared on the basis of their impact on the objectives to be achieved and on
the basis of their efficiency. Option 1 does not meet the identified
objectives and has therefore only be considered as the baseline scenario with
which to compare the other policy options. Option 2 will have only a limited
contribution to the fulfilment of the identified objectives (as regards
improvement of legal certainty and access to third countries markets) and also
has the least advantages in terms of efficiency, effectiveness and coherence.
Options 3A, 3C and 4 meet the identified objectives – but are not efficient
because of the retaliation costs that they may entail, as well as the problems
for supply chains of EU firms in USA and China. Option 3C generates a
substantial administrative burden. None of the options except option 6 can
actually target the abnormally low tenders of state-supported firms, goods and
services. Option 3B is the most likely to meet all the objectives and to meet
them to the greatest extent. It has also received the best scores in terms of
effectiveness, efficiency and coherence as compared with the other policy
options. As a result, it is recommended to follow option 3B and to complete
with option 6 and 2B. 6. Monitoring and Evaluation The Commission will monitor the compliance
of Member States and Member States' contracting authorities with the
obligations laid down in the external procurement initiative. The initiative
proposes a set of indicators to track the achievement of each specific
objective, notably by monitoring of: ·
additional procurement-related exports ·
number of sectors (among the 22 selected) that
have been opened abroad compared to the ·
current number ·
expansion of trade flows in the area of
procurement ·
number of investigations launched by the
European Commission ·
removal of procurement trade barriers against EU
suppliers in specific third countries ·
changes in national law to reflect international
commitments in the area of public procurement. [1] Approach A: EU procuring entities would be required
in principle to exclude third country goods, services and companies not covered
by international commitments of the EU. [2] Approach B: Subject to notification to the
Commission, EU procuring entities would have the option to decide to exclude
third country goods, services and companies not covered by international
commitments of the EU.In addition, the Commission would be entrusted with a
specific tool to conduct enquiries about the market access situation for EU
goods, services and companies and to impose restrictive measures on goods and
services originating in third countries when EU goods, services and companies
do not have sufficient access to the public procurement market of these
countries.