WTO members in final push on procurement deal

GENEVA Tue Oct 12, 2010 6:35pm IST

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GENEVA (Reuters) - Trading powers are in a final push to liberalise the market for purchases by public authorities worth hundreds of billions of dollars a year as they seek to lock China into the global procurement system.

The talks are separate to the World Trade Organization's long-running Doha round to free up global trade but could arguably have a much bigger impact on businesses.

Government procurement has moved centre stage after the economic crisis put public infrastructure spending at the heart of economic stimulus packages, while U.S. "Buy American" policies and similar measures in other countries have raised fears of protectionism in the sector.

And the huge infrastructure needs and projects of emerging economies have raised the prospect of lucrative new markets opening in an area so far dominated by rich nations.

Diplomats at the WTO say a new government procurement agreement (GPA), or at least its outlines, could be concluded this year and talks to bring in new members have gathered pace.

"Our objective is to wrap up the revision as soon as possible and continue to work closely with China and others as they enter the process of accession," Robert Kasper, a U.S. trade diplomat to the WTO, said at a forum last month.

TRILLIONS IN PUBLIC SPENDING

Reliable figures on how much is at stake are hard to come by, but deputy U.S. Trade Representative Demetrios Marantis said in July that procurement accounts for 10-15 percent of GDP in most countries and the global market was worth $1.6 trillion in 2008, including more than $1 trillion in the United States.

The European industry lobby BusinessEurope said in February the value of public procurement potentially open to international trade was $2.1 trillion.

The GPA is a voluntary agreement of 41 of the WTO's 153 members, including the United States, the European Union, Canada and Japan. Taiwan joined last year and China is expected to join at some stage.

It sets out transparent rules for public contract tenders to ensure that domestic suppliers are not favoured unfairly over bidders from other parties to the agreement.

Those countries plan to negotiate an expansion of the agreement in the next few months, starting this week with a two-day meeting of the WTO's government procurement committee.

The text of the original 1994 agreement has already been updated, to take into account new developments such as electronic procurement tools and spelling out transitional measures available to developing countries that sign up.

But it will not take effect until members agree on expanding what is covered by the agreement, such as which government entities -- national, local or public utilities -- are included.

The extent to which contracts from state-owned companies will be included is of growing importance as China, Ukraine and Saudi Arabia prepare to join the agreement.

The European Union has been the most ambitious in seeking an expansion, as it wants access to contracts from the states or provinces in the U.S. and Canada, and to Japanese Railways.

The United States and Canada also want to expand the deal, but to a lesser extent than the European Union.

The EU made an offer in 2005 that it says would have opened an additional 340 billion euros ($475 billion) of procurement to foreign bidders. But after a disappointing response the EU made a revised offer, cutting back some of the coverage.

"We are still waiting for comparable market access offers from our major trading partners," John Clarke, acting EU ambassador to the WTO, told the forum. "Unfortunately our offer in 2005 wasn't the game-changer we had hoped it would be."

For many members the real game-changer will be bringing China into the agreement. China, which promised to become a member of the GPA when it joined the WTO in 2001, submitted a revised offer in July which was surprisingly well received, even if it did not meet all the demands of existing GPA states.

Talks are continuing on China's accession to the GPA which ultimately could do much more for businesses in the U.S. and other rich countries than the extra opening by China in the broader Doha negotiations that Washington is pushing for.

And once China joins, other big emerging economies may feel they must come in too, or be shut out of procurement markets that China has access to. India signed up as an observer to the GPA in February, but has so far not indicated it plans to join.

(Editing by Stephanie Nebehay)

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