There is a strong purist case for unilateral free trade: even if others block your access to their markets, you make yourself worse off than necessary if you also block their access to yours. But reciprocal free trade is better still, and the only way to achieve it may be through the strategic use of trade barriers to bring protectionists into line. The EU is right to give itself powers to exclude foreign companies from government contracts, but it must use those powers wisely.
Brussels is taking on one of the most stubborn bastions of protectionism, that of public sector procurement. This market is worth some €2tn a year in Europe alone, and provides similarly huge sales opportunities elsewhere – to companies allowed to participate in it. The problem is that many are not. None of the big emerging economies, where most of the world’s growth is currently happening, has joined the World Trade Organisation’s agreement on government procurement, which requires non-discriminatory treatment for companies from all signatories.
A big but tightly guarded prize is greater openness from Beijing, whose state capitalism is designed to favour the country’s own industry. As long as it does not become a pretext for its own protectionist proclivities, it is right for the EU to show muscle to force open markets in China and elsewhere.
This is, of course, a big “if”, as German doubts about the EU plans have highlighted. Of the two proposals on the table, that by Karel de Gucht, trade commissioner, is unobjectionable. It would let Brussels exclude companies from states that “repeatedly discriminate” against EU contractors from public procurement in the bloc. There is more to dislike about internal market commissioner Michel Barnier’s idea of letting local and national governments decide when to block access. This could easily be abused by authorities, not least in Mr Barnier’s native France, whose welcome of foreign business can at times be lukewarm.
A German position paper warns that a policy seen as promoting a “buy European” bias will damage EU credibility in trade affairs. The way to prevent this is not to eschew any confrontation, but to place the initiative on any exclusion squarely in Brussels, whose views on trade are more reliably liberal than most member states’. This entails further wing-clipping of Mr Barnier’s concession that Brussels should vet local decisions.
The EU should be arming its trade policy arsenal in order to promote “sell European” abroad, not “buy European” at home.
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