Battling Protectionism in the States

With much of the focus of the EU-US preferential trade agreement on regulatory matters, agricultural barriers, and other areas supposedly relating to vital product standards (as opposed to tawdry protectionism, you understand), one potentially beneficial part of the negotiations is being overlooked: the potential to tackle the overt protectionism still very much alive at the state level. While the federal government has constotutional authority over regulating trade with other nations, the states still have some leeway in certain areas, and the European Union negotiators are reportedly very interested in loosening state-level policies on public procurement contracts. From Inside U.S. Trade:

Michel Barnier, the top European Commission official on public procurement matters, yesterday (July 16) said the European Union will use trans-Atlantic trade talks to address a U.S. government contracting practice that some EU firms view as discriminatory because it locks in preferential, multi-year procurement contracts with a set list of suppliers…

The EU has complained in the past that these multi-year deals, known as task and delivery orders in the United States or “framework agreements” in the EU, can lock EU firms out of the market for extended periods. One EU source said the commission will likely press the U.S. to reduce the length of these multi-year contracts…

In addition to framework agreements, other EU priorities in the area of procurement with respect to the Transatlantic Trade and Investment Partnership (TTIP) include expanding the number of U.S. states and sub-federal entities that are covered by procurement rules barring discrimination. That is a difficult proposition for the Office of the U.S. Trade Representative, as it does not have automatic authority over sub-federal entities, and instead must convince them individually to take on new obligations.

But if the U.S. is willing to take on new commitments, it could reap rewards in the form of expanded access in the EU, Barnier said, although he did not elaborate…

Under the [World Trade Organization’s Government Procurement Agreement], the EU has opened the procurement of some entities to other GPA parties but not the U.S., as the EU does not view the U.S. as offering reciprocal market access in these areas. If the U.S. offered greater procurement access under TTIP, the EU could ostensibly extend to the U.S. this greater level of coverage that it offers to some other GPA partners…[emphasis added]

OK, ignore for a moment the usual faulty “if you stop punishing your taxpayers, we might stop punishing ours” thinking of trade negotiators, just for a second. It is true that neogtiators seem to have little time for the costs of “Buy American” policies, but here we see an excellent example of how protectionism is not dead, it’s just moved to a different jurisdiction. States still have overtly discriminatory procurement policies on their books, and they are costing their own taxpayers money (by not necessarily choosing the best value for money) and American exporters opportunities abroad. Perhaps the EU-US deal can change that, assuming the USTR can successfully “convince” sub-federal entities to do the right thing.