Bridges Weekly Trade News DigestVolume 15Number 35 • 19th October 2011

Finish Line “Clearly in Sight” for WTO Govt Procurement Deal: Chair

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Forty-two countries are close to finalising a deal that would liberalise access to billions of dollars worth of public procurement contracts, the chair of the WTO committee on government procurement said yesterday. Delegations are being urged to finish negotiations by the global trade body’s December ministerial.

Senior Swiss trade diplomat Nicholas Niggli, who chairs the committee, stressed to delegates at the end of the 17-18 October informal committee meeting that participating countries should aim to conclude the talks by the WTO’s December gathering. He cautioned that, should members fail to meet the deadline, the talks could “crumble” entirely.

A Geneva-based trade official told Bridges that, while not guaranteed, the “prospects [for finishing by December] are very good.”

With the global trade body’s Doha Round of trade talks struggling to make headway, the pressure is on to achieve concrete outcomes in other areas - including, potentially, a finalised version of the new Government Procurement Agreement (GPA) at the December WTO gathering.

The GPA aims to tackle cronyism and corruption in government contracts. The agreement commits members to certain core disciplines regarding transparency, competition, and good governance, covering the procurement of goods, services, and capital infrastructure by public authorities.

An earlier version of the agreement took effect in 1996, and was negotiated during the Uruguay Round of trade talks that ended in 1994.

The current talks seek to renegotiate the 1996 version of the agreement and negotiate accession for several WTO members, particularly China.

The actual revised text for the Agreement has been mostly complete since governments provisionally agreed on revised GPA text in December 2006; however, parties to the pact still need to finalise plans for expanding coverage.

Coverage, when speaking of the GPA, involves what range of government procurements - in terms of the entities or sectors covered - are subject to the rules of the Agreement.

In most countries, government procurements account for 15 to 20 percent of gross domestic product (GDP). Acceding to the GPA means governments have to give up the ability to direct certain types of purchases to domestic firms - a mechanism that is otherwise traditionally used when needing to promote particular economic sectors.

As recompense for relinquishing this option, these countries’ companies are given access to the types of public tenders covered by the GPA in all countries that are parties to the agreement. Not all types of public procurement are covered by GPA, however. Each participating party, in acceding to the agreement, made a detailed offer that outlined which public purchases of goods and services would be available for competition from other GPA parties.

A WTO working paper released earlier this month found that the total value of additional market access commitments that could result from GPA accession from 42 WTO members and some others could well be in the range of US$ 380 billion to US$970 billion annually.

If the Agreement were to eventually include the BRICS countries - Brazil, China, India, Russia, South Africa - that by itself would add in the range of US$233 billion to US$596 billion to that value, the study found. However, China is currently the only one of these seeking to join GPA, and Russia is not yet a WTO member.

New accord to reflect “21st century” realities

After the informal meeting of the GPA committee, Niggli told delegates that the Agreement’s text has seen large improvements, so that it “reflects the realities of government procurement in the 21st century.”

Much of the impetus for modernising the GPA is to ensure the agreement reflects technical changes that have occurred since the original pact’s negotiation in 1994. For instance, at the time online advertising was rarely used to solicit and receive tenders for public projects; electronic procurement has since become commonplace.

Market access gains for existing membership under the renegotiated agreement are expected to cover more than 200 new ministries, government agencies, and other entities across the Agreement’s membership. These gains will also include full coverage of construction services by all parties for the first time; expanded coverage of goods and services by all parties; new coverage of public works concessions by four parties; and reductions by several parties in thresholds applied under the previous Agreement.

US, EU, Japan working out differences

Ninety-five percent of negotiating pairs in the talks are now said to be settled - or close to a settlement - with one another with regards to the market access element of the negotiations.

However, sources close to the talks stressed to Bridges, “95 percent is still not 100 percent - the last steps have to be taken by the big three: the US, EU, and Japan.”

“Even amongst those three,” the source continued, “it’s not like we’re starting at zero.” The three parties are negotiating intensely, and have all declared their intention of being done in time for the December gathering, the official added.

The EU has had difficulty finding agreement with the US and Japan regarding the two countries’ proposals for coverage of future commitments on liberalised public procurement, and the US and Japan with the EU’s proposal.

“The EU was very ambitious in this negotiation… in the sense of wanting to extend coverage” substantially, sources told Bridges. The other two parties were slightly less so, and the three are now working to even out their respective goals.

Historically, the EU has believed its coverage under the GPA to be broader and more comprehensive than that of the US, asking US to reciprocate; Washington has responded with metrics that say its own public procurement is more open (see Bridges Weekly, 16 March 2011).

Possibilities of membership expansion

The results of recent negotiations has led to improved transitional measures for developing countries seeking accession, along with greater flexibility for all parties, Niggli told delegates. Most of those that have, to date, acceded to the agreement are developed countries.

Unlike the Doha Round, the GPA only applies to those members who have acceded to the agreement; to date, 42 members have acceded, including the US and the EU’s 27 member states. Armenia was the most recent WTO member to join, acceding to the agreement in September of this year.

Nine other WTO members have applied for accession to the GPA: Albania, China, Georgia, Jordan, Kyrgyz Republic, Moldova, Oman, Panama, and Ukraine. Of these nine, the most active processes are those of China, Jordan, and the Ukraine.

Jordan’s process is said to be at an advanced stage, and China has submitted multiple offers and re-affirmed its commitment to provide a “robust improved offer” before year’s end.

While sources close to the talks do not expect China’s accession to be concluded by the end of the year, they do expect a “significant milestone” by late November or early December - specifically, the above-mentioned revised offer.
This offer would outline China’s proposal for which Chinese government agencies would be covered under the agreement, what thresholds would apply, and other coverage-related details. The submission of this new offer is expected to be “quite well received by the parties,” officials say.

Meanwhile, four members - Croatia, Macedonia, Mongolia, and Saudi Arabia - have agreed to provisions in their WTO accession protocol that call for them to eventually seek GPA accession.

Some members without prior obligation to join the GPA are also said to be evaluating whether it is in their favour to join the agreement. Acceding to the GPA requires consensus among the current parties to the Agreement on the terms of accession offered by the party seeking to join.

Work programmes nearly finalised

The committee has also developed a set of future work programmes for after the GPA renegotiation is done and the revised text has taken effect. These work programmes are said to be nearly finalised; these would cover the treatment of small and medium-sized enterprises (SME), sustainability, and statistics, among other issues.

The SME work programme would deal with comparative approaches to SMEs, and would involve a transparency mechanism for countries to explain their SME support measures, a trade official told Bridges.

The sustainability work programme would cover areas such as green procurement, reviewing the Agreement to “illustrate the way it supports environmental values and compare experiences,” the same official explained.

Next steps

Another meeting of the GPA committee is currently set for the week of 28 November. At yesterday’s meeting, Niggli asked all delegations to prepare final offers for the same week, urging that those offers be pre-tested with the relevant delegations.

In the meantime, delegations have been asked to make some final market access concessions; reciprocate the current concessions on the table and ones that will soon be put forth; expand coverage as compared to commitments made under the existing GPA - and revise any offers that currently involve backtracking on concessions from the prior agreement - and then bring all of these elements together quickly.

With the 15-17 December ministerial set as a deadline, Niggli stressed that “it should be obvious that the approach I have outlined leaves almost no slippage time. There is, therefore, a heavy onus on you to move swiftly to a conclusion.”

“Given how close we are to the finish line, if we fail to meet our responsibilities, the judgment of history will be harsh, to say the least,” he added.

ICTSD reporting.

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