The clear way through trade barriers

13 March 2003
More news

13 March 2003

The tendency to protect domestic markets from foreign suppliers is a powerful one, as events in Europe and the US have shown. Robin Parker looks at how purchasers can resist it

Political tensions in the international arena have rarely been higher than in the preparations for war against Iraq. But the cordiality extended to President Bush under the UK's so-called "special relationship" is not shared by all of our European cousins, who remain divided on his bullish stance on a conflict whose outcome remains unknown.

This battle of wills is also highlighting the fractured nature of western trade relations, placing an extra burden on free trade.

And doubts over the US's pro-war approach naturally extend to fears that the president will put up his country's guard further and become more isolated in both political and economic spheres if much of the world remains against him.

Evidence of this is already emerging as the state of New Jersey aims to protect domestic jobs and the local economy by banning the outsourcing of services to low-cost countries, a move that seems counter to the spirit of European Union law.

If other states follow suit, as seems likely, it could be seen as further evidence that the home of free-market capitalism is strengthening transatlantic trade barriers, both physical and psychological.

Last year's row over the US's tariffs, when it imposed taxes of up to 30 per cent on European steel imports, was bitter enough. This, and the ongoing battles over the distribution channels of big US brands like Levi's jeans, now seem the tip of the iceberg.

The irony is that Europe, despite its popular image as a minefield of red tape and bureaucratic wrangling, fuelled largely by tabloid jeering over straight bananas and the banning of imperial weights, is getting tough in its promotion of the open market.

Public-sector purchasing is in the firing line as the European Commission brings charges on five cases of infringement of EU public procurement law, and warns member states on five more.

Those charged with anti-competitive practices will defend their corner in the European Court of Justice for the best part of two years, but the outcome of previous cases suggests they will lose the battle.

However, for the majority of purchasers who play by the EU's rules - and the UK for one has an admirable track record - this should be good news, as the more competitive the market, the better chance they have of getting the best value for taxpayers' money.

Those angered by the US's protectionist stance will be thankful that European decision-makers are not following suit.

Court warnings

Many of the EU laws flouted in the latest cases have been in place for more than a decade, and those due to face court have already had a series of warnings.

Member states are standing firm by the right to set their own agenda, fuelled by a desire to support domestic industry above others in a difficult economic climate, coupled with a firm refusal to be bullied. This is especially worrying in the cases against Portugal and France, which relate not to specific contracts but to policies enshrined in domestic laws on which they refuse to budge.

A large part of the problem is that the EC still cannot get member states to sing from the same hymn sheet. An integrated approach to procurement is sorely lacking.

Purchasers also have their work cut out as some key parts of the legislation are poorly spelt out. A particular headache for public-sector purchasers, for example, is to ascertain at what point they are legally obliged to advertise a contract beyond their national borders.

Unless they are over-cautious and advertise practically every contract internationally, confusion can easily arise.

Crucially, this issue, although of vital interest to purchasers, is not being addressed in the forthcoming revamp of the EU's public procurement directives.

These will focus on other, by no means unwelcome, improvements, such as simplifying basic procurement rules and introducing more long-term framework agreements.

After the warnings they have received so far, those involved in cases brought to court can hardly plead ignorance of them.

But in its zeal to clamp down on anti-competitive behaviour, the EC must ensure purchasers can get on with their daily job by giving a clearer idea of just how they can avoid getting caught out.

For a free, open market to thrive, procurement needs unambiguous guidance.


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