EU and Procurement

Apr 01, 2012 Editorial

In our Friday edition we reported on the EU’s demand for a ‘more level playing field’ in trade with us and its intention to rectify that imbalance through our governmental procurement. On Friday the government also presented its $192 billion budget for the country – basically a summary of its public procurement plus its personnel costs.
This opposition has promised to give the procurement portion of the budget special attention but unless their proposed cuts are revolutionary, one can appreciate the huge amount of funds that will be expended.
And this explains the EU’s interest in our procurement. Government procurement in some countries such as ours is even more important than trade in terms of the value and volume of goods and services involved. Ours is at the high end of around 25 per cent of our GNP. The EU wants more access to this spending and has threatened to restrict businesses for countries that do not comply.
But the new initiative should not come as a surprise to our policy makers, or be blamed on the economic crisis in the EU. It was outlined and included very specifically in the Economic Partnership Agreement (EPA) that CariCom signed with the EU over two years ago.
Noting that the governmental procurement of the EU is open to our businesses, the EU disingenuously argues – as it did during the EPA negotiations – that these businesses would be able to grow by exploiting that “opportunity”. But the reality, due of economies of scale, not to mention non-market barriers such as phytosanitary requirements – is that it is very unlikely that our companies can compete there.
The converse, of course, is not true: the EU giants would quickly overwhelm our fledgling companies in supplying both goods and services. The EU explicitly noted: “The restrictions applied by our trading partners affect sectors where the EU is highly competitive, such as construction, public transport, medical devices, power generation and pharmaceuticals.”
The EU was bold enough to refer to its abandonment of the ‘special and differential’ treatment it had historically accorded to trade and commerce with the developing world: “The EU should no longer be naïve and should aim for fairness and reciprocity in world trade.”
It was the EU’s insistence that ‘fairness’ meant abandonment of non-reciprocity that had caused then President Jagdeo and a huge swathe of Caribbean intellectuals and economists to reject the EPA. While the EU made mention of submissions to the WTO in its procurement initiative, as we said, it has already covered its bases with CariCom, including Guyana, via the EPA. So that point is moot.
It is perhaps surprising that the EU took so long to attempt to take advantage of its comparative advantage in securing our governmental procurement. The public procurement chapter of the CARIFORUM- EU EPA is extensive and interestingly it called for immediate market access for European companies to purchasing by CARIFORUM governments.
This may occur through a number of provisions, but the clearest example is under the innocuous heading of ‘supporting the creation of regional procurement markets’. This requires immediate equal treatment of locally established suppliers regardless of their degree of foreign affiliation or ownership by European nationals.
What this means is that the involvement of EU companies can be as loose as supplying a local agent with goods to qualify for equal treatment. This amounts to an obligation not to discriminate against EU companies that have a most minimal commercial presence in a CARIFORUM State and as such qualify as a domestic company for public procurement bids.
What this new push by the EU means for us as a nation at this time is that we will have to look at the procurement process of the government, starting from this budget, with a much more nationalistic perspective. As we discovered in trade – in vegetable oil for instance – while it was cheaper than our coconut oil, the destruction of the latter industry was more expensive overall for our nation. Forewarned is forearmed.

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