WTO and Construction Services
European international contractors and their affiliated companies and subsidiaries are currently present on all five continents. In 2009, the European construction industry generated an international construction turnover of more than 73 bn. € outside of Europe, primarily but not exclusively through the so-called "mode 3" or “commercial presence abroad” where the service is provided within a foreign market by a locally-established affiliate or subsidiary of a foreign-owned and -controlled company.
Given the global presence of the European construction industry EIC is committed to the international trade principle of open markets and opposes any form of protectionism, market foreclosure or unfair competition, e.g. through state subsidies. In particular, EIC opposes all discriminatory obstacles with regard to a commercial presence abroad, such as restrictions on types of corporate entities, investment restrictions, nationality requests as well as restricted access to local utilities, which all have a great effect on the construction firms providing services in foreign markets.
Effective market assess for EU construction firms depends to a great extent on whether it is possible for them to compete for the public procurement of construction projects abroad. The absence of multilateral rules for procurement is considered by the European Commission as the most important non-tariff barrier affecting our sector. Therefore, EIC has supported from its inception in the year 2000 the multilateral services liberalisation negotiations within the GATS context as well as the parallel negotiations on expanding the membership of the plurilateral Agreement on Government Procurement (GPA). EIC regrets that the services liberalisation negotiations to date have failed to lead to tangible results with regard to construction services. After a decade of trade negotiations in the context of the “Doha Development Round”, which commenced in November 2001, the stocktaking for our sector is sobering:
- Full membership in the WTO Agreement on Government Procurement (GPA) to date is limited to OECD countries (except for Australia, Chile and Turkey) plus Hong Kong/China, Liechtenstein, Singapore and Chinese Taipei;
- As concerns the GATS negotiations, the European Commission rightly acknowledged that limitations to commercial presence abroad, such as investment restrictions, nationality requests, restricted access to local utilities and institutions and restrictions on types of cooperate entities all have a great effect on the construction firms providing services in foreign markets. Yet, after ten years of negotiations we cannot observe any perceptible progress in the construction sector with regard to that mode of supply.
- Last but not least, negotiations on a Multilateral Agreement on Transparency in Government Procurement have been dropped on 1st August 2004 in Cancún, Mexico, when the WTO General Council agreed that this issue will not form part of the Doha Work Programme and therefore no work towards negotiations (...) will take place within the WTO during the Doha Round. Since this decision, the Working Group on Transparency in Government Procurement has been inactive.
Against that background, EIC holds the opinion that market access to government procurement in the area of Government Procurement should be based on the principle of reciprocity which is a fundamental pillar of the WTO itself. For instance, the Preamble to the WTO reads: “Being desirous of contributing to these objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the eliminations of discriminatory treatment in international trade relations”.