Frances proposals to keep out foreign companies from public contracts are misdirected
At a time when the global economy is still not out of the woods,the European Commission has adopted proposals pushed by French President Nicolas Sarkozy that seek to keep foreign companies out of the bidding process for government contracts in the EU. In doing so,Sarkozy has shrewdly added a fair trade caveat which says such restrictions will not apply to countries that provide similar market access to European companies. Sarkozy,who is seeking a second term,has pledged to be a different president if he were to be re-elected. But his proposals,if approved by the European Parliament,will spark a major protectionism war in the rest of the world,affecting big emerging economies such as Brazil,China and India,besides triggering retaliatory measures by the US and Japan. India,as things stand,is going through a rough patch in exports.
The proposed barring of foreign suppliers goes against WTO members commitment to accord national treatment and Most Favoured Nation status to all fellow members. Surely,the legal compatibility of such a decision will be challenged by not just the emerging economies bloc,but also the US,where the first green shoots of recovery are seen to be sprouting. The EU,a signatory of the WTOs 1996 Government Procurement Agreement (GPA),will also find it difficult to explain such discrimination to 14 other signatories,including the US and Japan. The agreement provides for transparency and non-discrimination in public contracts that are bid out by countries that are party to the GPA.
The proposal that will skew the $1.33 trillion worldwide procurement market will certainly draw flak at the forthcoming G-20 meeting in Mexico this June. Ever since the G-20 was set up to jointly evolve mechanisms to pull the world economy out of recession in the aftermath of the global financial crisis of 2008,India has been voicing its concerns over the rising tendency of protectionism among developed countries. In fact,India became an observer to the GPA in February 2010,suggesting that it fulfils basic transparency requirements relating to its own procurement processes. It is also planning to enact a procurement law. While India puts its own house in order,it needs to reiterate its opposition to protectionism. Frances proposal goes against the principle and practice of free trade the WTO strives for,besides jeopardising the fragile global economic recovery. While pledging to be a different president,Sarkozy had said he will not repeat old mistakes. He may be making a new one.