The main motivation for the development of public procurement in European countries in the second half of the last century was the need for post-war reconstruction. Since 1971, treaties regulating public procurement in EU countries have been adopted.
On the 1st of January, 1981, the Agreement on Government Procurement entered into force. It is one of two currently relevant optional agreements with a limited number of participants. It is optional because it is not necessary to participate in the Agreement in order to join the WTO.
This Agreement contains a list of all procedures and rules governing the conduct of government tenders. Its purpose is to encourage governments of different countries to cooperate not only with domestic, but also with foreign suppliers. For the latter, this has facilitated access to domestic national markets for participation in procurement.

The importance of government procurement for European countries

By the end of the twentieth century, the public procurement system began to work smoothly in both small and large-scale programs – the construction of transport networks, energy complexes, industrial facilities, etc. The development of government tenders contributed to the increase in the number of services provided for different segments of the population, stimulated economic activity in different territories and paved the way for innovation.
Government agencies are the largest customers of various products. It is profitable and beneficial for suppliers to enter into transactions with the state since it not only ensures the development of production, but also expands the market and strengthens a positive image. The need to purchase certain goods provides suppliers with a guarantee that their product is in demand. In its turn, the state is making significant budget savings.
Modern requests require modern solutions – government customers require innovative approaches from suppliers in the production and provision of services. Thus, the restructuring of the economy has a place. The state goes an evolutionary path with suppliers, becomes a witness of their successes and failures, and turns out to be the first buyer of the most modern products and services.
The support of the state has a positive effect on the decision making of manufacturers in terms of using improvements and innovations that perhaps nobody has not applied yet. Innovations are particularly relevant in such areas as energy, pharmaceuticals, transportation, and environmental protection.

Basic principles of the European government procurement system

In European practice, government procurement is based on the following principles:

Transparency – procurement information is publicly available.
Reporting and compliance with legal procedures – following the legislatively regulated procurement algorithm under public control.
Open competition – no discriminatory conditions.
Justice – the equality of all participants.

The echo of protectionism

Support for domestic producers and restricting access to foreign companies was a clear strategic line that distinguished the early stages of the formation of government procurement in EU countries. And even despite the Agreement on Government Procurement, the echoes of this practice are still observed, only on a much smaller scale.
Defenders of the policy of protectionism rightly argue in favor of their opinion – the profit of national producers remains within the state and eventually returns to the budget in the form of taxes. The procurement of foreign products and services is actually the financing of the economies of other countries.
At the conclusion of government contracts, customers prefer domestic suppliers for a number of objective and subjective reasons. An important factor is the lack of a language barrier. After all, problems in understanding can become a serious obstacle when performing, for example, constructional or engineering works of high complexity that require active communication.
Among the objective reasons there are a number of rules in the field of labor remuneration, environmental and health protection and in other areas that have significant differences in different countries.
Support for national participants is made by providing trade preferences. For example, it may be a bonus to national enterprises in case of winning the tender.

The dark side of protectionism

Protectionism has certain negative effects:

obstructing international trade cooperation;
indirect support for uncompetitive companies;
loss of the state budget due to the impossibility of fully satisfying all the needs of the state by means of exclusively national enterprises;
the establishment of high prices for products without any reason as a result of the policy of actual state subsidies to domestic companies.

Protectionism, used by many developed countries to protect national suppliers, served the opposite purpose – there was a decrease in national incomes, countries competitiveness in the international market, and industrial stagnation. The guarantee of receiving the state order deprived the suppliers of motivation for improvement.

The bright side of protectionism

Properly implemented measures of protectionism may be useful in achieving certain goals, for example:

national defense sector supply;
support for certain industry segments;
providing assistance to needy social strata.

Moderate protectionism, combined with the implementation of the main principles of government procurement, will have a positive economic effect and will become an effective procurement tool.