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GOVERNMENT PROCUREMENT: GENERAL OVERVIEW

General overview of WTO work on government procurement

A well-regulated government procurement system, embodying the principles of transparency and non-discrimination, helps to ensure optimal value for money in public purchasing, and also facilitates international trade.

The WTO’s work in the area of government procurement has three dimensions, which are discussed below.

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I.   Introduction    back to top

Government procurement is of considerable economic significance at both the domestic and international levels, accounting for a significant proportion of national GDP. At the domestic level, the procurement of goods and services by government agencies provides needed inputs that enable governments to deliver public services and fulfil other tasks. Procurement systems have a significant impact on the efficiency of the use of public funds and, more generally, on public confidence in government and on good governance. The attainment of value for money, public access to information on government contracts, and fair opportunities for suppliers to compete for government contracts, are all essential requirements of an efficient government procurement system.

As public procurement of goods and services represents a major part of a country's market for foreign suppliers, government procurement is also of great importance to international trade flows, and government procurement markets are of interest to foreign suppliers as well as domestic suppliers. In this respect, the principles of transparency and fair and effective competition identified above, are equally relevant in the international context. Nonetheless, in the past, government procurement has been effectively excluded from the application of the main multilateral trade rules under the GATT and the WTO. In the General Agreement on Tariffs and Trade, originally negotiated in 1947, government procurement was explicitly excluded from the key national treatment obligation. More recently, government procurement has also been excluded from the main market access commitments of the General Agreement on Trade in Services.

Over the years, GATT and WTO Members have therefore been seeking ways to address the issue of government procurement in the multilateral trading system. This has resulted in three main areas of work:

(a)   the plurilateral Agreement on Government Procurement (the so-called “GPA”);

(b)   negotiations on government procurement in services pursuant to Article XIII:2 of GATS; and

(c)   the work on transparency in government procurement in the Working Group established by the Singapore Ministerial Conference in 1996.

II.   Main aspects of the government procurement work in the WTO    back to top

The three main areas of WTO’s work on government procurement complement each other, however, they also show some significant differences. Each area of work has its distinctive characteristics, for instance, in terms of the type of work carried out, main principles, scope of application (coverage), and nature of participation by WTO Members. These are summarised in the following table:

* On 1 August 2004, the General Council decided, as part of the “July Package”, that no work would be done toward negotiations on this subject as part of the Doha Round. See also below.
  

III.   The plurilateral Agreement on Government Procurement    back to top

A.   Brief background to the development of the GPA

Early efforts to bring government procurement under internationally agreed trade rules were undertaken in the OECD framework. This matter was brought into the ongoing Tokyo Round of Trade Negotiations in 1976. As a result, the first Agreement on Government Procurement was signed in 1979 and entered into force in 1981. It covered central government entities and procurement of goods only. It was amended in 1987, with this amended version entering into force in 1988.

In parallel with the Uruguay Round, Parties to the Agreement held negotiations to broaden the coverage of the Agreement to purchases by sub-central government entities and other public enterprises and to the services and construction services sectors. Following these negotiations, the Agreement on Government Procurement (1994) (‘GPA’) was signed in Marrakesh on 15 April 1994, at the same time as the Agreement Establishing the WTO.

The GPA entered into force on 1 January 1996. It led to an estimated ten-fold increase in the value of procurement subject to international competition under its rules, as compared to the approximate annual value, between 1990 and 1994, of US$30 billion of covered procurement under the Tokyo Round Agreement. The value of coverage has expanded considerably since then, with economic growth, inflation and the expansion of the coverage and membership of the Agreement. In December 2011, a decision on the outcomes of the re-negotiation of the Agreement, which had been on-going for more than a decade, was taken at Ministerial level in Geneva. This political decision was confirmed, on 30 March 2012, by the formal adoption of the Decision on the Outcomes of the Negotiations under Article XXIV:7 of the Agreement on Government Procurement (GPA/113).
 

B.   The nature and content of the Agreement

The GPA is a plurilateral agreement under the WTO Agreement, meaning that not all Members of the WTO are bound by it. The Agreement en compasses provisions relating to:

• national treatment and non-discrimination for the suppliers of Parties to the Agreement with respect to procurement of covered goods, services and construction services as set out in each Party’s schedules (“Appendix I”) and subject to various exceptions and exclusions that are noted therein;

• transparency and procedural aspects of the procurement process, in general, designed to ensure that covered procurement under the Agreement is carried out in a transparent and competitive manner that does not discriminate against the goods, services or suppliers of other Parties;
• transparency of procurement-related information;
• modifications and rectifications of Parties’ coverage commitments;
• the availability and nature of domestic review procedures for supplier challenges which must be put in place by all Parties to the Agreement;
• the application of the WTO Dispute Settlement Understanding in this area.
• accession to the Agreement of further WTO Members; and
• a “built-in agenda” for improvement of the Agreement, extension of coverage and elimination of remaining discriminatory measures through further negotiations.

Currently, the GPA is the main instrument in the WTO that provides a framework for the conduct of international trade in government procurement markets among the participating countries. Additionally, it can be considered to serve broader purposes relating to good governance and the attainment of value for money in national procurement systems.
 

C.   Parties and Observers to the Agreement

Currently, forty-two WTO Members are covered by the WTO Agreement on Government Procurement. These comprise: Armenia, Canada, the European Communities, including its 27 member States; Hong Kong, China; Iceland; Israel; Japan; Korea; Liechtenstein; the Kingdom of the Netherlands with respect to Aruba; Norway; Singapore; Switzerland; Chinese Taipei and the United States.

Twenty-two other WTO Members have observer status under the Agreement.

These are: Albania, Argentina, Australia, Bahrain, Cameroon, Chile, China, Colombia, Croatia, Georgia, India, Jordan, the Kyrgyz Republic, Moldova, Mongolia, New Zealand, Oman, Panama, Kingdom of Saudi Arabia, Sri Lanka,Turkey and Ukraine. In addition, four intergovernmental organizations, namely the International Monetary Fund (IMF), the International Trade Centre (ITC), the Organization for Economic Co-operation and Development (OECD), and the United Nations Conference on Trade and Development (UNCTAD) also have observer status in the WTO Committee on Government Procurement, which administers the Agreement.
 

D.   Accession to the Agreement

Accession to the Agreement on Government Procurement is open to all WTO Member governments (Article XXIV:2). The process of accession involves negotiations on coverage issues (in particular, on the “Appendix I offer” of the acceding Party) and verification of the consistency of the acceding Party’s national legislation with the norms and requirements of the GPA(2).

Currently, nine WTO Members are in the process of acceding to the Agreement on Government Procurement: Albania, China, Georgia, Jordan, the  Kyrgyz   Republic, Moldova, Oman, Panama and Ukraine. In addition, a further six WTO Members have provisions in their respective Protocols of Accession to the WTO with regard to accession to the Agreement. These additional Members are: Croatia, the Former Yugoslav Republic of Macedonia (FYROM), Mongolia, Montenegro, the Russian Federation and Saudi Arabia.

> More on the Plurilateral Agreement on Government Procurement (GPA)

IV.   Negotiations under GATS Article XIII    back to top

Article XIII:1 of the General Agreement on Trade in Services (GATS) provides that government procurement of services is subject neither to the most-favoured-nation requirement of the GATS (Article II) nor to specific commitments on market access (Article XVI) and national treatment (Article XVII). WTO Members are consequently not subject to any obligations on market access or non-discrimination in the field of government procurement of services under the GATS at this time. Paragraph 2 of Article XIII then goes on to say that there shall be multilateral negotiations on government procurement in services within two years from the date of entry into force of the Agreement.

A Working Party on GATS Rules was established by the Council on Trade in Services in March 1995 to carry out, among other tasks, the negotiating mandate contained in the GATS on government procurement in services. GATS Article XIII:2 does not specify an end date for the negotiations. However, the Guidelines and Procedures for the Negotiations on Trade in Services, adopted by the Special Session of the Council for Trade in Services in March 2001(3), provide that Members shall aim to complete the negotiations in various rule-making areas, including those pursuant to Article XIII, prior to the conclusion of the Doha Round negotiations on specific commitments.

WTO Members hold different views with respect to the scope of the mandate for negotiations contained in Article XIII. Some Members take the view that negotiations under this mandate can involve market access and non-discrimination as well as transparency and other procedural issues. Other Members do not share this interpretation, considering that Article XIII excludes MFN treatment, market access and national treatment from the scope of the mandated negotiations.

The Ministerial Declaration issued by the Hong Kong Ministerial Conference in December 2005 included the following provision regarding the work on government procurement mandated in the GATS: “Members should engage in more focused discussions and in this context put greater emphasis on proposals by Members, in accordance with Article XIII of the GATS”(4).

> More on GATS negotiations on services procurement

V.  Working Group on Transparency in Government Procurement    back to top

At the 1996 Singapore Ministerial Conference, Ministers decided to set up a Working Group to conduct a study on transparency in government procurement practices, taking into account national policies and, based on this, to develop elements suitable for inclusion in an appropriate agreement(5).

The Working Group on Transparency in Government Procurement which was established to carry out this mandate began its work in 1997 by examining the transparency-related provisions in existing international instruments and national practices. It then developed and carried out a study of twelve issues (twelve so-called ‘Items on the Chairman’s Checklist of Issues’(6)) relating to a potential agreement on transparency in government procurement(7), spanning the following four broad subject-areas:

(i)     the definition of government procurement and the scope and coverage of a potential agreement;

(ii)    the substantive elements of a potential agreement on transparency in government procurement, including various aspects of access to general and specific procurement-related information and procedural matters;

(iii)   compliance mechanisms of a potential agreement; and

(iv)   issues relating to developing countries, including the role of special and differential treatment as well as technical assistance and capacity building.

> More on the Working Group on Transparency in Government Procurement
  

At the Doha Ministerial Conference held in November 2001, Ministers recognised the case for a multilateral agreement on transparency in government procurement and agreed that negotiations would take place after the Fifth Ministerial Conference “on the basis of a decision to be taken, by explicit consensus, at that Session on modalities of negotiations”(8). The Ministerial Declaration further stated that “negotiations shall be limited to the transparency aspects and therefore will not restrict the scope for countries to give preferences to domestic supplies and suppliers”(9).

No agreement on modalities for negotiations was reached at the Fifth Ministerial Conference, held in Cancún in September 2003.

On 1 August 2004, the WTO General Council adopted a decision, which addressed, inter alia, the future handling of the issue of transparency in government procurement, as well as the issues of the relationship between trade and investment and the interaction between trade and competition. The Council agreed that “those issues will not form part of the Doha Work Programme and therefore no work towards negotiations (...) will take place within the WTO during the Doha Round”(10). The decision does not indicate what might occur, if anything, following the completion of the Doha Round.

VI.  Technical Co-operation and special and differential treatment    back to top

In the GPA, a separate Article governs special and differential treatment for developing countries, technical assistance and capacity building. For instance, developing countries are entitled to retain specifically negotiated offset schemes in their procurement processes following accession to the Agreement. The special and differential treatment provisions have been clarified and in some respects extended in the provisionally agreed text for a revised Agreement, with a view to making the Agreement more attractive and accessible for developing and least-developed countries.

In line with the Doha Ministerial Declaration, which highlighted the need to “take into account participants’ development priorities, especially those of least-developed country participants”, the Working Group on Transparency in Government Procurement discussed extensively the development implications of a possible agreement in this area. The Doha mandate also recognised the need for enhanced technical assistance and capacity building and contained a commitment to provide such assistance both during any negotiations and after their conclusion.

The WTO Secretariat undertakes a substantial programme of technical assistance (TA) activities in the area of government procurement, pursuant to the overall Secretariat Technical Assistance Plan(11). This is often done in co-operation with other international organizations, regional bodies, expert bodies from WTO members, and academic institutions. These activities are of four broad categories: regional workshops; a workshop focused on the GPA (usually Geneva-based); the government procurement element of wider WTO technical co-operation programmes, such as the trade policy courses; and national seminars on government procurement at the request of interested WTO Members.

The broad objectives of these activities are:

(i)   to enhance participants’ awareness of key concepts and principles in the area of government procurement;
(ii)  to familiarize them with relevant WTO activities and instruments including the Agreement on Government Procurement; and
(iii) to facilitate policy development and decision making in this area at the national and regional levels.

The regional workshops cover, over each 2-year cycle, all developing country and transition economy regions. These workshops address government procurement as it relates to trade more widely, including developments in the regions and at the national level. Regional activities have been undertaken respectively, for:

(i)     Arab and the Middle East countries;
(ii)    Asia—Pacific countries;
(iii)   Caribbean countries;
(iv)   Central and Eastern Europe and Central Asian countries;
(v)    English-speaking African countries;
(vi)   French-speaking African countries; and
(vii)  Latin American countries.

These workshops deal with both the Agreement on Government Procurement and broader aspects of the procurement process.

The GPA workshop is held in Geneva annually for the benefit of GPA accession candidates, observers and other interested WTO Members. This workshop differs from the regional activities in that it has a particular focus on the GPA itself, and is tailored particularly to the interests of WTO Members that are in the process of acceding to the GPA, have made commitments to eventually seek accession to the Agreement or otherwise wish to learn more about it.

National seminars on government procurement are organised by the Secretariat at the request of and for the benefit of individual WTO Members. The national seminars have the benefit that they can be tailored to the particular needs of the requesting WTO Member and that they can be open to more national participants.

The Secretariat’s TA programme in the area of government procurement involves significant cooperation with other international organizations, regional bodies, expert bodies from WTO members, and academic institutions. Such organizations and bodies have included the World Bank, UNCITRAL, the OECD and the national governments of several WTO member and observer countries in the relevant regions, and other institutions.

> For more information see the webpage on technical cooperation

Footnotes:     back to top

1   See document GPA/W/297 of 11 December 2006.
2    For relevant documents concerning the Accession process see GPA/1, Annex 2; GPA/35 (Checklist of Issues for Provision of Information Relating to Accession to the Agreement); GPA/W/109/Rev.2 (Indicative Time-frame for Accession Negotiations and Reporting on the Progress of Work); and GPA/87 (Modalities for Accession to the Agreement on Government Procurement, which deals with nomenclature and other terminology of separate customs territories acceding to the Agreement). back to text
3   S/L/93 of 29 March 2001. back to text
4   WT/MIN(05)/DEC of 22 December 2005, Annex C, “Services”, paragraph 4(b). back to text
5   Singapore Ministerial Declaration, WT/MIN(96)/DEC, para. 21. back to text
6   See List of Issues Raised and Points Made, Informal Note by the Chair (Job(99)/6782). back to text
7   See Work of the Working Group on the Matters Related to the Items I-V of the List of the Issues Raised and Points Made (WT/WGTGP/W/32) and Work of the Working Group on the Matters Related to the Items VI-XII of the List of the Issues Raised and Points Made (WT/WGTGP/W/33). back to text 8   Doha Ministerial Declaration, WT/MIN(01)/DEC/1, para. 26. back to text
9   Id. back to text
10   Doha Work Programme, Decision Adopted by the General Council on 1 August 2004, WT/L/579, para. 1(g). back to text
11   Technical Assistance Plan, for 2007 see documents WT/COMTD/W/151 and Corr.1. back to text