How the EU wants to slow down China when it comes to tenders – economy

Daniel Caspary can not resist a point against the Council of Ministers: The trade committee of the European Parliament worked out its position on the draft law in less than three months, says the CDU MEP. The Council of Ministers, on the other hand, the legislative chamber of the member states, took “almost ten years”. Caspary is the MP responsible for an important piece of legislation designed to make it easier for European companies to do business in China and elsewhere. Adopted on Monday evening the trade committee Parliament’s position on this was unanimously voted against.

This “instrument for international procurement”, so the cumbersome name, is intended to give the EU Commission a sharp sword in order to break up isolated markets for European companies. In Brussels, the set of rules is usually called IPI, which is the English abbreviation. The regulation doesn’t mention China, but the country is clearly the primary target. After all, the legal act is directed against the grievance that countries like China do not allow European companies to bid in state tenders, for example for construction contracts or the purchase of computers for government offices. The US government also discriminates against foreign manufacturers with the “Buy American” rules. Conversely, the EU is very open to the participation of Americans and Asians in state tenders.

Such tenders have a value of in the 27 Member States two trillion euros annually – a huge market that could be closed to Chinese companies in the future. If corporations from China or other isolated markets want to participate in tenders, for example for the construction of a motorway, the commission can sabotage this according to the law. The Brussels authority may force the advertising office to apply a penalty to Chinese offers. The officials would then have to treat the offer as if the price was higher than it is in reality. That improves the chances of European rivals. The Commission also has a second, even tougher option: it can completely forbid member states from letting certain companies take action.

The Commission should use this leverage to open up foreign markets for EU companies in negotiations. The aim is not to seal off Europe, but to open up China – by threatening to otherwise copy China’s protectionist practices. Nevertheless, many EU governments were uncomfortable with this instrument for a long time. They fear that the EU could very well isolate itself with the set of rules. In addition, contracts could become more expensive for authorities and thus ultimately for taxpayers if cheap Chinese companies are booted out.

How high should the penalty be for the Chinese?

The Commission presented a first draft law back in 2012, revised him but in 2016 after government resistance. But only in Summer 2021 the Council of Ministers agreed on a negotiating position – these are the “almost ten years” of which MEP Caspary speaks. Parliament’s plenary will approve the trade committee’s agreement in January. Negotiations on the law between Parliament and the Council of Ministers can then begin. Caspary says he is aiming for a consensus by spring, which is, however, “really ambitious”. Of course, he calls the differences between the two positions “bridgeable”.

One of the differences is that Parliament is demanding a higher penalty. A second point concerns the exceptions: under certain circumstances, companies from isolated markets should be spared, for example if their products are important in a health crisis. But the MPs want to make it more difficult to use such clauses.

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