Trade liberalisation and overall relationship

3 - Reciprocity in access to public procurement in Europe and China

Grade: C+
Unity 4/5
Resources 2/5
Outcome 3/10
Total 9/20
Scorecard 2012: C (8/20)

The EU shifted gears on reciprocal access and adopted a new approach in 2010. But this could still be undermined and has yet to have an impact.   

Whereas internal market requirements mean that European public procurement is liberal and open, China has not signed up to the Government Procurement Agreement (GPA) in the WTO. Therefore, while China can successfully bid to build a major Polish highway, its own infrastructure and construction industries are mostly closed. European firms also risk a further disadvantage because of the easy terms of China’s soft loans. The EU seeks reciprocity in the terms of public procurement at a time when China’s huge programme of domestic public infrastructures, especially with the 2009 stimulus spending package, combined with the go-global strategy of its big state firms, has created worldwide competition on public projects.

The EU shifted gears on the issue in 2010. Chancellor Angela Merkel and EU Trade Commissioner Karel De Gucht have been particularly outspoken on this. In the new draft trade policy, De Gucht proposed a new instrument – which seems likely to be enacted in 2011 – that could close Europe’s public-procurement market if there is no reciprocity, as is the case with China. There is relative unity in the EU on the need for genuine mutual opening-up of the Chinese market on public procurement, although the free-trade group in the EU, spearheaded by the UK, is less likely to accept negative policies that would close off some European public markets, especially at a time of austerity.

Public procurement is a test case of the EU’s more hard-nosed negotiation approach. It could still be undermined by internal division, by the short-term need for China’s purchase of public debt, and quite simply by the attractiveness of Chinese bids for the European taxpayer.