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The WTO’s Government Procurement Agreement

The Government Procurement Agreement (GPA) is a plurilateral treaty that commits members to certain core disciplines regarding transparency, competition and good governance in one of the most important and fast-growing areas of the economic activity of any country. It covers the procurement of goods, services and capital infrastructure by public authorities.

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.

Currently, 42 WTO members have signed up to the Agreement. A number of other WTO members are showing interest in signing the Agreement, recognising the important economic benefits that accession can bring.

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, such as defence-related procurement. The disciplines only apply to the entities and sectors and financial thresholds agreed to by each member and specified in an appendix to the Agreement.

Typically, parties to the Agreement cover entities at all the respective levels of government applicable to them. Goods such as medicines, machinery and associated products, fuels and petroleum products, and textiles products are covered unless specified otherwise. In addition, a broad range of services, such as construction services, are open to international competition, including:

• transport infrastructure, such as highways, ports and airports
• telecommunication services
• computer and related services
• financial services
• management consulting and related services.
    

Membership

On 15 September 2011, Armenia became the 42nd WTO member to accede to the Agreement, becoming 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)

Observers — WTO Members (including those negotiating accession)

  
Negotiations to improve the Agreement

The Agreement incorporated a built-in mandate for negotiations to improve the text of the Agreement, expand coverage and further eliminate discriminatory measures. These negotiations, started in 1997, have now been completed.

On 15 December 2011, just before the start of the WTO 8th Ministerial Conference, negotiators reached a political agreement. The adoption of the revised Agreement took place on 30 March 2012, following a final legal review.

Revised text of the Agreement
The revised text includes a complete revision of the provisions of the Agreement with a view to making them more user-friendly. The provisions have also been updated to take into account developments in current government procurement practice, including the role of electronic tools in the procurement process.

Additional flexibility has been built in on some points, for example shorter time-periods for procuring goods and services available in the commercial market place. Special and differential treatment for developing countries has been more clearly spelled out, in a manner that it is intended to facilitate future accessions by such countries.

Attention has been given to such questions as domestic review procedures for supplier challenges and the rules for modification of the coverage lists of parties. The GPA parties have agreed that the new text should be used as the basis for accession negotiations with countries wanting to join the GPA, even before formal entry into force of the revised Agreement. The GPA will enter into force when two-thirds of participants have ratified it.

Extension of the coverage of the Agreement
The negotiations have resulted in a significant extension of the coverage of the Agreement (which will be effective after the entry into force of the revised Agreement). These gains in market access have been provisionally estimated by the WTO Secretariat as in the range of US$ 80 billion to US$ 100 billion annually.

They result from lower thresholds and additions of new entities and sectors to the existing parties’ schedules of commitments. For example, three major parties will provide new coverage of so-called “build-operate-transfer” agreements. One party has agreed to cover all of its provinces and territories. The other parties to the Agreement have collectively included at least 300 additional entities in their schedules of commitments. 

Additional services coverage has been added by various parties, and two parties have agreed to reduce their thresholds for procurement by central government entities.
  

Negotiations for the accession of new members

Nine countries are currently in the process of acceding to the Agreement. Of these, China, Jordan and Ukraine are currently the most active in their accession process.  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 2012, 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

Accession to 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 is on the rise
• 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
• 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. 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 the biggest purchasers of goods and services of all kinds, ranging from basic commodities to high-technology equipment.

• 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 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 grew by up to 300% over a ten-year period to 2006-07.