Council agrees its negotiating mandate on IPI

International Procurement InstrumentThe EU ambassadors agreed on a mandate for negotiations with the European Parliament on a regulation to create an International Procurement Instrument (IPI), which will help to address the lack of a level playing field in world procurement markets.

The International Procurement Instrument is a trade offensive tool aiming to provide the EU the necessary negotiating leverage to open up third countries’ procurement markets and ensure access and a level playing field to EU businesses in those markets.

“The EU will be now better equipped to defend European businesses against discriminatory and restrictive practices applied by some of its major partners. If the procurement market of a third country is closed to EU companies, the EU could close segments of its own procurement market in response. An open procurement market will boost competition and transparency, reduce the cost of public goods and services for taxpayers and minimise the risk of corruption,” Augusto Santos Silva, Minister of State and Foreign Affairs of Portugal said.

The IPI would enable the EU to limit or exclude, on a case-by-case basis, access to its public procurement markets by economic operators originating in countries that apply restrictive or discriminatory measures to EU businesses.

The existing EU commitments with third countries, including the WTO Government Procurement Agreement (GPA) and bilateral trade agreements, would remain unaffected by the IPI. In addition, the instrument is also structured to minimise the administrative and budgetary burden upon the contracting authorities from member states resulting from its application, and to take into account the specificities of the least developed countries and European SMEs.

Under the new regulation, the Council’s Portuguese Presidency introduced some key amendments in the legislative texts agreed by the Council which include:

  • Shorter and more flexible deadlines for investigations and consultations;
  • The procedure for determination of origin has been simplified, targeting bidders rather than bids;
  • Two types of IPI measures can be implemented (adjustment measures and, in more extreme and therefore exceptional situations, the exclusion of a bidder);
  • Adjustment measures can include quality criteria in addition to price and can be applied within a certain percentage range;
  • IPI measures will only be applicable to new procurement procedures launched after the entry into force of the regulation;
  • Differentiated thresholds for goods/services and works/concessions have been introduced;
  • Additional contractual obligations are set to avoid the risk of circumvention of IPI measures and only apply for as long as the associated IPI measure is in force;
  • There is a possibility of applying exceptions under very strict conditions (including due to certain public policy needs and to a disproportionate increase of price or costs);
  • The specificities of LDCs and EU’s autonomous SMEs are taken into consideration;
  • The IPI Regulation should be reviewed by the Commission in a regular long-term basis to assess the need to improve its effectiveness or to minimise the burden to member states’ contracting authorities and entities.

The first proposal for a regulation on the International Procurement Instrument was made in March 2012 by the European Commission, but it has failed to obtain the necessary support in the Council. In January 2016, the EC adopted an amended proposal for a regulation on the International Procurement Instrument on the basis of which the Council is agreeing its negotiating mandate. The amended proposal was intended to eliminate certain aspects of the instrument that were perceived as negative and to simplify the procedures, shorten investigations and reduce the number of actors involved in implementation.

In March 2019, the European Council called for action and in October 2020 asked to foster discussions. The Portuguese Presidency pursued a new approach, presenting in early January a draft text, building on the Commission’s 2016 proposal, the work of successive Presidencies and inputs from member states and accelerated technical discussions. This intense work allowed the Presidency to present a compromise proposal in mid-April that reflects the different views of member states in the Council and strikes the right balance between an instrument with sufficient leverage for the Commission in negotiations with third countries to open up their procurement markets for European businesses and limits the administrative burden on the member states’ contracting authorities and entities.

Following the endorsement by EU ambassadors of the Council mandate, the European Parliament will now have to adopt its position. The trilogues with the Parliament will start after the summer.

On rail transport, this instrument is crucial to create an international procurement fair market. Although the EU public procurement market for goods and services is transparent and open to foreign bidders, third countries are increasingly restricting access to their markets while their companies are winning significant contracts abroad, including in Europe. This creates a lack of level-playing field for the European manufacturers which face an increasing number of barriers when trying to access third country procurement markets.

The European rail industry supplies around one half of the global demand for rail supplies and over 80% of the European demand for rail products.

The European rail supply industry has faced challenges to access foreign markets, mainly on the Chinese rail market. According to UNIFE, China’s rail market accessibility has reached a record low of 17%. Not only are some market segments effectively closed to foreign suppliers, but additional constraints like non-transparent public procurement procedures and expanding localisation requirements are regularly imposed by contracting authorities in the few areas that remain accessible.

Regarding the Japanese rail market, after years of negotiations, the EU and Japan’s Economic Partnership Agreement (EPA) entered into force on 1 February 2019 which provides European rail suppliers satisfactory guarantees on public procurement.

 


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