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What you need to know: A potential US exit from the Government Procurement Agreement

The WTO’s General Council meets this week. It will hear US gripes about the world trade body and receive proposals to improve it. One of the ‘solutions’ Washington has envisaged for itself is to withdraw from the institution’s Government Procurement Agreement. What would this mean in practice?

What is the WTO Agreement on Government Procurement?

The WTO’s core rules specifically exempt government procurement. In other words, when a government is buying goods or services, it is free to discriminate in favor of local firms, be non-transparent and generally behave how it likes.

The GPA is an agreement between a subset  WTO Members – including the US and EU, but not yet China – to open up some of their government tenders to one another’s firms, under certain conditions.

How the GPA works

The Parties agreed a common set of obligations on issues such as:

  • Not discriminating against foreign tenders or favoring domestic tenders;
  • Publishing tenders online;
  • Being transparent about decision making.

They then each listed the types of procurement these rules would apply to. This generally consisted of several criteria:

  • Types of procurement – e.g. printing services but not military equipment;
  • Government entities – e.g. state and federal agencies, but not local councils;
  • Thresholds – e.g. only tenders for over € 120,000.

What does it mean for me?

It depends. If you’re an exporter, it might mean you can bid for certain tenders in other countries without fear of losing out to a less competitive local firm just because they’re local or the government failed to publicize the tender.

As a tax payer, it means there’s more competition for government tenders and you’re getting greater value for your tax money.

What’s the USTR’s problem with it?

The Trump Administration holds the view that US market power means it will always be the dominant party in any bilateral negotiation. It believes previous US administrations erred in entering into plurilateral and multilateral deals where countries could ‘team up’ to extract more from the US together than any of them could individually.

It appears this evaluation now also applies to the WTO GPA.

The reported USTR view is that the US should withdraw from the GPA and instead negotiate government procurement deals one on one with countries it wants to do business with. In such negotiations, the USTR believes the US power means it could offer less access to its own market, secure more access to others markets, or both.

What would a US withdrawal look like?

The US can withdraw from the GPA by sending the other parties a memo and then waiting 60 days. After that, things start getting interesting.

Once the US is out of the agreement, it’s not obliged to be transparent or non-discriminatory in its government procurement decisions toward the GPA parties, and they aren’t obliged to do so toward US firms.

What’s less clear, is what would actually change.

Pulling out of the GPA doesn’t mean the US has to stop letting GPA partner countries bid for its tenders, it simply means you have the option. Similarly, the US not being in the GPA anymore doesn’t mean a GPA partner country can’t let US firms bid on its tenders (though it may make things more difficult, if the GPA is written into their domestic legislation).

Exactly how the US and the GPA parties will modify their de facto access to one another’s markets following a potential US GPA withdrawal remains uncertain.

I bid on US tenders, how can I tell if my access might be at risk from GPA withdrawal?

The WTO has built an online portal to help you search the GPA.

Alternatively, you can work through the criteria yourself by looking at the tender types you bid for to determine if the government entity that puts them out is covered, and whether they fall under the threshold.

The list of US federal and central agencies covered by the agreement is here.

The list of US state and local agencies covered by the agreement is here.

The most recent thresholds in US $ are here.

 

In his exclusive Borderlex blog series, ExplainTrade founder Dmitry Grozoubinski (@DmitryOpines) takes a relentlessly pragmatic look at the World Trade Organization with one question in mind: “You’re busy, what do you need to know?”

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