IPI: Europe’s new rules to level the playing field in the geopolitical trade game

The EU’s new, more assertive trade stance is not only necessary and pragmatic, but also the most intelligent course of action, explains INTA Committee vice chair Anna-Michelle Asimakopoulou
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By Anna-Michelle Asimakopoulou MEP

Anna-Michelle Asimakopoulou (EL, EPP) is a Vice-Chair of the European Parliament’s International Trade (INTA) Committee

08 Sep 2021

It’s been nearly ten years since the European Commission first adopted its proposed regulation to bolster the EU’s Public Procurement market. Otherwise known as the International Procurement Instrument (IPI), the renewed and long-overdue proposal finally reached the European Parliament’s International Trade Committee last week.

At its core, IPI is about levelling the playing field in world procurement, recognising the imbalances created by the EU’s comparatively liberalised approach when confronted with other more protected markets.

A 2018 study showed that the EU had opened up around 20 percent of its public procurement market to signatories of the WTO’s Government Procurement Agreement (GPA).

Some see in this tool the spectre of protectionism, but it’s important to understand how it’s intended to operate. It will allow the Commission to launch investigations into third country procurement markets, on the basis of allegations of discrimination against bids from EU companies.

There are to be no new, blanket restrictions on access to our procurement market. The so-called ‘price adjustment measures’ applied in the context of IPI will only be levied against countries that are proven to be blocking EU companies from accessing their own home markets.

Investigations and joint consultations with the third countries in question are built into the process. IPI will, therefore, act as a deterrent to protectionism in third countries, an incentive to liberalise, and offer us the means for retaliatory levelling measures, if required.

While this is intended as a universal tool, it’s particularly necessary when it comes to China. After 20 years at the WTO, and despite commitments at the time of its accession, China is still unwilling to sign up to the GPA.

Its continued use of egregious practices also means that its own state-owned enterprises benefit from closed markets at home, enabling it to undercut rival bidders in our more open market. EU companies’ access to China’s procurement market is negligible right now.

"While this [IPI] is intended as a universal tool, it’s particularly necessary when it comes to China. After 20 years at the WTO, and despite commitments at the time of its accession, China is still unwilling to sign up to the GPA. Its continued use of egregious practices also means that its own state-owned enterprises benefit from closed markets at home, enabling it to undercut rival bidders in our more open market"

With the move to a bidder-based approach, the inclusion of thresholds, and shortened review periods, I think we can already see a big improvement on past versions.

As we enter negotiations in the Parliament, the key to IPI’s success will be ensuring that these necessary measures avoid creating cumbersome bureaucracy in the process. We should also avoid the inclusion of excessive exemptions that undermine its overall effectiveness.

We can certainly fine-tune the proposals, however, and we will need to create a permanent structure for engagement with the contracting authorities that will ultimately be responsible for applying the measures, as part of efforts to review the regulation’s impact.

Viewing IPI in a wider context, its lengthy legislative journey highlights how the trade landscape has developed. Something that five years ago was put aside due to intense divisions in the Council, is today seen as an indispensable tool.

As a free trade advocate by inclination, who sees the benefits of a liberalised global trading system, many of the actions that we will have to take over the coming years would not have been my first choice. However, they do reflect the increasingly unpredictable and weaponised global trade environment that confronts us.

IPI is one of many tools that the EU needs to remain competitive in the new global trade game. The Commission has clearly prioritised developing these tools, and this is an agenda shared by the Parliament. These tools include the new regulation on foreign subsidies and the Carbon Border Adjustment Mechanism (CBAM).

In addition, while amending the Enforcement Regulation earlier this year, we explicitly called on the Commission to develop an Anti-Coercion instrument, which I will be shadowing when it reaches the Parliament later this year.

"IPI and other associated measures aim to deter malpractice and level the playing field for the European Union in this new geopolitical trade game. This is not only necessary and pragmatic, but also the most intelligent course of action"

While its exact provisions are still to be finalised by the Commission, the new EU anti-coercion instrument should be both a tool that acts as a deterrent - the trade equivalent of a nuclear weapon - and also a tool that we can use selectively to remedy actions that are harming us, should the deterrent fail.

As the EU embraces a more assertive stance in its trade defence methods, it is only natural that some fear the repercussions of these actions. They worry that allies may misinterpret our actions, and that adversaries will embrace increasingly offensive trade positions. In essence, they fear that we will only escalate existing trade wars.

I view the adoption of these tools as a necessary and pragmatic response to a changing global environment. They are the trade pillar of our “open strategic autonomy” policy. And while the meaning of the term remains both ambivalent and somewhat controversial, I think it is best understood through its etymology.

“Autonomy,” or “αυτονομία” in Greek, comes from the words αὐτός (autós, “self”) and νόμος (nómos, “law”). It literally means making your own rules.

IPI and other associated measures aim to deter malpractice and level the playing field for the European Union in this new geopolitical trade game.

This is not only necessary and pragmatic, but also the most intelligent course of action. In the end, whoever participates in making the rules of the game has the best chance of winning it.

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