The US public contract market
is estimated to be worth $1.9 trillion; the EU’s around $3 trillion.
Construction workers work at the Washington Dulles International Airport. The EU and the U.S. accuse each other of refusing to open up their procurement markets | Win McNamee/Getty Images
The ill-fated Transatlantic
Trade and Investment Partnership has frequently been cast as yet another victim
of an irresistible anti-globalization movement that has swept up leading
politicians in Washington, Berlin and Paris.
That downplays the degree to
which the negotiations themselves had met an almost impossible impasse over
public procurement — central government and regional contracts for everything
ranging from railways to water services. EU and U.S. officials meeting in New
York this week for talks to salvage their unraveling trade deal will not even
try to broach this topic, which has proved most critical to its undoing.
Over three years of talks, both sides have accused the
other of stubbornly engaging in a dialogue of the deaf and refusing to open up
their procurement markets, which have a combined value of about $5 trillion.
“Procurement has always been incredibly political as
it’s about public money,” said Christofer Fjellner, a European Parliamentarian
from the center-right EPP group and a member of the international trade
committee. He added that “politicians always want to favor national companies
and this is no surprise.”
This week’s 15th round of TTIP talks will try to work
towards closing easier chapters and locking in progress made in sectors such as
regulatory convergence in cars and chemicals before President Barack Obama
leaves office in January.
The more difficult topics such as agriculture,
protected food names and telecoms will be put on ice. But these stumbling
blocks subjects rarely attracted as much mutual acrimony as procurement. The
Americans have repeatedly emphasized a $2.68 billion, eight-year contract to
run the Massachusetts Bay Transportation Authority commuter rail service,
awarded to France’s Keolis, as a prime example of a lack of reciprocity in
public contracts.
“The EU and the U.S. bickering over public procurement
reflects the general mood around free trade deals. Everybody wants the other to
open their markets but want to keep their own closed,” said Patrick Messerlin,
an economist at Sciences Po and the author of several studies on public
procurement.
The spat is nearly as old as the three-year-old trade
negotiation itself. In April, U.S. Trade Representative Michael Froman and EU
Trade Commissioner Cecilia Malmström traded barbs over public procurement on
the sidelines of the Hannover Messe, the world’s biggest industrial trade fair.
Brussels and European businesses hoped to gain access
to more than $1.9 trillion in annual U.S. public procurement contracts, but
Washington’s offer, which was put on the table in March and described by U.S.
officials as the most “we have ever offered in a trade deal,” was called “very
disappointing” by Malmström.
During the summer it was Froman’s turn to complain
over EU protectionism during a closed-door meeting that took place on July 27.
According to notes of the meeting he cited the rail contract and cited data on
the barriers to penetrating the European market.
“The reality is that EU member states show local
loyalty — the French buy French, the Germans buy German — even on service
contracts …. and that only 1.6 percent of all contracts offered by EU members
states are cross-border and only 12 percent of these go to the rest of the
world,” Froman said, according to the notes.
European companies retort by citing the “Buy American”
provision, a U.S. law that requires companies that win public contracts to use
U.S. products and services in everything from steel and concrete for road
construction to fabric and buttons for military uniforms. They argue that this
makes it almost impossible for companies to enter the U.S. market.
Luisa Santos, BusinessEurope’s director for
international relations and a member of the EU’s TTIP advisory group, said that
“the figures cited by Froman are skewed and only show part of the picture.”
One Commission source noted that InterSystems
Corporation, a U.S. company, won a €117 million contract to set up a patient
management system for the U.K. national health care system. Another American
company, Epic, won an IT contract worth more than €100 million for the
Copenhagen region, he added.
European companies are also aggrieved by Washington’s
refusal to address the public procurement issue at the state level. American
negotiators have repeatedly said that the issue is beyond their remit and
insist that decisions on public works at the state level are a competence of
the state alone.
“The EU has a transparent internal market for public
procurement,” a Commission source said when asked about the U.S. accusations of
favoritism.
“All contracts throughout the whole of the EU are advertised in one
single portal.”
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