WTO Seals $100 Billion Deal Expanding Government Procurement

After more than a decade of negotiations, the World Trade Organization clinched a landmark agreement that opens up government-procurement contracts worth as much as $100 billion to more foreign competition.

The revised Government Procurement Agreement, approved today in Geneva hours before the WTO began its eighth ministerial meeting, covers 42 of the trade arbiter’s 153 members. China, which submitted a revised offer in November, won’t join the agreement this year.

“Even in a very difficult and deteriorating macro-economic environment, with a bit of will, plus goodwill and hard work, things can get done,” WTO Director-General Pascal Lamy told a news conference.

Government procurement in most countries accounts for between 15 percent and 20 percent of gross domestic product, the WTO said. It’s worth 17 percent of GDP, or almost 2.1 trillion euros ($2.7 trillion) in the European Union and about 30 percent of output, or $348 billion in 2008, in India.

The agreement expands coverage of procurement to include a number of central and sub-central entities not previously included in the GPA and modernizes the text to reflect current practices in procurement. The deal means Europe will increase its market share in Japan by 20 percent, particularly in construction, and it adds about 2 billion euros in terms of access to Korea’s railways, Michel Barnier, the EU’s financial- services chief, told journalists in Geneva.

More Needed

U.S. Trade Representative Ron Kirk urged China, which began discussions to join the agreement about four years ago, to make an offer that matches the benefits given by other members of the WTO.

“China has submitted three offers, each an improvement over the last,” Kirk said in a statement. “But China still has some distance to go.”

The U.S., which only committed 37 of its 50 states to the procurement agreement, wants China to include state-owned enterprises, add more sub-central entities and services, reduce its thresholds for the size of covered contracts and remove what Kirk called other “broad exclusions.”

Adding China -- which along with Jordan is in an advanced stage of negotiations -- to the GPA would more than double the value of the accord, Lamy said. Another seven countries, including Albania, Oman, Panama and Ukraine, are also interested in joining the deal, he said.

Reciprocity

The latest Chinese offer, submitted on Nov. 30, covers both central government and sub-central government entities and “was appreciated by many GPA parties,” said Yi Xiaozhun, China’s ambassador to the WTO. “But we know that we will continue the negotiation on GPA.”

China may ultimately decide not to join the agreement “if we find out that we cannot get reciprocity from GPA members,” Yi said in a Dec. 7 interview. “We have to negotiate with them and evaluate if we can get a fair return. That’s a tough negotiation. If they want us to bring in sub-central government entities, then they have to do the same.”

China has “consistently delivered what they said they would deliver,” said Swiss negotiator Nicholas Niggli, who led the government-procurement negotiations. “They know they need to do more. It is a long road.”

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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