This Friday, 23 June, will mark the one year anniversary of Britain voting to leave the EU, and there is still relatively little clarity about trade deals which will have an impact on public procurement.
However, four potential models for a procurement relationship for British companies to participate in the EU market after Brexit have been outlined in a paper published by the European Parliament, titled Consequences of Brexit in the Area of Public Procurement.
The report said the four models relevant to any discussion of EU/UK public procurement post Brexit were:
1. The European Economic Area (EEA) Agreement model, which represents current EU procurement law.
2. The WTO Agreement on Government Procurement (GPA), whose rules are much looser than EU law.
3. EEA-minus, which uses the EEA Agreement but without all its elements.
4. GPA-plus, which adds to GPA provisions. GPA-plus is the approach currently being pursued in negotiations with the US in the Transatlantic Trade and Investment Partnership (TTIP).
But how likely is each of these to be used, and how would the various models work? Let’s take a closer look at each of them.
EEA
This model is based on the European Economic Area (EEA) agreement, which is currently used by European Free Trade Association (EFTA) states such as Norway and Switzerland.
This agreement would involve Britain being a member of the EEA, without actually being part of the EU. In principle, this model would give Britain access to the single market – in exchange for a financial contribution – without the additional burden of being a full EU member. It’s worth noting that if Britain were to opt for this model after Brexit, they would first have to join the EFTA.
Under the EEA agreement model, the rules would follow those used within the EU, including a requirement to use the EU’s common advertising system for notices – Tenders Electronic Daily (TED) –and to submit notices in one of the EU’s official languages.
However, the EEA model requires accepting the core principles of the EU’s internal market, including free movement of people, which could be a sticking point. Politically, it may be hard to convince pro-Brexit ministers, MPs and voters that continuing to make payments to the EU (albeit not into the main budget), accepting free movement of people and becoming a law taker rather than a law maker is compatible with last year’s vote to leave the EU.
GPA
This model would see the EU-UK relationship on public procurement being governed solely by the rules of the World Trade Organisation Agreement on Government Procurement (GPA).
The GPA model has been used in the EU itself in public procurement agreements with its trading partners who are not parties to the GPA, and it could be a viable option for an EU-UK agreement on procurement.
The UK is currently party to the GPA through its EU membership, but there is no precedent for the current situation. With this in mind, there is some uncertainty as to whether the UK would have to rejoin the GPA after Brexit and this would be the first question that would have to be answered if the UK opted for this model.
One view is that the UK will in fact have to rejoin by following the same process as any new party to the agreement. The other perspective is that the UK can maintain its current rights and obligations under the GPA without having to make a new application to join.
The GPA model could, at the very least, serve as a short-term solution pending a final agreement. However, much will depend on the views of the current GPA Parties and the degree of consensus between them.
EEA-minus
Another possible approach outlined by the report is an ‘EEA-minus’ approach, which would use EU law as the basis for procurement-specific rules and would maintain EU access to above-threshold UK markets on the same basis as at present.
This model is similar to that used in the Deep and Comprehensive Free Trade Area agreements (DCFTAs) between the EU and some neighbouring countries like Georgia, Ukraine and Moldova.
This would work as an EU-UK agreement in procurement even if the UK does not remain fully part of the Single Market, and would mean that the UK would be permitted to continue using the common EU advertising system, TED. However, this model would offer the UK no more flexibility than it currently has and with no say over how rules develop in the future.
GPA-plus
Another option the paper identified is a ‘GPA-plus model’ that would use the WTO Agreement on Government Procurement as a basis, supplemented with additional rules and commitments which could be used to address issues that are not covered by the GPA, including rules based on EU law.
This type of agreement is in place with Chile, Colombia, Peru and Ecuador, and has been pursued in the EU-US trade negotiations. It would give the UK the freedom to pursue its own procurement policy within the limits of the GPA rules.
These are four options which are viable for UK public procurement after Brexit. Regardless of which approach is taken, whether it is one of these four or something completely different, the devil will be in the detail.
With the European Commission estimating that public expenditure on goods, works and services makes up 13.1% of EU GDP and 13.6% of UK GDP, it’s clear that both the UK and EU will be keen to make sure that markets stay open and accessible to each other after the UK’s withdrawal from the EU.
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