1. Introduction to the WTO Agreement on Government Procurement Robert D. Anderson Counsellor, WTO Secretariat National Seminar on Government Procurement Hotel Imperial, New Delhi 11-12 May 2006

2. Contents of Presentation  Nature and purposes of the Agreement on Government Procurement (GPA)  What is procurement and why does it matter?  Main elements of the GPA  Overview of Parties ’ coverage commitments  Potential benefits of participation in the Agreement  Potential concerns about joining the Agreement: how they can be addressed  The accession process  Enforcement and dispute settlement  Summary of main points

3. I.Introduction: nature and purposes of the Agreement on Government Procurement

4. The Agreement on Government Procurement: nature and purposes (1)  A plurilateral agreement - not all WTO Members bound  Currently, covers only 37 WTO Members (including the 25 member States of the EC; most other developed countries and Israel; Hong Kong, China; Korea; and Singapore)  But note: nine more countries currently seeking accession (Albania, Bulgaria, Georgia, Jordan, the Kyrgyz Republic, Moldova, Oman, Panama and Chinese Taipei).  Even more importantly: Other major developing countries (e.g. China, Saudi Arabia) have made commitments to join the GPA, as part of their WTO accession protocols

5. The Agreement on Government Procurement: nature and purposes (2)  Why have an Agreement on Government Procurement?  Procurement largely excluded from main WTO Agreements (GATT, GATS); yet constitutes a large proportion of economic activity and (potentially) trade  Ensures a transparent and competitive procurement and tendering process: serves the interest of both participating governments and foreign suppliers  Market access commitments: export opportunities for Parties’ national suppliers

6. II.What is procurement and why does it matter?

7. What is procurement?  Purchasing/obtaining by government departments and agencies of:  Supplies/goods (commodities, commercial items, manufactured items)  Services (including research and development)  Construction and public works  Potentially also includes:  Concessions and public-private-partnerships  Purchases by state-controlled corporations

8. Why procurement regimes matter  Significant proportion of Gross Domestic Product (5-15 % or more in most countries)  Essential function of government, vital to the delivery of socially important goods and services  Transportation and other infrastructure (airports, highways)  Public health (medicines and hospitals)  Schools, universities, defense and policing  Major implications for development; effectiveness of government

9. Benefits of an open and transparent procurement regime  More potential suppliers – results in more competition – lower prices/better quality goods and services  Access to broader pool of talent/technology  Translates into:  Reduced tax burden; and/or  Ability to provide more, better government services for same resources.  Also, potentially, increased access to foreign markets by (your own) domestic producers

10. III.Main Elements of the WTO Agreement on Government Procurement (GPA)

11. Main elements of the Plurilateral Agreement on Government Procurement (1)  Coverage defined through detailed schedules (Annexes) in “Appendix I”.  Provisions on national treatment and non- discrimination (subject to important limitations in coverage)  Detailed provisions on aspects of the procurement process, to ensure transparent and open competition. Includes provisions on:  Tendering procedures;  Qualification of suppliers;  Invitations to participate;  Selection procedures;  Time limits, documentation, opening of tenders and contract award procedures.

12. Main elements of the Plurilateral Agreement on Government Procurement (2)  Enforcement: provisions on national bid challenge procedures and application of the WTO-DSU  Special and differential treatment for developing countries  Built-in commitment to negotiations aimed at improving the Agreement, extending its coverage and eliminating discriminatory measures

13. Overview of Ongoing Negotiations Relating to the GPA  Negotiations cover both non-market access provisions of the Agreement (i.e. the text) and the market access (“coverage”) commitments  Purpose of negotiations on the text: to update/streamline the agreement and ensure greater flexibility, take account of new procurement methodologies (especially e- procurement) and facilitate the accession of new Members.  Purpose of the coverage negotiations: to deepen coverage and eliminate existing discriminatory measures.  All aspects of negotiations to be completed by end of 2006

14. IV.Overview of coverage commitments: examples of Parties ’ Appendix I

15. The scope and coverage of the Agreement: Appendix I and the Annexes  As specified in footnote 1 of the Agreement, for each Party, Appendix I is divided into five Annexes. These define the scope and coverage of the Agreement with respect to:  Central government entities (Annex 1)  Sub-central government entities (Annex 2)  Other covered entities such as public utilities (Annex 3)  Covered services (Annex 4)  Construction services (Annex 5)  General notes

16. Parties’ coverage commitments: where to find them  All Parties’ coverage commitments are available on the WTO website, www.wto.org  How to find them: go first to main website, then go to “Trade Topics”, then “Government Procurement”, then “Agreement on Government Procurement”, then “Appendix I”  I will now show some examples

17. V.Potential benefits of participating in the Agreement

18. Potential benefits of participating in the Agreement  A tool for achieving enhanced transparency and effective competition in national procurement markets: possibility of enhanced value for money  International “stamp of approval” re: national procurement processes  Possible significant export opportunities from access to markets that are currently foreclosed

19. VI.Potential concerns about joining the Agreement (which may or may not be applicable to India) … and ways in which they might be addressed

20. Potential concerns for developing countries (not necessarily applicable to India)  Adequacy of national legislation  Fears of adverse impact on small and medium- sized enterprises (but note relevance of possible exclusions, transition periods and offsets)  Concerns re: inability to take advantage of export market opportunities (NB: this is a concern for small, isolated developing countries but doesn’t seem relevant to India)

21. How remaining concerns might be addressed: negotiation and transition periods, other possibilities for special and differential treatment  Possibility of special and differential treatment for developing countries is a key principle of the Agreement. Includes possibility of:  Negotiated transition periods  Negotiated exclusions from coverage for sensitive industries  Exemption from prohibition of “offsets” which applies to all other (i.e. developed) countries. Offsets are domestic content, technology licensing and local investment requirements  “Favourable action by developed country Parties” (to facilitate imports from developing countries)

22. VII. The Accession Process

23. The basic process (from GPA Article XXIV:2)  Eligibility of any WTO Member to accede  Terms to be agreed (negotiated) with existing Parties  By deposit with the Director-General of an instrument of accession, including agreed terms  Entry into force on 30 th day afterwards

24. Some key procedural elements (From GPA/1, Annex 2 and GPA/W/109/Rev. 2 ) 1.Communication of interest in accession to Director- General and Committee on Government Procurement 2.Submission of relevant information, including on: (i) proposed coverage (draft Appendices); and (ii) national legislation (both essential) 3. Consultations to be held by the Committee, as necessary (supplemented by bilateral discussions with individual Parties) 4. Agreement on terms of accession, submission of Report on legislation and decision by the GPA Committee 5. Deposit of accession instrument/terms and entry into force

25. VIII. Compliance mechanisms under the GPA

26. Domestic review provisions: general  Purpose of domestic review provisions: permit suppliers (especially those who have lost out) to seek and obtain speedy correction of anomalies in the contractor selection process, consistent with national law.  A low-cost, effective means of systemic oversight.  Timely and transparent functioning of the review body is important.

27. Domestic review provisions: what does the GPA say?  GPA Article XX:2: “ Each Party shall provide non- discriminatory, timely, transparent and effective procedures enabling suppliers to challenge alleged breaches of the Agreement arising in the context of procurements in which they have, or have, or have had, an interest. ”  Article XX:6: “ Challenges shall be heard by a court or by an independent review body with no interest in the outcome of the procurement and the members of which are secure from external influence during the term of appointment.... ”

28. WTO dispute settlement under the GPA  Normal WTO Dispute Settlement machinery (DSU) fully applicable to disputes between GPA Parties  Certain special rules/procedures apply: e.g. (i) panels must include persons qualified in government procurement); (ii) absence of cross- retaliation under other WTO agreements  Actual disputes have been rare and voluntary settlements have usually been reached

29. Disputes to date under the current Agreement on Government Procurement  Japan: Procurement of a navigation satellite (panel requested by EC). Key allegation: tender specifications inconsistent with GPA in that they were based (partly) on a U.S. system, details of which not widely known. Resolved by negotiated settlement intended to establish a non-exclusive global navigation system.  US: Massachusetts “Burma Act” (prohibiting procurement by Massachusetts government entities from companies trading with Myanmar; panel requested by EC and Japan). Panel established but lapsed (issue resolved by U.S. Supreme Court decision barring implementation of the Massachusetts law).

30. Disputes to date (2)  Korea: Procurement of Inchon International Airport (panel requested by US). A key question was whether the procuring entity was covered by the GPA.  Panel held the procurement was not covered by the GPA since:  Entity not specifically listed  Entity was independent of the relevant listed entity, the Ministry of Construction and Transportation (not a “subordinate linear organization” or “attached organ”).

31. IX.For completeness... (other aspects of WTO work on government procurement)

32. Other aspects of the WTO’s work on procurement (1): multilateral work on transparency (on hold)  Work initiated at the Singapore Ministerial Conference; carried forward at Doha  Focus on transparency per se; no direct implications for market access  Work now on hold: General Council has decided there will be no negotiations on this subject (TGP) for the duration of the Doha Round  This work nevertheless provides a rich source of insights on international procurement issues

33. Other aspects of the WTO’s work on procurement (2): negotiations in the Working Party on GATS rules  Mandate given in GATS, Article XIII:2: “There shall be multilateral negotiations on government procurement in services....”  Under purview of the Working Party on GATS Rules (established by Services Council)  Limited progress to date: Members have differing views re: appropriate scope of negotiations

34. Summary of main points (1)  Nature of the GPA (plurilateral agreement; importance growing)  Definition and importance of government procurement (major aspect of economic activity; includes infrastructure and socially important goods/services of major developmental significance)  Main elements of the GPA (coverage commitments, national treatment and non-discrimination, procedural provisions, etc.)  Overview of Parties ’ coverage commitments (key to understanding potential export opportunities)

35. Summary of main points (2)  Potential benefits of participation in the Agreement (export opportunities abroad; help in implementing a transparent and competitive procurement process at home)  Potential concerns about joining the Agreement: how they can be addressed (availability of transition periods, negotiated exclusions, potential use of offsets, etc.)  The accession process and compliance mechanisms