Fazekas, M and Skohrovec, J (2016). Universalistic rules – particularistic implementation: The EU’s single market for government purchases. GTI-R/2016:01, Budapest: Government Transparency Institute.
Open and fair access to government contracts has been a long-standing principle in many international trade agreements including the one on the EU’s single public procurement market which is probably the most extensive among them with its long standing common regulatory and enforcement framework. However, the ostensibly low prevalence of cross-border trade in European public procurement represents a troubling puzzle: only about 5% of procurement contracts are awarded to non-domestic suppliers. This is in strike contrast with overall trade openness among these countries which surpasses 50% of GDP. The analysis uses country-level statistics as well as contract-level administrative data to investigate to what degree this gap results from governments’ particularistic protectionism and what are its drivers. We found that much of it can be attributed to public bodies using particularistic means to favour domestic firms both when looking at it from a country-level or a market-level perspective. Using contract-level data, we estimate that about 17% of public procurement spending takes place on markets characterised by particularistic protectionism. While most countries resorting to particularistic means are among the least-well governed countries in Europe at least according to perception surveys, there are a number of surprising outliers: Denmark and Finland and to a lesser degree Norway and Sweden appear to close their domestic markets to foreign competition considerably more than their corruption-levels would suggest. Conversely, Romania and Poland close their domestic markets much less than expected based on their corruption levels. Taking the example of EU institutions, which have arguably much less reason to prefer domestic companies in whichever member state they are located, suggests that procurement openness could increase up to 10-times approximating member states’ total trade openness. In order to foster greater cross-border procurement, the implementation of regulations should be monitored using Big Data analytical techniques and remedies systems should be improved.