Will Protectionism Prevail in Global Public Procurement?

GW Law Faculty Publications & Other Works Faculty Scholarship

2024

Will Protectionism Prevail in Global Public Procurement? Will Protectionism Prevail in Global Public Procurement?

Laurence Folliot Lalliot

Christopher R. Yukins

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REVUE DES DROITS DE LA CONCURRENCE | COMPETITION LAW REVIEW

Will protectionism

prevail in global public

procurement?

Article l Concurrences N° 2-2024

www.concurrences.com

Laurence Folliot Lalliot

[email protected]

Professor

Paris Nanterre University

Christopher Yukins

cyukins@law.gwu.edu

LynnDavid Research Professor in Government Procurement Law

GeorgeWashington University Law School, Washington, D.C.

Concurrences N° 2-2024 I Article I Laurence Folliot Lalliot, Christopher Yukins I Will protectionism prevail in global public procurement?

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Will protectionism

prevail in

global public

procurement?

1.For public procurement, the pendulum of trade policy seems to be swinging

back towards protectionism. Protectionism is a policy tool typically used by

governments to restrict international trade and thus protect their domestic indus-

tries. When a nation adopts protectionist measures—for example, non-tariff

measures (NTMs)—the government generally seeks to maximize economic

gains for its private sector. This effect is redoubled when the nation reshapes its

own purchasing policies for protectionist ends, as governments and other public

entities play a major role in their own economies through public procurement.

2.Public procurement is estimated to be worth USD13,000billion worldwide; in the

European Union, for example, it accounts for roughly 15% of gross economic output,

and in developing countries, government contracting is often the main growth engine.

As a result, governments can have a profoundly important impact on their home

economies when they raise direct barriers to foreign competition and boost protec-

tionism by imposing rules that restrict foreign companies’ access to the governments’

public bidding opportunities. Not only can nations dene protectionist policies,

but the economic effects of these will be amplied in the eld of public procure-

ment, which directly confers purchasing power, and therefore the power to act on

the market, to governments. In sum, public procurement can play an important

(and amplifying) role in leveraging the economic impact of protectionist policies.

3.Protectionism must, though, wrestle with globalization. As part of the postwar

international trade order, most countries around the world agreed over many

decades to open their public procurement markets, per a framework of bilat-

eral, regional and plurilateral agreements. Recent protectionist efforts by major

economic powers, including the United States(I.) and the European Union(II.),

suggest a new world order—of new import and export barriers, tight technology

controls and “friend-shoring” to limit public procurement trade to a closed circle

of aligned nations. Will this be the new economic order in public procurement?

4. This piece argues not. Open international trade in procurement was not a

historical accident or a quixotic adventure; instead, the current legal order reects

the economics of globalization and geopolitical realities: demand for emerging

technologies from abroad, the need for strategic interoperability, and informa-

tion technology that reduces transaction costs and thus opens borders. At the

same time, the costs of a restructured and restrictive legal order—pervasive tech-

nology transfer controls, for example, or a seemingly innite series of bilateral

agreements to accommodate shifting power relationships—could well be unsus-

tainable. On balance, it seems that the arc of history does not point towards overt

(what we will call “macro”) protectionism in public procurement.

5.This paper will also demonstrate, though, that protectionism in public procure-

ment can take various forms and have diverse outcomes, including “macro”

or “micro” (less overt but still impactful), cyclical or structural, and direct or

Article

Laurence Folliot Lalliot

[email protected]

Professor

Paris Nanterre University

Christopher Yukins

cyukins@law.gwu.edu

Lynn David Research Professor in

Government Procurement Law

GeorgeWashington University Law School,

Washington, D.C.

ABSTRACT

Public procurement is a highly effective

tool for amplifying governments’

macro‑protectionist policies.

But precisely because of this ﬂexibility,

public procurement can also be used

to promote other objectives, while preserving

competition. At a time when sustainable

public procurement policies are spreading

throughout the world, experience shows

that it is possible to reconcile these objectives

with an efﬁcient and competitive public

procurement system.

Les marchés publics constituent un outil

très efﬁcace pour ampliﬁer les politiques

macro-protectionnistes des Gouvernements.

Mais, précisément en raison de cette

ﬂexibilité, les marchés publics peuvent

également être utilisés pour promouvoir

d’autres objectifs, tout en préservant

la concurrence. A l’heure où les politiques

de marchés publics durables se répandent

dans le monde entier, l’expérience montre

qu’il est possible de concilier ces objectifs

avec un système de marchés publics efﬁcace

et concurrentiel.

Concurrences N° 2-2024 I Article I Laurence Folliot Lalliot, Christopher Yukins I Will protectionism prevail in global public procurement?

indirect effects(III.). Indeed, the question of a new kind

of protectionism in public procurement is being raised by

novel public policies, such as the implementation of the

United Nations’ Sustainable Development Goals—goals

for “sustainability” (social, economic and environmental

advancement) in human affairs, played out through public

procurement, which can in practice be quite protectionist.

In the current global context, sustainability requirements

challenge the traditional neoliberal belief in maximizing

competition in procurement. Drawing in part on the

U.S. experience over many decades with accommodating

social and economic goals in public procurement, the

paper will argue that the apparently contradictory goals

of competition and sustainability can, in fact, be recon-

ciled in the law. In this respect, and without becoming a

mere pawn of protectionism, public procurement law can

provide viable solutions for reconciling competition with

the new demands of sustainability(IV.).

I.A new

economic order:

Political “macro-

protectionism”

in U.S. public

procurement

6.We begin with the example of “macro” protectionism

in the U.S. system, in an effort to search out the ssures in

the new monolith of overt protectionism. Protectionism

has surged recently for a variety of reasons, ranging

from the pandemic to politics.

And protectionism is not

always obvious; many sharply restrictive measures can

be presented as patriotic, or environmentally sensitive.

But what is clear is that these measures are multiplying—

metastasizing, some might say—and they threaten

the postwar order that emphasized free trade in public

procurement.

7. The postwar liberalism in procurement trade grew

slowly out of the ashes of World WarII, and the pre-war

protectionism across the industrialized world that helped

fuel the war. “Deutsche Woche. Deutsche Ware. Deutsche

Arbeit” (roughly translated, “German week, German

goods, German work”) read one famous German poster

from the 1930s, calling for the purchase of German goods

over those from other nations. Read another: “Hitler

baut auf – Helft mit … Kauft Deutsche Ware”—“Hitler is

building up, help him, buy German goods.”

1 L.Folliot Lalliot and C. Yukins, COVID-19: Lessons learned in public procurement.

Time for a new normal?, Concurrences No. 3-2020, art. No.95667, pp. 46–58.

8. After the war—and despite U.S. pressure to include

government procurement in a new liberalized trading

regime—the General Agreement on Tariffs and Trade

(GATT) largely overlooked public procurement, which

was still considered to be a sovereign domain outside

the international trade order. Efforts were rst made

under the Organisation for Economic Co-operation and

Development (OECD) to include government procure-

ment under international trade rules; those efforts to

liberalize government procurement trade were carried,

in turn, to the GATT Tokyo Round of trade negotia-

tions in 1976.

In the United States, meanwhile, govern-

ment procurement was being assimilated into a massive

regional trade arrangement, the North American

Free Trade Agreement (NAFTA), which was nalized

between Mexico, the United States and Canada in 1994.

At the same time, the European Community was devel-

oping its own directives, to frame basic requirements that

its Member States would need to meet in their public

procurement in a common market.

This postwar order

calling for free trade in procurement was, at its core, in

many ways, a reexive response to the destructive power

of xenophobia. The rst agreement on government

procurement (GPA) was signed in 1979, and its scope

and coverage were extendedin 1994, before the current

(revised and updated) GPA came into force in 2014.

9.To make sense of the current wave of protectionism,

several strands from this postwar history are worth high-

lighting. First, while from the rst days after the war

it was often the United States (due in part to its rms’

interest in foreign sales) that led the march to open

government procurement markets, the European nations

in time joined that march, partly because open public

procurement markets were a key part of Europe’s own

plans for its integration through open trade. Second,

the impulse for open markets was stronger than the

supporting regimes—the march towards free trade in

procurement traversed different supporting institutions

and structures (OECD, GATT, etc.). Finally—and this

point deserves careful focus—those leading the push for

open procurement markets had a sophisticated under-

standing of procurement’s mechanics; while the agree-

ments could simply have called for non-discrimination,

the agreements went beyond to address “non-tariff ”

barriers buried in procurement, such as tendering

processes that close too quickly to allow for effective

foreign competition. That deeper understanding inte-

grated the procurement communities themselves into the

free trade arrangements, and in time the free trade agree-

ments became a means for exchanging ideas and best

practices on government procurement. Taken together,

these strands created a durable postwar fabric to support

free trade in public procurement, one now at risk from

the “new” protectionism.

2 J.Heilman Grier, The International Procurement System: Liberalization & Protectionism,

Dalston Press, Washington, D.C., 2022, ch.1.

3 Ibid., ch.5.

4 S. Arrowsmith, The Past and Future Evolution of EC Procurement Law: From

Framework to Common Code?, Pub. Cont. L.J., Vol.35, No.3, 2006, pp. 337–384.

5 Heilman Grier, supra note2, ch.1.

Concurrences N° 2-2024 I Article I Laurence Folliot Lalliot, Christopher Yukins I Will protectionism prevail in global public procurement?

1.Evolving protectionism:

TheUnited States

10. Over the latter half of the twentieth century, the

accepted understanding of protectionism evolved and

narrowed. In the United States, for example, while the

Buy American Act of 1933 was enacted as a sweeping

effort to block foreign competitors from the government

market, by the 1950s the Eisenhower administration had

scaled back the Buy American Act to make it a relatively

minor price preference, and as noted by the end of the

century the United States had helped put in place the

WTO Government Procurement Agreement (GPA)—a

free-trade plurilateral agreement which, in the U.S.

procurement system, largely displaced the Buy American

Act from the 1930s.

11. By the beginning of this century, there were three

main components to the U.S. regime relating to trade

policy and government procurement:

– A series of explicitly protectionist statutory measures

that can be traced to 1933 with the Buy American Act

and today stand as a confusing hodgepodge of “Buy

American”-type barriers.

Although these measures

can impose price preferences (as the original Buy

American Act does), these protectionist statutes can

also bar items with specic materials (such as iron or

steel), or even bar certain types of products outright

(for example, when the U.S. government banned

Huawei products because of a perceived espionage

risk).

– A less clearly dened array of statutory and regula-

tory measures with a protectionist effect, such as the

Small Business Act, which mandates that roughly a

quarter of all federal procurement dollars be reserved

for small businesses. Because those small businesses

are (almost always) located in the United States (they

need to contribute in some way to the U.S. economy

to qualify), the small-business preference in practice

creates a domestic preference in federal procurement.

Many other aspects of the procurement system, such

as U.S.-drafted cybersecurity requirements and tens

of billions of dollars in non-transparent procure-

ment under framework agreements, have a similarly

protectionist effect.

– While they do not resolve this web of protectionism,

the many trade agreements that the United States

has joined do help. The most important, as noted, is

the GPA, which includes 49 member states, from the

EU and much of the industrialized world. The GPA’s

6 E.g., C.Yukins and S.Schooner, Incrementalism: Eroding the Impediments to a Global

Public Procurement Market, Geo. J. Int’l L., Vol.38, 2007, pp. 529–576; C.Yukins and

A.Green, International Trade Agreements and U.S. Procurement Law, in The Contractor’s

Guide to International Procurement, M. Peterson and E. L. Felix (eds.), ABA Book

Publishing, Chicago, 2018. Some barriers to the U.S. market are even more ancient. For

over a hundred years, for example, Congress has required that dredging in U.S. waters be

done only by U.S.-registered vessels. That preference may have stemmed from the role that

dredging played in the country’s early defense and development. Today, the U.S. govern-

ment still excludes dredging from U.S. free trade agreements, despite massive shifts in the

econom

y and despite pressure from trading partners to open federal dredging contracts

to foreign competition.

annexes dene the agreement’s coverage in terms of

agencies, goods, services, etc., and can (with other

members’ agreement) explicitly reserve longstanding

preferences, such as the U.S. preference for small

businesses noted above. The United States has also

entered into regional and bilateral free trade agree-

ments with Canada and Mexico (originally NAFTA,

now renegotiated as the U.S.-Canada-Mexico Agree-

ment (USMCA)), Peru and many other countries,

which include government procurement; many of

these agreements are modeled on the GPA. Finally,

the United States has expanded free trade to defense

markets as well through “reciprocal defense procure-

ment agreements”; these bilateral executive agree-

ments with U.S. allies (arguably a model for the

“friend-shoring” discussed below), though often

overlooked, have been vitally important in removing

all barriers to trade among allies in defense materiel

and services. Taken together, these various trade

agreements put in place after World War II reect

the United States’ strong commitment to free trade

in procurement.

12.It is important to stress that these various elements

of the U.S. trade regime in procurement evolved over

time, and they generally work together. The U.S. social

and economic preferences for small and minority-owned

businesses that emerged at mid-century, for example,

are often (as noted) specically reserved in trade agree-

ments, and those same trade agreements often exempt

environmental measures, even if they are protectionist in

effect. Similarly, new laws that raise protectionist barriers

(such as Section 1605 of the 2009 American Recovery

and Reinvestment Act, which imposed a severe domestic

preference in scal stimulus spending) often defer explic-

itly to international trade agreements. And the trade

barriers that rise out of the mechanics of the procure-

ment system—the barriers, for example, that emerge

from national initiatives in social justice, economic

growth and environmental protection (from “sustain-

able” government policies, to use the modern term)—

are often resolved through practical solutions (an oppor-

tunity to meet with agency ofcials to explain a foreign

cybersecurity solution, for example) or through outright

cooperation between U.S. and foreign ofcials (such as

occurred when the U.S. government rewrote its procure-

ment standards for technologies accessible to persons

with disabilities). The U.S. procurement system that grew

up after World War II, in other words, accommodated

domestic social, economic and environmental needs at

the same time it honored international trade agreements

that opened procurement markets to an extent unimag-

inable before the war.

13.Much of that changed, of course, with DonaldTrump.

President Trump rode to power on a type of populism

really not seen in mainstream politics in the United States

since the 1930s—a populism deeply steeped in nativism.

Isolationism became the order of the day, and protec-

tionism its handmaiden. Nor did things change funda-

mentally with Joe Biden; facing a likely electoral chal-

lenge from Trump in November2024, the Biden admin-

istration has steered away from centrist Democratic free

Concurrences N° 2-2024 I Article I Laurence Folliot Lalliot, Christopher Yukins I Will protectionism prevail in global public procurement?

trade policies and towards a protectionist industrial

policy that also had, until recently, largely fallen out of

fashion in the United States.

14.These recent shifts—examples of what we might call

“macro-protectionism”—can be understood through

the prism of two Biden-era major policy developments

in U.S. procurement: the rise of “friend-shoring” (an

industrial policy of trading rst with friendly nations,

and perhaps excluding adversary nations) and new “Buy

American” requirements in laws such as the Ination

Reduction Act (IRA). In contrast to the Trump admin-

istration’s protectionism, which was opportunistic and

thus remarkably predictable,

these new measures from

the Biden administration demand a closer look to under-

stand their sources—amalgams of social justice, polit-

ical calculation and geopolitical ambition—and poten-

tial vulnerabilities. Notably, while these Biden admin-

istration policies grew out of the same popular protec-

tionism, in practical effect they are strikingly different

from President Trump’s policies, and those differences

point to critical weaknesses in the new protectionism.

2.Friend-shoring in current

U.S. policy

15. “Friend-shoring” emerged as a policy theme during

the Biden administration, and gained currency when

the White House issued a report on “Building Resilient

Supply Chains” in June2021. The report was a follow-up

to an executive order issued by Biden in his rst month of

ofce that called for studies of global supply chain risks;

public awareness of those risks had grown acute during

the pandemic, as the United States faced critical shortages

of life-saving materiel from abroad to battle the Covid-19

virus.

To temper those risks, the June2021 report called

for “ally and friend-shoring (...) along with investments in

sustainable domestic production and processing.” Treasury

Secretary Janet Yellen—who is broadly credited with

coining the term—helped make “friend-shoring” a central

theme of Biden administration trade policy.

16.“The traditional conception of free trade,” Secretary

Yellen wrote in 2022, “emphasizes the efciency of trade

governed by comparative advantage. That’s the economic

theory that suggests that each national economy should

produce what it is comparatively best at”—the classic

economic theory of comparative advantage propounded

by Scottish economist Adam Smith in The Wealth of

Nations in 1776, the year the United States was born—

which “explains the efciency gains of international trade

and specialization.” But, wrote Secretary Yellen, “we

have learned that we must also account for the reliability

7 C. Yukins, Assessing the Trade Agenda for Government Procurement in the Biden

Administration, 2020 Gov. Contr. Year in Rev. Conf. Briefs 77 (Thomson Reuters,

Feb.2021) (citing prior assessments during the Trump administration).

8 E.g. R.Handeld, A.Patrucco, Z. Wu, C.Yukins and T. Slaughter, A New Acquisition

Model for the Next Disaster: Overcoming Disaster Federalism Issues Through Effective

Utilization of the Strategic National Stockpile, Pub. Admin. Rev., Vol.84, Issue1, 2023,

pp.65–85.

of trade,” which means planning against the “vulnerabil-

ities that result from over-concentration, geopolitical and

security risks, and violations of human rights.” Through

this “approach called ‘friend-shoring,’” she wrote, “the

Biden administration aims to maintain the efciencies of

trade while promoting economic resilience for the United

States and its partners.”

17.Secretary Yellen thus laid bare the central strands of

“friend-shoring”—to intertwine supply chain resilience

with the U.S. government’s goals on the global stage.

When applied to public procurement, the two strands can

strain and conict. Making supply chains more reliable

is neither new nor controversial; indeed, it is a mainstay

of both public and private procurement. What is novel

is to gauge the security of the supply chain—especially,

for our purposes here, the security of the public supply

chain—by its delity to a nation’s political and diplo-

matic goals, and so to divert procurement away from

adversaries and towards “friends.”

18. The rst problem with this is transience, because

a nation’s “friends” change over time. The British

statesman Lord Palmerston famously noted, in a speech

of the House of Commons in March1848, that Britain

has “no eternal allies, and we have no perpetual enemies.”

Instead, he said, Britain’s “interests are eternal and

perpetual, and those interests it is our duty to follow.”

Nations’ “friendships” swell and sour from one adminis-

tration to the next, sometimes due to something as petty

as one leader’s dislike for another, and sometimes (as in

the case of China and the United States) because of a

titanic shift in a global rivalry.

19.A second and related problem with “friend-shoring”

is structural. The free trade regime in procurement that

grew up after World WarII is, as noted, one dened by

a web of trade agreements, including the World Trade

Organization’s GPA, a plurilateral agreement which, at

least in principle, any member of the WTO can join if the

existing members of the GPA agree. “Friend-shoring”

could distort that nominally non-discriminatory gover-

nance structure, especially if (as is likely) the United

States works to block geopolitical rivals such as Russia

and China from joining the GPA’s free-trade network.

Over time, “friend-shoring” could result in a closed circle

of trading partners, aligned with the United States on a

political basis, but with predictable risks to public supply

chains that are not naturally dened by politics, and with

potentially catastrophic impacts on the existing trade

agreements regime.

20.These structural issues—the web of trade agreements

related to procurement that limit the United States’

ability to discriminate against perceived opponents—

have a peculiar practical effect on “friend-shoring,” and

illustrate why the existing trade regime could stumble

under the weight of “friend-shoring.” The existing trade

agreements bar discrimination in any number of ways,

such as technical requirements. Trade agreements thus

make it more difcult for the United States to discrim-

inate broadly, say against all goods that contain any

components from “unfriendly” countries; as a result,

Concurrences N° 2-2024 I Article I Laurence Folliot Lalliot, Christopher Yukins I Will protectionism prevail in global public procurement?

discriminatory measures must be defensible based on

exceptions in the trade agreements, such as those for

national security. This could force the United States

to make overly aggressive use of those exceptions, for

example by striking every product or component from

an “unfriendly” nation with the same “national security”

hammer—in time, making nonsense of the exception and

destroying the integrity of the trade agreement.

21. The third problem is one of cost and complexity.

Beyond the obvious costs of “Buy American” protec-

tionism—one academic study estimated that elimi-

nating “Buy American”-type protections could save

300,000 U.S. jobs—there are the costs of unwinding an

increasingly complex supply chain. Political rhetoric

assumes that there are purely “American” goods sold by

“American” suppliers, but the reality is much less tidy.

As the European Commission has shown in a series of

studies on cross-border procurement, suppliers from

abroad have penetrated the EU Member States’ public

procurement markets much more effectively as suppliers

and subcontractors than as prime contractors. This

suggests that if the U.S. goal is to tear all products and

components from “unfriendly” nations out of U.S. public

procurement markets, root and branch, it will be neces-

sary for U.S. agencies and their prime vendors to make

costly and complex efforts to “screen” the items sold to

the government.

22. The concept of “security of supply” at the core of

“friend-shoring” is not new to public procurement;

indeed, Adam Smith himself noted in the Wealth of

Nations that countries might well draw exceptions to free

trade where needed to protect military supplies in antic-

ipation of war. But realigning the entire public supply

chain to reect a nation’s alliances abroad faces serious

hurdles, which makes it less likely this sort of “macro-pro-

tectionism” will survive.

3. Politics and protectionism

inthe U.S. system:

Themeaning of “BABA”

23.“Friend-shoring,” discussed above, reects an effort to

align the U.S. government’s purchases with its foreign alli-

ances. The protectionism of the recent “Build America,

Buy America” (BABA) Act, in contrast, reects an effort

to align procurement with domestic politics—and also

offers insights into how that more purely political protec-

tionism can undo itself.

24.The “Build America, Buy America” Act is part of the

Infrastructure Investment and Jobs Act (IIJA). Under

BABA, a new domestic preference applies to federal

nancial assistance (i.e., grants, or what might be called

“State aid” in the EU) for infrastructure provided by

federal agencies to state and local entities.

9 For more details, see the workshop and materials on Implementation Issues Under BABA,

on the Public Procurement International website.

25. The domestic content procurement preference

imposed by BABA means that whenever federal assis-

tance is used in a project, all iron and steel used in the

project must be produced in the United States, and the

manufactured products and construction materials

purchased for the project must be produced in the United

States—with special, more stringent requirements for the

construction materials, discussed below.

26.This preference applies beyond the billions of dollars

of infrastructure projects funded by the IIJA, to reach

presumptively all infrastructure projects supported

with federal nancial assistance to non-federal entities.

In other words, under BABA, the federal government

has harnessed tens of billions of dollars in federal infra-

structure spending annually to create an expansive new

domestic preference, one that reaches beyond the federal

government into state and local procurement as well.

27. While the domestic preferences for U.S. “green”

industries under the IRA have gained more noto-

riety in Europe, BABA’s preferences are probably more

important for public procurement markets in the United

States—and highlight the frailties inherent in a politically

driven preference.

28. To understand BABA, we need to look back

to February 2023, when President Biden addressed

Congress in his State of the Union address and offered

his own political perspectives on domestic preferences,

echoing themes he had raised before. Speaking of the

BABA preference, he said:

“And when we do these projects — and, again, I get crit-

icized about this, but I make no excuses for it — we’re

going to buy American. We’re going to buy American.

Folks — and it’s totally — it’s totally consistent with

international trade rules. Buy American has been the

law since 1933. But for too long, past administrations —

Democrat and Republican — have fought to get around

it. Not anymore.

Tonight, I’m also announcing new standards to require

all construction materials used in federal infra- — infra-

structure projects to be made in America. Made in

America. I mean it. Lumber, glass, drywall, ber-optic

cable.

And on my watch, American roads, bridges, and

American highways are going to be made with American

products as well.

Folks, my economic plan is about investing in places and

people that have been forgotten. So many of you listening

tonight, I know you feel it. So many of you felt like you’ve

just simply been forgotten. Amid the economic upheaval

of the past four decades, too many people have been left

behind and treated like they’re invisible.

Maybe that’s you, watching from home. You remember

the jobs that went away. You remember them, don’t you?

The folks at home remember them. You wonder whether

the path even exists anymore for your children to get

ahead without having to move away.

Concurrences N° 2-2024 I Article I Laurence Folliot Lalliot, Christopher Yukins I Will protectionism prevail in global public procurement?

Well, that’s why — I get that. That’s why we’re building

an economy where no one is left behind.

Jobs are coming back, pride is coming back because

ofchoices we made in the last several years.

You know, this is, in my view, a blue-collar blueprint

to rebuild America and make a real difference in your

lives at home.”

29.The speech reected President Biden’s core political

themes.

He was speaking to those Americans who feel

dispossessed by economic change (including globaliza-

tion)—the American middle-class voters at the heart of

the battle between Biden and Trump. Biden’s solution for

those voters is a domestic preference that would build

opportunity for working-class Americans.

30. What Biden said was also important for under-

standing BABA’s technical particulars; the legislation

was already over a year old, and Biden’s speech reected

policy decisions embedded in his administration’s

strategy for BABA’s implementation.

31. For example, although many states that use federal

infrastructure funding for their own procurement long

ago committed to follow U.S. free trade agreements—

and thus those states are, in many instances, bound to

open their federally funded procurement to foreign

competitors—Biden simply shrugged off those commit-

ments by arguing (erroneously) that “Buy American has

been the law [of the land] since 1933.” The Buy American

Act of 1933 does not apply to state or local government

procurement; even if it did, as was noted above, interna-

tional agreements entered into since World WarII have

largely displaced the 1933Act and opened procurement

markets in the United States. President Biden essentially

ignored that history.

32.Biden also signaled that few waivers would be granted

from BABA coverage. When he spoke in April2023, it

was not yet clear what that would mean for foreign

vendors. In August 2023, however, the U.S. Ofce of

Management and Budget (part of the White House)

issued nal guidance saying that even where an interna-

tional agreement has opened a state market to foreign

competitors, the state government must still seek a waiver

from the federal government before bypassing BABA’s

domestic preferences. In other words, a state’s commit-

ment to open procurement under a foreign trade agree-

ment would no longer be a commitment, but just a rst

step in an uncertain waiver process. This created a real

risk that other nations would retaliate by smothering free

trade obligations using similar stratagems.

10 The transcript is a remarkably intimate window into President Biden as a person and as

a politician—the transcript even reects the stammer that he has struggled with since

he was a child.

33. Finally, Biden’s words anticipated BABA’s skewed

implementation. The traditional price preference under

the Buy American Act of 1933 applies to “construc-

tion materials,” which include all the materials deliv-

ered to a work site. Biden’s speech, however, signaled a

much narrower regulatory denition of the same term

(“construction materials”), to include only a small

handful of goods, including (in Biden’s words) “[l]umber,

glass, drywall, ber-optic cable.” To the casual observer,

Biden’s speech suggested that the new BABA domestic

preferences would apply to all construction materials

(under a broad, traditional denition of the term); in

fact, however, President Biden was naming essentially

all of the very few products that would be covered by

BABA’s much more rigorous domestic content require-

ments. Biden’s speech, in other words, promised exactly

what the Biden administration delivered—which, in fact,

was less than it seemed.

34.As Biden’s speech reected, the new BABA domestic

content requirements were honed by specic, highly

political goals. The BABA requirements offer helpful

insights, therefore, into the points of vulnerability when

protectionism is dened closely by politics.

35.First, the BABA requirements conrmed that where

politics and trade obligations collide, politics may

prevail. Although the BABA statute deferred to foreign

trade agreements, in implementing that statute, the Biden

administration largely ignored the access guaranteed

to foreign vendors by trade agreements. BABA shows

how politically driven protectionism can be danger-

ously corrosive to a trade regime. While in the short

run, that conict between politics and trade agreements

can be destructive, in the long run, it makes politically

driven protectionism less sustainable, because succeeding

administrations with different political perspectives are

less likely to be willing to sacrice trade guarantees for a

prior government’s political goals. Binding protectionism

closely to politics, in other words, arguably makes protec-

tionism as transient as politics itself.

36.Second, the BABA requirements show how, handled

deftly, politically informed protectionist measures can

appear to carry much more impact than they actually

do. BABA sets very onerous domestic content require-

ments for “construction materials,” but renes them to

include only a small number of products. Protectionist

voters were pleased, but the actual impact was in reality

narrower than it appeared. Political rhetoric in short can

distort protectionism, which in turn makes that protec-

tionism less sustainable and secure.

37. Finally, by loading a new “Buy American” deni-

tion onto an established body of rules—and leaving the

old rules in place—the new BABA requirements made

industry compliance and government enforcement much

more difcult. Industry and enforcement ofcials must

now struggle with a confusing welter of sometimes over-

lapping rules—is, for example, a particular good covered

by the Buy American Act or BABA, and is that good

a “construction material” under the old law or the new

law, because the denitions are not the same? The new

Concurrences N° 2-2024 I Article I Laurence Folliot Lalliot, Christopher Yukins I Will protectionism prevail in global public procurement?

BABA law thus illustrates the perils of protectionism

etched by politics: the protectionist measures may prove

much harder to follow and enforce, which mutes their

effectiveness.

38.These two recent examples of surging protectionism

in the United States—“friend-shoring” and BABA—

illustrate critical weaknesses in the new wave of protec-

tionism internationally, weaknesses that suggest that the

new protectionism may not endure. “Friend-shoring”

assumes that a nation’s geopolitical goals can be endur-

ably aligned with its procurement supply chains; practical

experience suggests, however, that this is not sustainable.

And the Biden administration’s BABA initiative, a type

of protectionism carefully honed around a political goal,

also appears unsustainable—it strains against established

trade and compliance regimes, and stands vulnerable to

a shift in the political landscape. Taken together, these

examples from the United States suggest that over-pro-

tectionism may not, in fact, prove the “new normal.”

II.European

Union: Growing

protectionism,

insideand out

39.As the discussion above reected, protectionism has

been an ingrained part of the U.S. procurement system

for over a century. In the European Union, in contrast—

in a union founded on free trade—protectionism has

long been anathema. More recently, however, the EU

has been more willing to meet protectionism abroad

with protectionist measures of its own, though, as the

discussion below shows, those measures have been more

tactical and defensive than structural. At the same time,

like the United States, the European Union is accom-

modating new goals in sustainability—social justice,

economic development and environmental protections—

in its procurement regime, tempered by the EU’s over-

arching goal of competition and economic integration.

1.Within the EU: Cross-border

procurement and the single

market

40. To understand protectionism in the European

Union, it is important to recognize that in the EU, public

procurement law is intertwined with competition law.

Since the 1970s, the EU has enacted a series of legal

instruments (Directives) to regulate public procurement

and promote the construction of the internal market

by harmonizing tendering rules among Member States.

The last package was published in 2014, covering both

public procurement contracts per se and concessions

contracts. Even for contracts excluded from the scope of

the Directives, such as those below the EU thresholds,

or concessions at that time, the Court of Justice of the

European Union (ECJ) decided, in its seminal Telaustria

ruling, that those contracts remain subject to the “funda-

mental rules of the Treaty,” such as transparency, equal

treatment, and non-discrimination based on nationality.

This extensive implementation of the EU’s competition

policy in public procurement explains why setting aside

contracts for small and medium-sized enterprises (SMEs)

(to match the U.S. small business preferences under the

Small Business Act), even if restricted to European

SMEs, was never accepted despite demands from several

Member States. However, starting with its 2005 Coname

ruling, the ECJ has increasingly emphasized the need to

scale the opening up of intra-European competition for a

public procurement contract to its “denite cross-border

interest.” In other words, to warrant aggressive measures

to open competition across borders, the contract must,

among other criteria, be of sufcient economic impor-

tance to attract foreign competition.

41. Despite these longstanding efforts in the European

Union to link competition and public procurement, the

European Court of Auditors recently published a special

report (28/2023), which criticized the decline of compe-

tition in public procurement in the EU from 2011 to

2021. Additionally, the report raised questions about

the efciency of the 2014 public procurement Directives

in stimulating a free EU market for European compa-

nies. Despite efforts by European authorities, regional

and sectoral differences in public procurement practices

persist not only between Member States but also within

them. The report suggested that the 2014 Directives,

which contemplated the division of public contracts

into lots (portions) to attract SMEs, may in practice

be of greater interest to large companies, and the ease

of entering into direct agreements may have ultimately

reduced competition. To promote innovation and cross-

border cooperation, the report complained, too few

initiatives are launched such as the platform “Big Buyers

Working Together,” and at the same time market concen-

tration is deterring open bidding processes.

2.Outside the EU:

“Friend-shoring” and the new

reciprocity requirement

42. For a long time, EU trade policy, sometimes crit-

icized as too naïve, encouraged free competition, and

access (with notable exceptions in the utilities’ direc-

tive, which contemplates domestic content requirements)

and defense (where special preferences are allowed

because of the unique demands of national security).

But since then, the EU agreement signed with Korea in

2011, and the so-called new generation European agree-

ments (Comprehensive Economic and Trade Agreement

(CETA), Japan-EU Free Trade Agreement (JEFTA)

since 2019, and soon MERCOSUR), also seek to reduce

other barriers to trade (“non-tariff barriers”), including

access to public procurement opportunities.

Concurrences N° 2-2024 I Article I Laurence Folliot Lalliot, Christopher Yukins I Will protectionism prevail in global public procurement?

43. In 2022, in a striking move after years of almost

unconditional opening of its Member States’ public

procurement contracts, the EU switched to a restric-

tive policy aligned with the “open, sustainable and asser-

tive EU trade policy” launched by the Commission on

February2021. Two major steps marked this shift.

44. On June 23, 2022, after ten years of discussions,

Europe adopted a new trade regulation (the International

Public Procurement Instrument (IPPI)) which restricts

access to its public procurement contracts and conces-

sions for operators and products from third countries

that do not afford access to their own public procurement

markets.

This regulation is based on the requirement

for reciprocity in access to European public procure-

ment markets. The regulation aims to dampen the

interest of operators that would otherwise be attracted

by the EUR2,400 billion in annual public contracts in

Europe. Some of these operators come from countries

with closed or difcult-to-access domestic markets for

European companies, such as Chinese companies that

engage in “dumping”—pricing in the EU below their

home market price—with the support of Chinese politics

and economics. The Commission presented this regula-

tion not only as a direct protective measure but also as

a means to promote international fair trade. It should

induce third countries to negotiate and open their

bidding opportunities to European rms, ensuring recip-

rocal access for their own companies.

45. To avoid being excluded from European procure-

ment contracts, candidates must demonstrate that their

country of origin offers reciprocal or equivalent access

to European operators, goods, and services, or has

concluded a trade agreement with reciprocal terms, or

qualies for a specic exception such as being a least

developed country beneting from the “Everything But

Arms” regime as set out in Annex IV to Regulation (EU)

No. 978/2012 of the European Parliament and of the

Council.

46. Currently, the IPPI regulation applies only to

contracts with a value of at least EUR 15 million

(excluding VAT) for works and concessions, and at least

EUR5million (excluding VAT) for goods and services.

The regulation also prohibits subcontracting more than

50% of the contract to a foreign operator, with limited

exceptions, and it includes an exception for small munic-

ipalities (with less than 50,000inhabitants).

3.Assessing reciprocity

47.The new IPPI regulation is based on the identication

of non-tariff barriers to EU operators or products in the

public procurement markets of third countries. However,

this latter category is not homogeneous, since it includes

countries that have not concluded a trade agreement with

11 For a 2022 workshop and resources on the IPPI and related measures in the EU, see

New Protectionism in International Public Procurement, on the Public Procurement

International website.

the EU (apart from the “protected” countries mentioned

above), as well as those that have concluded a trade

agreement but may not reciprocally cover the subject of

the public contract or public-private partnership (PPP)

in question. For the latter, the European Parliament has

recommended the use of the dispute settlement proce-

dure specic to the trade agreement concerned, which

(in the case of the GPA) would refer a dispute to the

WTO Dispute Settlement Body (DSB). As a result, it is

not enough to have a trade agreement with the EU to be

protected from IPPI measures: at best, the third country

could benet from a favorable presumption, but that

presumption could collapse if the Commission proved

that there is no full reciprocity of access (depending

upon the criteria of size, sector or subject matter of the

contract). In the end, this new mandatory regulation

“marks a hardening, even a reversal, of European compe-

tition policy in terms of access to its public procurement

contracts.”

(Authors’ translation)

4.Foreign Subsidies

Regulation: Leveling

theplaying eld

48. Later the same year, the EU enacted the well-

known Foreign Subsidies Regulation (FSR), 2022/2560

(14 December 2022). The FSR works against the

backdrop of the EU’s “State aid” regime, under which

the EU controls market distortions by limiting Member

States’ ability to provide subsidies in their home econ-

omies. The FSR turns this concept outward to ensure

that foreign competitors cannot gain an unfair advan-

tage in EU public procurement markets thanks to

subsidies from foreign governments.

In the area of

public procurement, the FSR addresses foreign compa-

nies that may be supported by non-EU governments

through direct subsidies, which would undercut compe-

tition.Thenew Regulation creates an exante obligation

forpublic procurement procedureswhere (i) the contract

value is at least EUR 250 million and (ii) the bidder

has received a foreign nancial contribution of at least

EUR4million per non-EU country. Below these thresh-

olds, the Commission will also be able torequest adhoc

notications if it suspects that foreign subsidies may have

been involved in the transaction and the transaction is

not yet concluded.

49. On February 16, 2024, the European Commission

announced its rst in-depth investigation under the

Foreign Subsidies Regulation targeting CRRC Qingdao

Sifang Locomotive, a Chinese bidder in a public procure-

ment procedure held by Bulgaria’s Ministry of Transport

and Communications, concerning the provision of

12 L. Folliot-Lalliot, Commerce international : Le Parlement européen et le Conseil

adoptent un nouveau règlement de politique commerciale restreignant l’accès à ses

marchés publics et concessions par les opérateurs et produits en provenance de pays tiers,

Concurrences No.3-2022, art. No.108195, pp.189–191.

13 E.g., P. Friton, M. Klasse and C. Yukins, The EU Foreign Subsidies Regulation:

Implications for Public Procurement and Some Collateral Damage, Gov. Contractor,

Vol.65, No.11, Mar.22, 2023, ¶ 63.

Concurrences N° 2-2024 I Article I Laurence Folliot Lalliot, Christopher Yukins I Will protectionism prevail in global public procurement?

20 electric “push-pull” trains as well as related mainte-

nance and staff training services, with an estimated value

of the contract of around €610million.

50.Going beyond these macro-protectionism approaches,

countries can also promote a tailored protectionist stand

in public contracting—some EU Member States, for

example, have moved independently to exclude vendors

from nations that do not agree to open their procurement

markets

—and, as the discussion below reects, this

growing movement now extends from developed coun-

tries to countries from the “Global South.”

III. Customizing

protectionism in

public procurement

51. Different types and forms of public procurement

rules illustrating protectionist impacts can be spotted in

domestic legislation, the world over. The discussion below

proposes a categorization of examples, keeping in mind

that different measures may coexist at the same time. It

is more and more common that a procurement regime

must balance multiple protectionist measures; as the U.S.

and EU experiences outlined above conrm, however, it

is possible to coordinate these sorts of “conjunctural”

measures, even in times of crisis.

1.“Conjunctural”

protectionism in public

procurement

52. Most governments have enacted post-Covid provi-

sions following the extraordinary and unprecedented

competition between countries to purchase emergency

health products for their populations. Emergency situ-

ations or exceptional circumstances, such as Covid-19,

could be cases for preferences due to time constraints,

exceptions that were already justied under trade

agreements.

53. Paradoxically, this exceptional period of frantic

global public purchasing demonstrated the value of

maintaining the possibility of buying goods from

abroad, despite any previous restrictions.

New innova-

tive techniques were designed, such as joint procurement

14 For a detailed summary, see M.Bowsher, P. Friton, P. Lalonde, A. Sundstrand and

C. Yukins, International Procurement Developments in 2022: New Perspectives in

Global Procurement, 2022 Gov. Contr. Year in Rev. 59, at 62 (Thomson Reuters, 2023)

(summary by Dr.Friton).

15 E.g., P. Trepte, The Rise of Resilience in Addressing COVID-19 Procurement

Challenges and the Impact of International Trade-Related Instruments on Countries’

Freedom of Action, in Public Procurement Regulation in (a) Crisis?, S.Arrowsmith,

L.R.A.Butler, A.LaChimia and C.Yukins (eds.), Hart Publishing, Oxford, 2021.

16 E.g., S. Evenett, Tackling COVID-19 Together: The Trade Policy Dimension, Global

Trade Alert, Mar.23, 2020.

to buy vaccines, collaborative purchasing, cross-border

sourcing, and supply monitoring—all of which balanced

against the “new protectionism” emerging worldwide.

54.Nor were these imperatives for open trade limited to

the health crisis. In the defense sector, the war situation

on Europe’s doorstep recently prompted the European

Commission to call for joint procurement with the aim of

strengthening the industrial defense base. On March5,

2024, the European Defense Industrial Strategy (EDIS)

called for the EU Member States to procure at least

40% of defense equipment in a collaborative manner by

2030, in order to prevent future supply crises of defense

products.

55. After the Covid crisis, in addition to implementing

and securing emergency procedures for vital purchases,

countries with well-developed private sectors have

adopted attractive industrial policies to relocate supply

chains and prevent potential shortages of public health

supplies, and other goods. This movement has extended

to other justications for emergency purchases: supply

difculties in the energy sector, threats of war, economic

and inationary crisis, climate crisis or even (as discussed

above, regarding “friend-shoring” in the United States) a

political discourse on sovereignty.

56.Government contracts are also a prime area for the

implementation of international sanctions regimes, such

as transaction restrictions and embargoes. These are

commonly decided within the framework of the UN

sanctions regime, or the lists of persons sanctioned by

the EU Council, as part of the Common Foreign and

Security Policy. This was exemplied by the full prohi-

bition against the participation of Russian nationals and

entities in procurement contracts under the EU sanc-

tions, and the termination of ongoing contracts.

2.Structural protectionism

inpublic procurement

57. Precisely because public procurement has demon-

strated its exibility and effectiveness as a public policy

tool, more changes are emerging more rapidly in public

procurement laws—fragmenting and proliferating special

regimes to accommodate a range of new public policy

imperatives. To better understand the reality of protec-

tionist policies and outputs in public procurement, one

needs to go deeper in the analysis and look beyond

appearances. Protectionism in public procurement can

take various forms, including the complete closure of a

market, sector, or a specic invitation to tender through

direct contracting. It can also mandate certain condi-

tions, such as qualication criteria for selecting the

candidates, or technical specications, or conditions of

contract, or award criteria, or procedural rules deterring

free and open competition.

17 Council Regulation (EU) 2022/576 of 8April2022 amending Regulation (EU) No.

833/2014 concerning restrictive measures in view of Russia’s actions destabilising the

situation in Ukraine, OJ L 111, 8.4.2022, p. 1, Art.5k.

Concurrences N° 2-2024 I Article I Laurence Folliot Lalliot, Christopher Yukins I Will protectionism prevail in global public procurement?

58.To make sense of this kaleidoscope of instruments,

in 2017 the OECD proposed a taxonomy of measures

affecting trade in government procurement processes

that can impact cross-border public procurement.

TheOECD study was performed in conjunction with the

United Nations Conference on Trade and Development

(UNCTAD), which had worked since 2006 on a global

project to classify NTMs. The project was supported by

a Multi-Agency Support Team (MAST), of which the

OECD, as a member, volunteered to chair the working

group on government procurement classication.

59. The result was a methodology based on two main

groups of direct and indirect barriers in public procure-

ment. The main category of direct measures covered

several subcategories: “upfront” market access restric-

tions, domestic price preferences, local content require-

ments, collateral restrictions or restrictive effects imposed

by other legislation (such as investment law restrictions

PPPs). Indirect measures included several subcatego-

ries: the conduct of procurement proceedings, qualica-

tion criteria for selecting companies, evaluation criteria

applied against offers, whether review and complaint

systems are open for foreign companies, transparent

requirements, and the effectiveness of ethics and integ-

rity systems. In all, more than 57measures were identi-

ed, which showed the variety of procurement barriers

to trade at the disposal of governments.

60. Based on this taxonomy, well-known protectionist

policies such as the Buy American Act fall within the

ensemble of “direct measures” as a local content require-

ment. Empirical analysis shows that many countries

are now clarifying, with direct measures, their commer-

cial policies regarding foreign candidates’ access to their

tenders. This clarication helps to highlight protectionist

tendencies that may actually not be new but were previ-

ously more ambiguous.

61. Some countries that have not joined major global

agreements (such as the WTO Government Procurement

Agreement) or regional trade agreements covering access

to public procurement, such as the BRICS countries,

are now ofcially proclaiming protectionist government

procurement policies. This trend is echoed in China’s

long-closed government procurement market, in a

protectionist stance which is now joined by Brazil. The

“Make-in-India” policy is a good example of this trend.

In South Africa, Section 217(2) of the Constitution

provides for “categories of preference in the allocation of

contracts” and “the protection or advancement of persons,

or categories of persons, disadvantaged by unfair discrimi-

nation,” the legal foundation for the “Broad-Based Black

Economic Empowerment” (B-BBEE, formerly Black

Economic Empowerment) preferential policy in public

procurement.

18 J.Gourdon, V. Bastien and L.Folliot-Lalliot, OECD taxonomy of measures affecting

trade in government procurement processes, OECD Trade Policy Papers, No. 198, 2017,

https://doi.org/10.1787/5bfb44c3-en.

62. Other countries are following this path of protec-

tionism. Algeria’s Law No. 23-12 of August 5, 2023,

for example, sets out general rules for public procure-

ment that maintain very limited foreign access, and allow

for sole-source contracts (Art. 41) “when it is necessary

to promote national production and/or production tools.”

(Authors’ translation) The Algerian law reects one of

the most common grounds for protectionism: to protect

and nurture national industry.

3.Competition limited

tospecic value contracts

63.Very popular among national systems is the practice

of limiting access of foreign bidders based on thresh-

olds. National laws often open “international procure-

ment procedures” only for the highest-value contracts.

One example is Brazilian Law No. 14,333/2021: to partic-

ipate in regular public opportunities, the operator must

be duly constituted under Brazilian law, or it can be orga-

nized under foreign law only in the case of an interna-

tional award procedure. On the other hand, countries

may announce that their procurement is open by default,

but reserve small-value public contracts to local SMEs.

64.These domestic measures may conict with interna-

tional trade obligations entered into by the state, which

can create potential breaches with huge consequences.

Not many in procurement workforces, especially in coun-

tries from the “Global South,” are fully aware of these

international obligations when it comes to designing

their procurement processes; the breaches, therefore,

may come as a surprise even to the procuring agencies

themselves.

65. The 2023 procurement regulation of Morocco,

which is a party to bilateral trade agreements with the

United States and the EU, is a rare example of a provi-

sion on “national preferences” crafted to avoid such

conict (Art. 147): “Where competitors not established

in Morocco tender for works, supply or service contracts,

preference shall be given, in the evaluation of nancial bids,

to bids submitted by competitors established in Morocco,

subject to compliance with commitments entered into under

international agreements duly ratied by the Kingdom of

Morocco.”

(Authors’ translation)

66. All these recent examples demonstrate how protec-

tionism can be carried forward through tailored public

procurement rules to promote domestic companies—and

how that protectionism can be reconciled with interna-

tional agreements that require open markets.

19 Protectionist measures in recent U.S. legislation discussed above, such as the American

Recovery and Reinvestment Act and BABA, also explicitly defer to standing trade

agreements.

Concurrences N° 2-2024 I Article I Laurence Folliot Lalliot, Christopher Yukins I Will protectionism prevail in global public procurement?

IV.Micro-

protectionism and

sustainable public

procurement

67.The discussion above on current U.S. and EU posi-

tions addressed “macro” protectionist policy—general

restrictions on foreign competition. Here, we will focus

on “micro” protectionism—measures that are managed

at the procurement level with a protectionist impact.

Currently, one of the most important types of “micro”

protectionism relates to sustainable procurement, which

is public procurement reshaped to accomplish social

justice, economic and environmental goals. As noted,

those goals in sustainable procurement are often

framed by the United Nations’ very modern Sustainable

Development Goals (SDGs); the roots of these sustain-

able procurement policies, however, can be traced back

for centuries.

1.SDGs as a new justication

for protectionism?

68.Ironically, while the debate on whether competition

undermines the SDGs is heating up in the eld of inter-

national trade, public procurement may offer an inter-

esting perspective on how SDGs and open markets can be

reconciled. As protectionism re-emerges as an economic

policy tool in trade relations (see above), public procure-

ment rules around the world are evolving, again, as an

effective public vehicle for the implementation of govern-

ments’ commitments under the SDGs. Indeed, the SDG

sub-target 12.7 specically focuses on public contracts.

Thus, environmental and social criteria, including the

protection of human rights, as well as afrmative actions

in favor of SMEs for economic purposes—all illustrating

the three pillars of sustainable development (economic,

social and environmental)—are increasingly being inte-

grated into legal frameworks with the emergence of

“sustainable public procurement” (SPP).

69.Changes are proceeding quickly. Just a few years ago,

the 2011 UNCITRAL Public Procurement Model Law

hardly addressed socio-economic goals, but instead left

them to implementing nations under a very sparse legal

framework.

And these goals or objectives were usually

dismissed as “secondary policies” by the trade commu-

nity, in contrast with primary objectives or principles

of public procurement such as competition, transpar-

ency, equal treatment, non-discrimination and efciency.

20 E.g., C. McCrudden, Buying Social Justice: Equality, Government Procurement, and

Legal Change, Oxford University Press, 2007.

21 See United Nations Commission on International Trade Law (UNCITRAL), Guide to

Enactment of the UNCITRAL Model Law on Public Procurement, October2014, at

5–8.

However, it seems that the implied hierarchy between

competition principles and the SDG objectives is now

criticized, at least in the public procurement eld.

70.Sustainable development goals tend to reshape public

procurement, and the EU refers to them as “complemen-

tary objectives,” and the OECD calls them “secondary

policies.” The change started years ago, with the ECJ

case law: going beyond the EU public procurement direc-

tives of that time, landmark decisions made it possible

to reconcile competition and social goals. In the ECJ’s

1988decision in Gebroeders Beentjes BV v. State of the

Netherlands, case 31/87, EU:C:1988:422, the Court wrote

that a procurement

“condition relating to the employment

of long-term unemployed persons is compatible with the

[EU procurement] directive if it has no direct or indirect

discriminatory effect on tenderers from other Member

States of the Community,” though an “additional specic

condition of this kind must be mentioned in the contract

notice.” The Court similarly reconciled competition and

environmental goals in its 2002 decision in Concordia

Bus Finland Oy Ab, formerly Stagecoach Finland Oy

Ab v. Helsingin kaupunki and HKL-Bussiliikenne,

caseC-513/99, EU:C:2002:495, where it wrote that “in the

context of a public contract for the provision of urban bus

transport services, [if] the contracting authority decides to

award a contract to the tenderer who submits the economi-

cally most advantageous tender, it may take into consider-

ation ecological criteria such as the level of nitrogen oxide

emissions or the noise level of the buses, provided that they

are linked to the subject-matter of the contract, do not

confer an unrestricted freedom of choice on the authority,

are expressly mentioned in the contract documents or the

tender notice, and comply with all the fundamental prin-

ciples of Community law, in particular the principle of

non-discrimination.”

71. If proportionate and non-discriminatory, environ-

mental (or “green”) criteria in public procurement can

both satisfy the SDGs and comply with the competition

principle. But some may ask if the ght against climate

change could indirectly lead to the emergence of “environ-

mental” or “green” protectionism. By requiring agencies

to buy “green” or with environmental preferences such

as those for a circular economy (in which consumption

is planned, in turn, towards reuse and regeneration),

and encouraging local purchases to limit transporta-

tion and greenhouse gas emissions, green public procure-

ment (GPP) could be seen as a case study in transitioning

from a traditional economy to a “greener” economy with

(indirect) protectionist consequences.

22 R.Caranta and M.Trybus (eds.), The Law of Green and Social Procurement in Europe,

DJOF, Copenhagen, 2010; R. Caranta, Sustainable Procurement, in EU Public

Contracts Law, M.Trybus, R.Caranta and G.Edelstam (eds.), Bruylant, Brussels, 2013,

ch. 7, at 166.

23 See also CJEC, 4December 2003, EVN AG and Wienstrom GmbH v. the Republic of

Austria, caseC-448/01, EU:C:2003:651 (“The Community legislation on public procure-

ment does not preclude a contracting authority from applying, in the context of the assess-

ment of the most economically advantageous tender for a contract for the supply of electric-

ity, an award criterion with a weighting of 45% which requires that the electricity supplied

be produced from rene

wable energy sources.”).

Concurrences N° 2-2024 I Article I Laurence Folliot Lalliot, Christopher Yukins I Will protectionism prevail in global public procurement?

72.In France, the Climate and Resilience Act, published

on August24, 2021, includes several provisions designed

to take sustainable development more into account when

awarding and executing public procurement contracts.

From 2026, contracting authorities will have to include

environmental technical specications from the rst

stages of dening their needs. They will also have to

include at least one environmental criterion for award.

In practice, this change will bar the use of price as the

sole criterion for award. Purchasers will be required to

include in their public procurement contracts perfor-

mance conditions that take the environment into

account. In addition, from 2030 onwards, there will be

an obligation to use bio-sourced or low-carbon mate-

rials in at least 25% of all major renovations and new

buildings commissioned by the public sector. In addition,

France’s Law No. 2023-973 of October 23, 2023, called

for excluding those companies that have been convicted

of environmental offenses or are not in compliance with

environmental, social and governance (ESG) reporting

obligations (based on the EU Directive 2022/2464, the

“Corporate Sustainability Reporting Directive,” in force

since January2024) from public procurement.

73. In addition, social “protectionism” in public

contracting could also result from the SDGs’ imple-

mentation. For the past decade (and especially since the

Covid-19 crisis encouraged governments to take steps to

mitigate the pandemic’s adverse effects), the European

Union has been promoting public procurement policies

that take social factors into account. The Commission

has published several tools to encourage Member States

to adopt the principles of socially responsible public

procurement: Buying Social (a guide on taking account

of social considerations in public procurement),

Making

Socially Responsible Public Procurement Work (a collec-

tion of good practice cases),

and a social media group,

Actors for Social Impact Procurement. The Commission

promotes multiple social goals: “By purchasing wisely,

public buyers can promote employment opportunities,

decent work, social inclusion, accessibility, design for all,

ethical trade, and seek to achieve wider compliance with

social standards.” To do so, policies favoring socially

responsible public procurement (SRPP) and GPP require

agencies to compare prices of goods or services using life-

cycle cost analysis that integrates all costs of production,

sourcing, delivery and recycling.

74.As it matures, public procurement serves as a vehicle

for a number of public social policies: job creation,

compliance with labor regulations, gender equality

policies, etc. In this social dimension, respect for human

24 For similar initiatives in the European Union, the United States and Brazil calling for

environmental planning in procurement, see workshops on the Public Procurement

International website, EU and U.S. “Green Procurement” Strategies: A Comparative

Assessment for the March2024 FIDES Workshop, and Brazil’s Public Procurement

Market: New Opportunities, New Challenges, Oct.7, 2021.

25 Eur. Comm., Buying Social: A Guide to Taking Account of Social Considerations in

Public Procurement, 2nd ed., C(2021) 3573nal, 26May2021.

26 P.Tepper, A.McLennan, R.Hirt et al., Making Socially Responsible Procurement Work:

71 Good Practice Cases, Publications Ofce of the European Union, Luxembourg,

2020.

rights, in the broadest sense of the term, thus becomes a

condition of participation for bidders, which can obvi-

ously affect the participation of companies non-com-

pliant with these human rights requirements. As a major

step, not limited to public procurement, on March 15,

2024, the proposal for an EU Corporate Sustainability

Due Diligence Directive was adopted by the Council.

If approved by the EU Parliament, it will impose on

5,000 EU and non-EU companies, with a turnover of

over EUR450million minimum, a civil liability regime

for failing to carry out diligence in their supply chains.

These requirements could be considered as having an

indirect “protectionist” effect, for they erect complex

new supply chain requirements that foreign competitors

simply may not be prepared to meet.

75.Referring to the OECD’s taxonomy on government

procurement measures, discussed above, one should

consider whether these SDGs’ requirements imple-

mented through public procurement rules are actually

variations of indirect protectionist barriers because

these requirements may deter competition from foreign

companies, and even force them to modify their ways of

doing business to compete in EU Member States’ public

procurement markets. In assessing this question, it is

worth noting that these new requirements may also affect

local companies’ participation, as the requirements are

not specically related to the nationality of the candi-

date—the requirements’ rst and obvious purpose is not

protectionism.

2.Preferences for SMEs,

theeconomic pillar of SPP

76. As noted, in the past, SME preferences were regu-

larly criticized as examples of protectionist economic

policies. But they have now gained legitimacy, since SME

preferences are considered crucial for implementing the

economic pillar of the sustainable development objec-

tives. (Notably, SME preferences can also advance the

social justice pillar, for example when they are used

to promote minority- or women-owned businesses.)

Morocco, for example, with Decree 2023 – Article 148,

said that a contracting authority “is required to (...) reserve

a percentage of thirty percent (30%) of the estimated value

of the contracts they intend to award, for each nancial

year, for very small, small and medium-sized enterprises

established in Morocco, including young innovative enter-

prises, cooperatives, cooperative associations and self-em-

ployed entrepreneurs.” (Authors’ translation) Similarly,

the United Kingdom’s post-Brexit Procurement Act of

26 October 2023 sets new procurement rules (divorced

from the EU constraints) that offer greater opportunities

for small businesses and social enterprises.

77. Signicantly, the Methodology for Assessing

Procurement Systems (MAPS), a global assessment

tool developed jointly by a consortium of interna-

tional organizations including the OECD, the World

Bank and the United Nations, and used by govern-

ments to identify aws in their domestic procurement

Concurrences N° 2-2024 I Article I Laurence Folliot Lalliot, Christopher Yukins I Will protectionism prevail in global public procurement?

systems, has just revised its supplementary module on

SPP. Its 2023 version allows for “preferences for certain

categories of rms, if any, are adequate and justied and do

not undermine the economy and efciency of the system.”

However, the formulation is somewhat ambiguous, for it

avoids specifying whether these preferences are limited to

local SMEs. Reconciling preferences for SMEs with open

competition is much more difcult if those set-asides are

limited to local companies.

3.Localism and protectionism

78. This critical question—whether sustainability pref-

erences should be focused only on local companies—

carries well beyond MAPS, as we may be on the cusp of a

major turn in public procurement. Sounding the themes

of sustainable development—promoting local industries

to advance social justice, foster economic growth and

reduce environmental damage—new procurement rules

often promote “localism.” Presented as a new mantra in

the world of public procurement, the “local” requirement

is indeed spreading, and in the process it is becoming

another form of protectionism, a micro-protectionism

with a geographical dimension. For the OECD, “local

content requirements (LCRs) are part of a broader set of

‘localisation’ policies that favour domestic industry over

foreign competition, requiring companies and the govern-

ment to use domestically-produced goods or services as

inputs.”

79. The concept of localism is becoming more elabo-

rated, as countries apply it with different meanings, such

as “local development,” “local companies” and “local

employment.” From a spatial, or geographical, point

of view, the concept can denote a global region, such

as the West African Economic and Monetary Union

(WAEMU), and so require preferences for “commu-

nity companies” across a relatively large region. “Local”

may also refer to states versus national governments

in a federal system, or it may mean local governments.

Subnational protectionism has developed, ranging from

the municipal to the regional/county level, which has

led to layers of preferences. In Morocco, for example,

Decree2023 – Article91 states: “This preference is given,

in order of priority, to the offer of the competitor oper-

ating within the territorial jurisdiction of the municipality,

province or prefecture, or region.” (Authors’ translation)

Ultimately, this type of layered localism can create a

maze of preference rules, leading to inefcient purchasing

activities and unnecessarily lengthy and costly processes.

But these provisions illustrate the malleability with which

public procurement law can adapt to public policy, in this

case, a decentralization objective. However, if these rules

result in contracts being reserved for “local” candidates

only, they clearly qualify as direct protectionist measures,

with anti-competitive effects, even when conned to small

contracts that are less attractive to foreign competitors.

V.Conclusion

80.Public procurement is a very efcient tool that can be

instrumentalized to amplify macro-protectionist policies

with political and economic objectives, as seen with

“friend-shoring” and the BABA Act in the United States,

and the BRICs’ closed markets. But, precisely because

of that exibility, public procurement can also be used

to advance other goals while preserving competition.

Sustainable public procurement policies that are gaining

traction worldwide could serve as a model for reconciling

social, economic and environmental goals with compe-

tition, as experience demonstrates that there is room

for reconciling those goals with an effective, competi-

tive procurement system. Measures need to be adjusted

and proportioned, with tailored reciprocity and prefer-

ences, and—whenever possible—without national pref-

erences for their own sake. Although these sustainable

public procurement goals create more complexity, these

measures can help shape sustainable public procurement

in markets around the world. The question, then, will not

be whether protectionism will prevail, but whether social,

economic and environmental goals can be reconciled in

a responsible way with competitive public procurement

markets.

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