Say “no” to domestic products discrimination
- Source: Global Times
- [22:02 June 11 2009]
- Comments
By Ma Guangyuan
In the end of May, foreign companies lost their bid for a package of 25 wind turbine orders worth more than $7.03 billion (48.02 billion yuan) in China.
Joerg Wuttke, president of the European Union Chamber of Commerce in China, criticized the Chinese government of deliberately ruling foreign suppliers out of contracts under its 4 trillion yuan ($585.13 billion) stimulus package. He also expressed his concern that the bidding criteria set by the Chinese government made it difficult for foreign suppliers to win.
It is not Wuttke’s comments, but the response of the National Development and Reform Commission of China (NDRC) that surprises us.
On June 1, an NDRC spokesperson said that during the bidding and purchasing process for equipment manufacturing in China, discrimination against domestic equipment is actually more prominent.
It is believed that EU has no right to accuse China of discrimination since it never acknowledges the status of China’s market economy. Besides, China has gone on several buying trips to the EU to demonstrate good will. It is unfair to accuse the Chinese government of discrimination based on a simple bidding loss.
The economic stimulus package mainly consists of central and regional public finance.
According to China’s Government Procurement Law (GPL), the expenditure of 4 trillion yuan is within the scope of government purchase, and it is an international practice to give preference to domestic goods in government procurement.
For instance, for the US, the Buy American Act of 1933 clearly states that the US government must give preferential treatment to US-made goods in its purchases, and that federal funds used for public works such as highways should also give preferential treatment to domestic goods.
The EU has similar provisions of government procurement. For example, projects over 5 million euros ($6.99 million) and goods and services over 200,000 euros ($ 279,909) must be conducted within the EU; government procurement of foreign products should be accompanied by a corresponding trade remedy to avoid harm to domestic industries.
China’s GPL clearly states the preference for domestic goods in Article 10.
The government shall procure domestic goods, construction and services, except in one of the following situations: (i) where the goods, construction or services needed are not available within the territory of the People’s Republic of China or, though available, cannot be acquired at reasonable commercial terms; (ii) where the items to be procured are for use abroad; and (iii) where otherwise provided for by other laws and administrative regulations.
In other words, it is an international practice to put priority on domestic products in government procurement. Instead of being regarded as a policy of trade protectionism or discrimination, China’s preference for domestic products is a necessary step for industrial upgrading and equipment enhancement.
However, some Chinese government agencies always treats domestic products unfairly in the procurement process by giving preference to foreign equipment, projects, goods and services. The explicit favor of foreign brands, regardless of price or quality, is a violation of the
GPL’s spirit of protecting domestic industries.
The NDRC brought this issue up previously, but it was not taken seriously. In this sense, we should appreciate Wuttke’s efforts to make us aware of the severe discrimination against domestic products
in China’s government procurement.
The gigantic stimulus package is a critical step on China’s way to economic restructuring and transformation.
Since China is not yet a member of the Government Procurement Agreement, the preference for Chinese goods does not violate WTO regulations, nor does it constitute discrimination or protectionism.
As the EU and the US are urging China to join the agreement, we should make good use of this time lag to protect domestic industries and brands though government procurement.