Public procurement is about how public authorities spend public money when buying goods, works or services. This can range from buying IT equipment or providing water, gas and electricity to building a hospital or a road.
Public procurement in a nutshell
Why does public procurement matter in international trade?
Public procurement affects a substantial share of world trade flows, amounting to € 1000 billion per year. It also makes up a significant part of national economies: 10-25% of gross domestic product (GDP). In the EU, the public purchase of goods and services has been estimated to account for 16% of GDP.
Opening of public procurement markets can be beneficial for the following reasons:
- enhances government abilities to obtain better value for money and increases efficient use of public resources
- is a powerful tool to fight corrupt practices
- increase transparency and legal certainty
Public procurement contracts constitute considerable international business opportunities in sectors where EU industry is highly competitive. This stimulates a competitive European industry, creating jobs and sustainable economic growth.
While the EU procurement market is one of the most open in the world, European businesses cannot always get equal access to procurement markets outside the EU. Many countries are reluctant to open their procurement markets to international competition. This creates an uneven playing field for EU companies and limits business opportunities in these markets.
Some countries have even introduced protectionist measures relating to procurement contracts which hit EU companies. For example, such policies are applied by the US, Brazil, China, Turkey, Russia, certain States in Australia, etc.
EU trade policy and Public procurement
In addition to regulating public procurement within the EU market, the EU advocates for an ambitious opening of international public procurement markets outside the EU and has committed itself to granting market access to its public procurement market for certain foreign goods, services and companies. The EU negotiates both bilateral/regional and plurilateral international agreements.
The objectives of the negotiations are:
- to set modern and international standard procurement principles which seek to ensure that public money is spent in a transparent, efficient and non-discriminatory way.
- provide a level playing field for EU suppliers when tendering abroad.
At regional and bilateral level:
- Provisions covering public procurement have already been included in Free Trade Agreements (FTAs) with:
- Negotiations are ongoing with several regions and countries and are expected to lead to considerable improvements in the mutual opening of procurement markets:
At plurilateral level:
The successful conclusion of the revision of the WTO Government Procurement Agreement (GPA) on the 15 December 2011, was an important step towards opening international public procurement markets. The revision improved the disciplines for awarding government contracts and offered some €80-100 bn a year of additional business opportunities by further opening up the public procurement markets of each of the 15 countries that are part of the agreement.
The European Commission has proposed a new set of tools in the area of public procurement to ensure further opportunities and greater fairness for EU businesses competing internationally. The proposal (Regulation on access to international public procurement markets) confirms the traditional openness of the EU's public procurement markets and provides the Commission with tools to engage countries outside the EU in negotiations to further open their public procurement markets.
The proposal is currently under discussion in the European Parliament and the Council.