The EU countries have agreed to pass the International Procurement Instrument (IPI), one that was initially proposed by the European Commission back in 2012.
The purpose of the instrument is to encourage reciprocal trade agreements, particularly from countries that the EU considers less 'open'.
The instrument allows the EU to apply penalties or exclude bidders if they come from countries with restrictive or discriminatory measures against EU member country businesses. This means the European Commission would investigate potential cases of discrimination and seek to remedy them through consultation and negotiation. However, if the third country refuses or consultation fails, the commission can apply a price penalty to bids from the targeted country.
Bids from those countries would be considered to offer a higher price of up to 20 % more than the actual price put forward, giving EU and non-targeted countries' bids a competitive advantage on EU public procurement markets.
The passing of the IPI is in response to the protectionist stance of countries like China and also the US with Biden's recent "Buy American" platform, however, this new law has a broad scope and would apply to any country that does not reciprocally open its procurement market to EU firms.
The European Rail Industry Association (UNIFE) has welcomed the move, their President Santos Silva saying, “An open procurement market will boost competition and transparency, reduce the cost of public goods and services for taxpayers and minimise the risk of corruption.”
Marie-Pierre Vedrenne, French MEP and Renew Europe group's trade representative stated, "We have to make our partners understand that we are open and we want to remain open, but it has to be reciprocal and fair. We need to avoid being squeezed between China and the U.S."
Existing EU commitments with third countries including the World Trade Organisation Government Procurement Agreement (GPA) and bilateral trade agreements will remain unaffected by the IPI.
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