Government procurement means that a government or public organization procures from the private sector goods or services including construction works, design and consulting. Generally speaking, government procurement amounts to 10% to 15% of GDP of a ...
Government procurement means that a government or public organization procures from the private sector goods or services including construction works, design and consulting. Generally speaking, government procurement amounts to 10% to 15% of GDP of a nation. Thus, it has a substantial impact on the national economy. To a large extent, procurement of materials for construction of social infrastructure and other facilities is related to government procurement. There are many governments that positively use government procurement as a means of implementing certain policies including protection of small-medium firms and fostering of military defense industry. Also, it is common that governments resort to discriminative systems or practices in order to keep foreign governments or firms from entering into their government procurement markets. The typical examples of discriminative measures include local contents, offset, and preferential treatment to local products and services at the time of bid evaluation.
Although government procurement has a great share in the national economy and involves a very important economic activities, it was not subject to free trade even under the GATT system. In the mid-1971, the international community agreed that liberalization of world trade could not be accomplished in a real sense without liberalization of the government procurement market. In 1979 Tokyo Round formulated GATT Government Procurement Code(MTN Code) for the first time. Later, the Urguay Round supplemented the previous Code and adopted WTO GPA. From January 1, 1996, WTO GPA became effective. At present, WTO GPA is the only international uniform government code. Differing from other multilateral WTO agreements, WTO GPA is plurilateral agreement only applicable to 28 signatories. Because of this, liberalization of government procurement market has not made any significant progress despite that quite a long period of time has passed since WTO GPA took effect. The major reason for this is because threshold value is set up at too high a level, mainly reflecting the interest of advanced countries. Secondly, becoming a signatory of WTO GPA requires too complicated procedures. In order to become a member of WTO GPA, candidate country is required to present market opening scheme sufficiently satisfactory to existing members and conduct negotiations with each signatory. However, these applicant countries, which are mostly developing countries, find it difficult to work out a market opening program which will please existing members.
In the meantime, WTO is in the process of preparing a scheme to establish government procurement transparency treaty as a separate multilateral trade agreement which will be evenly applicable to all the WTO members. Since 1990s, aspects of government procurement have been incorporated in most of about 240 regional trade agreements(RTAs) worldwide including APEC. What is noteworthy is that these RTA signatories consist of both signatory and non-signatory of WTO GPA. Besides, because most countries participate in many RTAs, they may not be willing to join WTO GPA.
It is likely that enforceability of WTO GPA will be weakened, judging from the fact that there are two GPA-related international rules within the WTO system, and that RTAs tend to individually incorporate provisions similar to those of WTO GPA.
In order to prevent this possibility from turing into a reality, it is proposed that provisions of WTO GPA be amended drastically and be changed to multilateral trade agreement. This new WTO GPA has to contain rather abstract provisions similar to the non-binding principles of APEC. Observance and implementation of the new WTO GPA has to be left to the hands of each signatory, provided that WTO will conduct regular inspection and ask for necessary corrective measures. This new proposed scheme will bring about the following positive effects:
- WTO GPA will be able to merge government procurement transparent agreement currently under construction.
- As for RTAs, there will be no need to set up separate GPA-related provisions because WTO GPA will be applicable as it is now.