U.S. punishes 9 countries in Europe Firms are forbidden to bid on contracts

May 28, 1993|By New York Times News Service

Following through on a public pledge last month, the Clinton administration released regulations yesterday that will ban companies from nine European countries from bidding for federal government contracts for legal services, certain telephone services and other services.

The ban, which takes effect today in retaliation for new European Community rules that discourage sales of U.S. telecommunications equipment there, covers $29 billion a year worth of contracts, said an American official who insisted on anonymity.

But because many of the services are local, such as operating airport concessions, European companies won an average of only $20 million a year worth of these contracts from 1989 through 1991, the official said.

U.S. Trade Representative Mickey Kantor announced last month that the new regulations would be issued after talks with the European Community failed to resolve the dispute. But a similar dispute over European rules on electrical power-generation equipment was resolved in April, and the sanctions yesterday cover only half as many contracts as Mr. Kantor had originally threatened.

Even so, Sir Leon Brittan, the EC's commissioner for external economic affairs, criticized the move.

"I greatly regret the U.S. decision," he said in a statement. "In view of the progress we have made, notably on public procurement, it is neither justified, wise nor necessary."

Sir Leon issued a thinly veiled threat that the community might retaliate but stopped short of saying that it was willing to risk a broader confrontation by abandoning 112-nation global free-trade talks that began nearly seven years ago in Punta del Este, Uruguay.

"We are not going to allow this issue to delay or frustrate the progress we are making in the Uruguay Round, nor let it poison the atmosphere, but the U.S. cannot expect us to ignore wholly unjustified action of this kind," he said.

There are 12 countries in the European Community. The American sanctions apply to only nine of them because Greece, Portugal and Spain have agreed to give American companies access to their markets for telephone company equipment.

The likelihood of actual counter-retaliation is unclear.

The current dispute began several years ago, when the European Community drafted new regulations for government purchases of telecommunications and electrical power generation equipment, to take effect Jan. 1 of this year.

The new rules, which replaced more restrictive government procurement rules in each of the 12 member countries, allow European utilities to reject bids from non-European companies on two grounds: If less than half their goods are made inside the community, or if a European company submits a bid that is up to 3 percent more expensive.

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