EU unveils ‘buy European’ public procurement rules to counter China

Authorities and public bodies to be urged to buy goods and services from Europe, but without binding quotas

European authorities will be encouraged to buy more domestic goods and services when they spend public money under the EU latest effort to counter China’s economic might.

In a further “Buy European” plan, the European Commission published proposals on Wednesday for a sweeping overhaul of EU public procurement rules.

National authorities and public bodies, such as schools and hospitals, will be encouraged to buy goods and services made in Europe but, unlike earlier plans to promote domestically manufactured clean tech , there will be no binding “made in Europe” quotas.

Brussels officials are concerned that many public agencies think existing EU rules oblige them to choose the cheapest bid when spending public money, which can lead to the contract going to a non-European firm.

The European Commission’s lead official on industrial policy, Stéphane Séjourné, told reporters the regulation would give public sector buyers greater legal certainty and clarity about purchasing goods and services made in Europe.

“Purchasers can have a more preferential approach to European bids [and] restrict or reject bids from countries which do not have a public procurement agreement or do not play by binding rules in terms of public procurement internationally,” he said.

Public procurement is estimated by EU officials to amount to 15% of the bloc’s gross domestic product, about €2.6tn (£2.2tn) a year, and is seen in Brussels as an underused lever already deployed by Washington and Beijing to support their respective domestic companies.

The new rules will oblige public buyers in the EU to put more emphasis on quality and metrics such as environmental sustainability and local supply chains, rather than opting for the cheapest bid.

Under the proposals public agencies will be obliged to give a minimum 30% weighting to quality when they draw up conditions to award a contract, or explain why they chose to disregard this indicator.

Labour-intensive contracts will have a minimum 50% weighting for quality, so purchasers must ensure decent jobs when awarding the contract, not simply the cheapest price.

Séjourné hopes the proposals will encourage more democratic scrutiny over the spending of public money by local authorities. “It won’t be the European Commission’s fault if purchasers were to prefer Chinese buses to European buses because … in the [draft regulation] there is every possibility to give preference to European buses.”

Brussels is concerned about inroads Beijing is making into European markets for transport and infrastructure, especially Chinese firms benefitting from state subsidies that make them cheaper than European alternatives.

In April, the commission blocked a Chinese rolling-stock company from joining a consortium to build a new line on the Lisbon metro after an investigation found the firm had benefited from state subsidies that gave it an “unfair competitive edge”.

Last year, Brussels opened an investigation into Chinese security company Nuctech, which has supplied European airports and ports with security scanners. EU officials suspect the company was helped by subsidies and tax breaks that gave it an unfair advantage in the European market, although the investigation has not reached final conclusions.

Séjourné – a close ally of France’s president, Emmanuel Macron, who has long championed European preference – said spending public money on goods made in Europe should become “part of public discourse and accountability”.

He added: “It should be very clear that it’s not because of European Union rules that a foreign product was preferred over a European one, but because it was a political choice that was made.”

The draft regulation, which also aims to radically simplify rules by merging three laws into one, must be agreed by the European parliament and the EU ministers before it enters into force. It is likely to be altered during the legislative process.

Séjourné is also spearheading a push for made-in-Europe rules to apply to the public purchase of renewable energy products and electric cars under the the Industrial Accelerator Act. The IAA, which also is likely to be changed by MEPs and ministers, marks a departure for Brussels, long a bastion of open markets.

The plans have alarmed the British government, but EU officials said the latest draft rules on procurement would not disadvantage UK firms because existing agreements ensured both sides played by the same rules.

Séjourne said the EU had agreements with the UK whereby reciprocal market access was respected. “There should not be any difficulties for the UK,” he added.

Non-EU countries that have agreements with the bloc on public procurement are not expected to face barriers.

An online tool will allow public purchasers to see which countries are covered by the EU’s web of free-trade agreements and other international deals that cover procurement.

Membership of the World Trade Organization’s agreement on government procurement (GPA), which promotes fair competition in markets to supply state bodies, will be an important indicator. The GPA has 22 members including the EU (counted as one), the UK, the US, Canada and Japan. Mainland China is not party to the agreement.