The fact that the EU had concluded its least ambitious agreement on public procurement in a free trade agreement in many years with the four member countries of the Mercosur was well known.
The recent release of the fine print of the mutual market access offers in the trade pillar of the EU Mercosur Association Agreement by the European Commission shows to what extent this is indeed one of the EU’s least ambitious trade deals in that area in many years.
One of the reasons for this choice might well be that none of the Mercosur countries are parties to the World Trade Organization’s Government Procurement Agreement. Brazil is in the process of joining the GPA.
The GPA sets the floor and minimum ‘standards’ on rules and market access in this not insignificant part of a national economy. Nonetheless, the EU has signed more ambitious market access offers with other South and Central American countries that are not parties to the GPA either.
So what’s on offer?
Basically, the agreement is a bog-standard GPA-based offer for ‘central government’ entities as concerns the European Union side.
The four Mercosur countries committed to market-based and transparency enhancing procedural rules and market access opportunities at that central government level. The EU for its part makes commitments to Argentina and Brazil on the area of construction works above a threshold of 5 million Special Drawing Rights at central government level.
What is ‘new’ for the EU is that the deal does not contain any market access commitments at all at the sub-central level, i.e. federal governments, big state-owned enterprises or large municipalities. This is in contrast to the very different from deals signed with emerging markets such as Vietnam.
There is however a mutual promise to open markets at federal level in future. Argentina, Uruguay and Brazil committed to making an offer to the EU within two years of operation of the agreement. The offer is expected to cover 65% of the countries’ gross domestic product.
This echoes the way the EU negotiated its FTA upgrade with Mexico. The only difference is that Mexico was asked to file their offer before the deal would be declared fully concluded. In the Mercosur case the agreement would already be in operation before negotiations begin.
Paraguay is exempted from the obligation to provide an offer at sub-central level. Paraguay – a poor landlocked country of 7 million people – could end up broadly being exempted from any government procurement obligation as it has the leeway to tell within three years of entry into force of the agreement that it will comply with the limited commitments in made to the EU – or not.
