Analysis: Europe ponders free trade or fair trade

Mon Apr 2, 2012 1:53am EDT
 
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By Paul Taylor

PARIS (Reuters) - Europe has opened a can of worms by trying to reconcile free trade with fair trade.

Under pressure from French President Nicolas Sarkozy, the European Commission adopted proposals on March 21 that could shut foreign companies out of bidding for public contracts in the European Union unless their home countries provide similar access to European firms.

The EU executive, which has historically promoted free trade and opposed protectionism, insists the measure is intended as a crowbar to open lucrative government contracts in countries such as Japan, the United States and China, not to close EU markets.

Public procurement worldwide, ranging from building roads and railways to supplying software and running data networks, is worth some 1 trillion euros a year, and Europe's market is far more open than those of competitors, the Commission says.

Japan allows foreign bidders on less than 3 percent of public contracts, and the United States is only slightly more open. EU officials are irked by more "Buy American" provisions creeping into recent U.S. legislation.

The plan has to be approved by the European Parliament and a qualified majority of EU governments, which is far from assured, but it has already prompted fierce debate.

Critics, notably the free-trading British, say the proposals send the wrong signal and would put Europe on a slippery slope towards fencing off markets rather than opening them.

A 2011 British government policy paper on trade said the principle of reciprocity might sound "superficially reasonable", but it could open the door to protectionism.   Continued...