ACCESSION TO THE WTO AGREEMENT ON GOVERNMENT PROCUREMENT AND LEGAL REFORM Anna Caroline Müller Legal Affairs Officer, WTO Secretariat INTERNATIONAL ANNUAL WTO FORUM KALININGRAD 25 – 27th of March

QUICK INTRO TO GOVERNMENT PROCUREMENT & THE GPA Part I 2

Why procurement regimes matter: economic, social and trade dimensions o A large proportion of Gross Domestic Product (15-20 % in most countries, more in some cases) o Supports essential functions of government, vital for development and social policy purposes: o Provision of transportation and other vital infrastructure (airports, highways, ports) o Public health (hospitals, medicines, water and sewer systems) o Schools and universities o Significance as a component of international trade o Importance for “good governance”. 3

Factors currently enhancing the significance of the GPA for the multilateral trading system (1): increasing membership of the Agreement worldwide o A plurilateral Agreement opening procurement markets to international competition. o Currently, the GPA covers 43 WTO Members including the EU and its 28 member States; most other developed countries (i.e. US, Canada, Japan; Liechtenstein, Norway and Switzerland); plus Hong Kong, China; Iceland; Israel; Korea; Singapore; Chinese Taipei; Aruba and Armenia. o Eleven more WTO Members currently seeking accession (Albania, China, Georgia, Jordan, the Kyrgyz Republic, Moldova, Montenegro, New Zealand, Oman, Tajikistan and Ukraine). Two to be concluded at the next Committee meeting o Four additional WTO Members have commitments to seek GPA accession (eventually), as part of their WTO accession protocols: the former Yugoslav Republic of Macedonia, Mongolia, the Russian Federation, and Saudi Arabia. 4

Factors currently enhancing the significance of the GPA for the multilateral trading system (2): the policy context o Enhanced importance of the procurement sector in light of: (i) the global economic crisis; and (ii) emerging economies’ infrastructure needs. o Also greater emphasis on procurement and good governance as an underpinning of development. o Increased pressures for policies potentially limiting access to important procurement markets. o GPA and/or bilateral/regional agreements embodying similar disciplines are the main tool of exporting economies to preserve market access rights in this crucial sector. 5

Factors enhancing the significance of the GPA (3): synergies with other international instruments, and national legislation o GPA a distillation of best practices internationally, as seen by the participating WTO Member governments. o Carefully harmonized with the UNCITRAL Model Law o Of interest in current review of the World Bank Procurement Guidelines. o The model for procurement chapters in bilateral FTAs and regional trade agreements worldwide. o An important benchmark for national procurement reforms. 6

Objectives of the GPA (see Preamble) o Trade aspect: a guarantee of market access; assurance of fair treatment for all suppliers (foreign and domestic) o Governance aspect: o Integrity and predictability of government procurement systems; o Efficient and effective management of public resources; o Prevention of corrupt practices. o Avoidance of conflict: promotion of compatible procurement systems worldwide 7

Core principles of the Agreement (basis for all legal elements) o Three core principles: o Non-discrimination (especially between foreign and domestic suppliers); o Transparency of the procurement system and of individual procurements; o Procedural fairness for suppliers/potential suppliers NB: Above three principles underlie/explain all elements of the Agreement 8

The recent entry into force of the revised GPA: overview o The revised GPA has entered into force on 6 April! o “Political conclusion” to the negotiations reached by GPA Ministers on 15 December 2011, following intensive negotiations over almost a decade. o Formal adoption of the results of the negotiations on 30 March 2012, following a verification process. o Elements of the deal: o Market access enhancement package valued at $ billion annually. o Revised GPA text. o Package of Agreed Work Programmes on issues such as SMEs and sustainability. 9

The recent entry into force of the revised GPA (2): key improvements in the revised GPA text o Core principles of the revised text are the same as the existing one (non-discrimination, transparency, procedural fairness). However, revised text incorporates: o A complete revision of the wording of the provisions of the Agreement with a view to making them more streamlined, easier to understand and user-friendly; o Updating of the text of the Agreement to take into account developments in current government procurement practice, notably the use of electronic tools; 10

The recent entry into force of the revised GPA (3): improvements in the revised GPA text (cont’d) o Additional flexibility for Parties' procurement authorities, for example in the form of shorter notice periods when electronic tools are used. Shorter time- periods have also been allowed for procuring goods and services of types that are available on the commercial marketplace. o More explicit recognition of the GPA's significance for good governance and the fight against corruption, including in new substantive provisions that require participating governments to carry out their GPA-covered procurements in ways that avoid conflicts of interest and prevent corrupt practices; and o Revised and improved transitional measures ("special and differential treatment") for new Parties that accede to the Agreement. Under the revised provisions, such measures are to be tailored to the particular developmental needs of the individual accession candidates. 11

ACCESSION TO THE GPA Part II 12

13 Who: Eligibility of any WTO Member to accede What: Terms to be agreed with existing Parties How: Deposit with the Director-General of an instrument of accession, including agreed terms When: Entry into force on 30th day afterwards Article XXII:2 “Any Member of the WTO may accede to this Agreement on terms to be agreed between that Member and the Parties, with such terms stated in a decision of the Committee. Accession shall take place by deposit with the Director-General of the WTO of an instrument of accession that states the terms so agreed. This Agreement shall enter into force for a Member acceding to it on the 30th day following the deposit of its instrument of accession. “

Accessions to the Agreement: Current Status o 11 observers are in the process of acceding Albania; China; Georgia; Jordan; Kyrgyz Republic; Moldova; Montenegro New Zealand; Oman; Tajikistan. Ukraine. o 4 WTO Members have commitments to accede to the GPA the former Yugoslav Republic of Macedonia; Mongolia; Saudi Arabia; Russian Federation. 14

GPA accession commitments by new WTO Members 15

The GPA: What are the benefits? Legally ensured market access to other Parties procurement markets Benefits of internal reform according to principles of integrity, transparency, and non-discrimination Double benefit: external and internal! 16

Internal benefits: “Locking in” reform Transparency Enhanced competition Better value for money Integrity/less corruption 17

Potential costs of accession* Direct costs of participating in relevant negotiations. Costs of necessary institutional adaptations. Adjustment costs for local firms/industry. 18 __________ *It is recognized that each acceding WTO Member must ultimately asses these itself.

19 Issues to be addressed Coverage offer (to be negotiated) National legislation (necessary changes) Flexibilities (developing countries only, and if agreeable) Institutional requirements (domestic review) Main topics

Legislative Compliance Replies to the Questionnaire Questions by Parties Answers to questions, Legislative changes if necessary Coverage Appendix I Offer Negotiations with Parties (bilateral meetings before GPA meetings) Revised Offer (several rounds of negotiation & offer) 20

Summary overview of coverage Annex 1: Central Government Entities Generally comprehensive coverage Annex 2: Sub-central Government Entities Some Parties do not cover all entities at this level Some important improvements in 2012 GPA (e.g. Canada). Annex 3: Other entities E.g. public utilities, state-owned enterprises. Variable coverage Importance depends on structure of economy Annexes 4-6: goods, services, cons services Goods (Annex 4): in principle covered: negative list; defence list Services (Annex 5): Mostly positive list; negative list: US. Armenia: full coverage Construction services (Annex 6): full coverage of CPC 51 + BOTs Notes and General Notes: a balancing tool 21

EntitiesGoodsServicesConstruction Services Annex 1130,000 5,000,000 Annex 2200,000 5,000,000 Annex 3400,000 5,000,000 o Coverage commitments of covered goods/services/construction services by covered entities are only applicable to procurements above specified thresholds. o Most Parties apply the general threshold levels. o Reciprocity is the foundation of coverage commitments generally. o Revised GPA: Some reductions in thresholds by some Parties Thresholds (general levels in SDR) 22

Flexibilities 23 Transition period Offset Price preference Initially higher thresholds Phasing-in entities

The GPA and Regional Trade Agreements This part of the presentation… … is based on an empirical study conducted by the WTO Secretariat on RTAs notified to the WTO since 2000 which remain in force (138 RTAs in total). 24

Overview 25

Agreements with detailed GP provisions o GPA Parties more active o Generally modelled on GPA o Some later RTAs on revised text o Agreements btw GPA Parties o Some further opening beyond GPA o Between GPA and non-GPA Parties o GPA as template o Some use of NAFTA rules o Between non-GPA Parties o Some regional patterns 26

Basic principles of interaction between WTO Agreements and RTAs o Preferential (regional) trade agreements are an exception to the general MFN principle contained in GATT and GATS. o Article XXIV of the GATT 1994 and Article V of the GATS allow WTO Members to depart from the MFN rule to grant more favourable treatment to their trading partners within a customs union or a free trade area without extending such treatment to all WTO Members, subject to certain requirements. o Different situation under GPA: Minimum standards for national legislation, limited MFN clause. 27

Interaction between GPA and RTAs with procurement chapters Text of the Agreement o Rules of the Agreement have to be applied vis-à-vis other GPA Parties through the national procurement system. o In order to be able to implement a single, functioning procurement regime, GPA and RTA rules have to be compatible. Coverage schedules o The GPA’s MFN clause only applies to o Treatment offered to Parties to the GPA (Treatment offered in RTAs to non-GPA Parties is not taken into account) o Covered procurement (extra coverage offered to non-GPA Parties in RTAs is not taken into account) o No exception to the GPA’s MFN clause needed. 28

Conclusions o GPA as a plurilateral Agreement of growing importance in the international trading system. o GPA accession as factor supporting national legislative reform. o Compatible with regional integration, when taken into account in negotiating RTAs. 29