- Trade topics
- Public procurement
Examples of public procurement – or government contracts – include buying computers for a police station, providing water, gas and electricity to people, and building a hospital or a road.
Why does public procurement matter in international trade?
Public procurement affects a substantial share of world trade. In the EU, in 2017, the public purchase of goods and services was estimated to be worth some €2 trillion or 13.3% of GDP (Source: European Commission, public procurement indicators, 2017).
The EU put new rules in place to open up the public procurement market within Europe in 2016. These new rules reduce red tape and make it easier for smaller companies to do business with public authorities.
Opening public procurement markets can be beneficial for many reasons:
- Competition between private companies increases a government's chances of getting better value for money and makes the use of public resources more efficient.
- Making the application process more transparent helps to fight corrupt practices.
- It increases legal certainty.
The EU public procurement market is one of the most open in the world. However, European businesses cannot always get equal access to public procurement markets outside the EU. Many countries are reluctant to open their public procurement markets to international competition. This creates an uneven playing field for EU companies and limits business opportunities in these markets.
Some countries have introduced protectionist measures relating to procurement contracts, which hit EU companies. Such policies are applied by:
- Turkey, and;
- the United States (among others).
EU trade policy and public procurement
Alongside regulating the EU's internal public procurement market, the EU also wants to see more open public procurement markets outside the EU.
In its trade deals, the EU and its trading partners offer each other access to procurement by certain public authorities and bodies for certain goods and services to encourage more open and balanced international markets. This means that EU companies can do business in the international public procurement market more easily, thus growing their business and providing more jobs.
Trade talks with other countries and regions:
- Rules about public procurement have already been included in EU free trade agreements (FTAs) with:
- Negotiations are ongoing with several regions and countries and are expected to open public procurement markets:
Revision of global trade rules
The revision of the WTO Government Procurement Agreement (GPA) entered into force in 2014. It provides a higher level of clarity and transparency and guarantees equal footing to suppliers, supplies and services originating in GPA Parties in procurement procedures. It also offered some €80-100 billion a year of additional business opportunities by further opening up public procurement markets in the 48 countries that are part of the agreement.
There are currently 21 WTO Members that are Parties to the GPA, including the European Union and its member states counting as one Party.
The International Procurement Instrument
The Regulation for an International Procurement Instrument (IPI) to improve reciprocal access to international procurement was published on 30 June 2022 and enters into force on 29 August 2022. The IPI gives the EU greater leverage to get access to public procurement markets outside the EU, boosting opportunities for EU companies.
The EU public procurement market is one of the largest and most accessible in the world. However, many of the EU's major trading partners apply restrictive practices in their markets that discriminate against EU businesses. These restrictions affect competitive EU sectors such as construction, public transport, medical devices, power generation and pharmaceuticals. The IPI will help address such procurement barriers abroad by empowering the EU to:
- initiate investigations in cases of complaints by EU companies against alleged restrictions in third-country procurement markets;
- engage in consultations with the country concerned on the opening of its procurement market, and;
- if consultations fail to provide a satisfactory outcome, restrict access to the EU procurement market for foreign companies originating in the countries that continue to apply restrictions against EU companies.