Briefing note: Government Procurement Agreement (GPA)

The aim of the Agreement is to open up to international competition as much as possible the government procurement of its Parties.  It is designed to make the Parties' measures regarding government procurement more transparent, and to ensure non-discriminatory treatment with regard to the products, services or suppliers of any Party to the Agreement. At the same time, it provides important flexibilities for developing country Parties to manage their transition to a more internationally competitive government procurement regime.

Participation in the Agreement is entirely optional. Nonetheless, based on an assessment of potential benefits and costs, a growing number of WTO Members are evaluating their options and showing renewed interest in potential accession, recognising the important economic and systemic benefits that accession can bring to them.

There are two key aspects to the accession process: conformity of the acceding member's legislation with the GPA; and agreement with existing parties regarding the entities and sectors of its public procurement that the acceding member wishes to open to international competition.

Governments are not expected to open up all their procurement, and they might specifically exclude some sensitive sectors like defence-related procurement. The disciplines only apply to the entities and sectors, and procurement above financial value thresholds, specified in an Appendix to the Agreement, and which are the result of negotiations.

Typically, the Parties cover entities at all the respective levels of government applicable to them. Goods are covered in principle (for instance, medicines, machinery and associated products, fuels and petroleum products, and textiles products), except as otherwise specified. In addition, a broad range of services and construction services are open to international competition, including:

• Transport infrastructure, such as highways, ports and airports;
• Telecommunication services;
• Computer and related services;
• Financial services; and
• Management consulting and related services.
    

Membership

On September 15 this year, (2011) the Republic of Armenia became the 42nd WTO Member to accede to the Agreement, and from that date became the 15th Party to the GPA (counting the EU and its 27 Member States as one Party).

The current 15 Parties (comprising 42 WTO members) are:

Observers — WTO Members  (those underlined are negotiating accession)

 

The current work at the WTO

1. - Negotiations to improve the Agreement

 The Agreement incorporates a built-in mandate for negotiations to improve the text of the agreement, expand coverage and further eliminate discriminatory measures. These negotiations, which have been on-going since 1997, are close to conclusion.

The first part of the negotiations (i.e. improving the Agreement) has been largely concluded and a revised text is publicly available (see GPA/W/313 and Corr.1). The revised text incorporates important new flexibilities for Parties in terms of procedural commitments, and strengthens the role of the Agreement as a tool of governance in the government procurement sector, with a view to effective and efficient management of public resources. It also provides important new flexibilities for acceding developing countries — and potentially sets the revised Agreement apart as probably one of the best tools for managing the value for money/policy space trade-off in the government procurement sector. Final Provisions and related draft decisions regarding the coming into force of the revised agreement remain to be finalized, although substantial progress has been made in streamlining the text and clarifying relevant options.

The second part of the negotiations (i.e. the coverage or market access-related aspects of the negotiations) is at an intensive stage and closure is within sight. Conclusion of this aspect of and all other aspects of the negotiations will enable the revised text to come into force, while also bringing on board expanded coverage in terms of both the entities and sectors covered. Subsequently, the coming into force of the revised text will also usher in a further round of future work programmes designed to further enhance the relevance of the Agreement by addressing such issues as sustainability, and ways of enhancing the participation of small and medium sized-enterprises in public procurement markets.

Based on the progress achieved to date and in accordance with the “Roadmap” proposed by the Chairman (Nicholas Niggli, of Switzerland), the Committee looks forward to a successful conclusion of all aspects of the negotiations in 2011 on time for a Ministerial decision at the 8th Ministerial Conference to be held in Geneva on 15-17 December 2011.
  

2. - Negotiations for the accession of new members

Nine countries are currently in the process of acceding to the Agreement. Of these, the accession processes of China, Jordan and Ukraine are currently the most active.  The accession process of Jordan is at an advanced stage. China has submitted two offers, and has re-affirmed its commitment to provide a third “robust improved offer” before the end of this year, which is expected to extend coverage to “sub-central” entities (regions, provinces and municipalities). This would set the basis for continuing negotiations with the Chinese authorities. Ukraine launched its accession process in February 2011.
  

Benefits: non-discrimination and increased competition

Whether in times of economic crises or in stable economic environments, accession to and participation in the Agreement provides important benefits for its Parties, their entities and suppliers. These include:

• Potential trade gains based on legally assured access to the covered foreign procurement markets;
• Ensuring a transparent, competitive and predictable government procurement regime, contributing to good governance in this sector;
• Keeping markets open in times of crisis where the temptation for protectionism rises;
• In the context of acceding candidates, facilitating internal policy coordination and harmonization in the government procurement sector;
• Improved public, supplier and investor confidence in the government procurement system, potentially stimulating inbound foreign direct investment;
• Enhanced competition for contracts, leading to improved value for money outcomes;
• Facilitating a more effective and efficient use of public resources.

Ultimately, the GPA provides a useful tool for optimising value for money, governance and trade objectives in the government procurement sector. It should be noted also that participation in the Agreement affords the opportunity to influence the future evolution of the Agreement.
  

Some figures

In most countries the government, and the agencies it controls, are often together the biggest purchasers of goods and services of all kinds, ranging from basic commodities to high-technology equipment, to information and communication services.

• In most countries, government procurement accounts for 15% to 20% of GDP.
• In the European Union it accounts for 17% of GDP (2,088 billion euros).
• The value of the total market access commitments under the GPA has been estimated at US$1.6 trillion in 2008, representing 2.64% of the world's GDP.
• China has indicated that the central government procures more than US$88 billion in goods and services annually, and that its sub-central government level procurement is even more significant.
• The European Union Chamber of Commerce in China, a private sector body, calculates the overall public procurement market in China, including central, sub-central and other government entities, to be worth approximately US$1.02 trillion, representing 20% of China’s GDP.
• In India government procurement has been estimated to constitute about 30% of GDP or US$347.8 billion in 2008.
• In nominal terms the covered procurement markets of some key GPA Parties have grown by up to 300% over a 10 year period to 2006/2007.
    

History

In terms of international trade regulation the concept of open government procurement has evolved over the years.
Government procurement was excluded in the first 30 years of the multinational trading system.

The first GATT disciplines were agreed in 1979 and came into force in 1981 (the Tokyo Round Government Procurement Code).
The current GPA, which entered into force in January 1996, expanded coverage of the Agreement to include sub-central and other government entities such as utilities, as well as services, including construction services.