EU aims govt contract curbs at China, Japan, U.S

Wed Mar 21, 2012 12:10pm EDT
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By Claire Davenport

BRUSSELS (Reuters) - The European Union could block non-EU companies from bidding for government contracts if European firms continue to struggle to win public tenders abroad, the European Commission said on Wednesday, in a move that could sharply escalate trade tensions.

European software companies in particular have complained of being sidelined in bids for government contracts in China, while the European Commission also has concerns about U.S. legislation that favors homegrown firms.

To fight back against what it regards as unfair competition from major economic competitors, EU commissioners for the internal market and trade policy have put forward proposals that could lead to a dramatic shift in public procurement, which can range from building highways to running data networks.

Such contracts are among the most lucrative in the world, worth well over 500 billion euros ($661 billion) a year according to EU figures.

"The EU should no longer be naive and should aim for fairness and reciprocity in world trade," said Michel Barnier, EU commissioner for the internal market, who drew up the proposal together with Karel de Gucht, trade commissioner.

Under the proposal, European public authorities could exclude foreign firms from competing for EU contracts worth more than 5 million euros if there is evidence European companies are routinely overlooked by public bodies abroad.

The draft law has already received sharp criticism from countries inside and outside the European Union - Germany, Sweden and Britain said it would close rather than open markets and raise costs at a time when budgets are being tightened.

The EU will need a qualified majority of countries and a majority of members in the European Parliament to approve the proposal before it can become legislation.   Continued...