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Government Procurement Summary Papers Links

Government Procurement Summary

Government Procurement of goods and services typically accounts for 10-15% of GDP for developed countries, and up to as much as 20% of GDP for developing countries. In an attempt to harness this significant portion of the international economy, WTO members signed the plurilateral (only binding to WTO members who choose to sign) Agreement on Government Procurement (GPA) at the Uruguay Round in 1994. The agreement was based on the 1979 Tokyo Round government procurement agreement. Currently, there are 26 signatories, including Canada, the EU, the United Kingdom and the United States.[1] The rest of the signatories are predominantly developed countries. [2]

The intention of the GPA is to ensure that government decisions regarding government purchases of goods and services do not depend upon where the good is produced or the service rendered, nor upon the supplier's foreign affiliations. The GPA signatories' initial step in establishing this "non-discrimination" was to create a working group at the 1996 Ministerial Conference in Singapore to investigate government procurement transparency. All WTO members were represented in this working group.

The Working Group on Transparency in Government Procurement examines questions such as: does a particular government publish the criteria upon which it bases its procurement decisions? Does it publish the opportunities for procurement so that all suppliers know about them? Does it encourage competition among potential suppliers? After investigating these questions and others, the working group will try to create policies to open competition for government contracts.

Many countries place restrictions on government procurement of both goods and services for a variety of reasons. Some will do so to encourage domestic industry, though many developing countries have limited domestic service industries, and turn to foreign service providers as a result. Several developed countries would like to see the GPA become a multilateral agreement. Such a step would increase market opportunities for their own firms, allowing them to bid for foreign government purchases on a "level playing field." The most vocal proponents of a multilateral GPA are the U.S. and E.U.

Proponents of a multilateral GPA also see it as part of a "good governance" agenda for the developing world - the more transparent procurement processes are, they argue, the less opportunity there will be for corruption and rent-seeking on the part of domestic governments and suppliers.[3]

While these countries hope for a multilateral GPA in the future, opposition to a multilateral agreement comes from several developing countries (particularly India, Pakistan and Egypt) and relief organizations, such as Oxfam.[4] These parties see the opening of government procurement not as a way to gain a "level playing field," but rather as a situation in which developing and least developed countries are likely to lose ground to expanding industrial countries. The developing countries and relief organizations fear that the growing industries of developing nations will be at a disadvantage if large and established foreign companies are allowed to bid for government contracts alongside their own domestic firms, leading to balance of payments problems.

In addition, other opposing countries cite government procurement laws as a restraint on their ability to address certain non-trade issues, such as the environment, ecolabelling, and human rights issues. Currently, if a government has certain labor standards, for example, it may discourage human rights violations in the workplace by only purchasing from firms that meet their standards. Such countries argue that if government procurement laws would eliminate their discretion in deciding similar matters, and labor standards and environmental protection, among other things, would fall.



[1] Evenett, Simon J., "Multilateral Disciplines and Government Procurement," in English, Philip, Bernard M. Hoekman, and Aaditya Matto (Eds.), Development, Trade and the WTO, Geneva: World Trade Organization, 2002, p. 423. [online: web] URL: http://publications.worldbank.org/catalog/content-download?revision_id=1526178

[2] Evenett, Simon J., "Multilateral Disciplines and Government Procurement."

[3] See, for example, WTO, "Moore welcomes Oxfam report but cites omissions and errors," Geneva: World Trade Organization, 11 April 2002, [online: web] URL: http://www.wto.org/english/news_e/pres02_e/pr285_e.htm

[4] See Oxfam speech at oxfam.org.uk/wto/speech.htm.


Last updated February 2003