TWN Info Service on WTO and Trade Issues (Feb15/03)
16 February 2015
Third World Network

Pakistan becomes observer to GPA, China's latest offer discussed
Published in SUNS #7961 dated 13 February 2015

Geneva, 12 Feb (Kanaga Raja) -- The Committee on Government Procurement of the WTO, at its meeting on 11 February, amongst others, admitted Pakistan as an observer and discussed the latest revised offer tabled by China for its accession to the Government Procurement Agreement (GPA). The Committee also heard renewed criticisms of the US ‘Buy America' provisions.
 
The current Parties to the plurilateral GPA are: Armenia, Canada, the European Union (with its 28 member states), Hong Kong-China, Iceland, Israel, Japan, Korea, Liechtenstein, the Kingdom of the Netherlands with respect to Aruba, Norway, Singapore, Switzerland, Chinese Taipei and the United States.
 
THE LATEST REVIEW OF CHINA'S REVISED OFFER
 
According to trade officials, the discussion focused on the fifth revised offer that was submitted by China to the WTO on 22 December 2014. Its first offer was submitted back in January 2008, with subsequent offers made in 2011, 2012 and 2013 respectively.
 
At the meeting on 11 February, China said that it had worked day and night in order to send a ‘big Christmas gift' to the GPA Parties, and it has done that. It was a comprehensive and substantive improvement over its previous offer.
 
China outlined its fifth revised offer, highlighting in particular: (i) reductions in China's proposed thresholds (for example, if a contract is above a certain value it will come under GPA coverage); (ii) coverage of entities from five provinces that China had not previously proposed to cover; (iii) initial coverage of fourteen "other entities", including the China Post Group, the first state-owned enterprise to be covered; (iv) coverage of five new service sectors; and (v) expanded coverage of some construction services.
 
According to trade officials, China said that it has made improvements in all fields and believes that its offer is now commensurate with the offers that other GPA Parties currently have in their schedules.
 
It shows the sincerity of the Chinese government, said China, adding, however, that progress in its negotiations mainly depends on the positions of other Parties now.
 
While Parties welcomed what some described as substantial improvements in China's latest offer, a number of Parties including the US, the European Union, Korea, Japan, Canada, Norway and Switzerland said that further improvements were necessary before the negotiations could conclude successfully.
 
According to trade officials, a key complaint was the continued absence of coverage for procurement by China's state-owned enterprises (SOEs) under Annex 3 as well as China's request for certain general exemptions from coverage under Annex 7, including procurement that impairs "important national policy objectives" and procurement contracts that include provisions such as domestic content requirements, offset procurement and transfer of technology obligations.
 
The EU welcomed China's revised offer and appreciated its efforts. The latest offer is an encouraging step forward, said the EU, noting that China had eliminated some of the exclusions that it had been asking for earlier for certain types of procurement.
 
However, the EU considers that important gaps remain and that these gaps need to be filled. In particular, the EU was concerned about what it called the "persistent refusal" of China to cover procurement by state-owned enterprises (SOEs) under Annex 3.
 
It is necessary for China to take the steps to respond to these repeated requests for it to cover SOEs, said the EU, adding that it was also extremely concerned about persistent general and specific notes allowing blanket exceptions for some procurement, including domestic content requirements.
 
The EU was further concerned about the continued demands for transitional periods. It also needs clarity that what China is offering in its revised offer won't be subject to further restrictions in the future.
 
The US said that it appreciated China's efforts, but that the current offer does not adequately respond to the US request for further coverage of entities.
 
Korea welcomed China's revised offer, saying that overall it was a big improvement. It noted that substantial progress was made in this offer and it is a meaningful step as well as being a good signal of China's accession to the GPA in the near future.
 
Nevertheless, it had some concerns. In particular, it wanted more local government entities to be covered, including SOEs, which are important. Korea also called for further coverage of provinces.
 
Japan also cited the need for expanded entity coverage under Annex 3. It noted that Japan had over 100 SOEs in its schedule.
 
Canada said that it believed that significant gaps remain in the Chinese offer, particularly for SOEs. As many SOEs play a big role in key sectors of procurement, a substantial proportion of China's procurement market would be excluded without substantial improvement of Annex 3, Canada said.
 
According to trade officials, China noted the concerns expressed by some GPA Parties, but stressed that China is at a different stage of development than the other GPA Parties.
 
China said there was no room left for further expansion of covered entities in the future but that it was willing to clarify the exceptions that it was seeking.
 
China further said that it was willing to continue the negotiations but hoped that the GPA Parties would adopt a practical attitude towards its offer.
 
According to trade officials, the Chair of the Committee, Mr Krzysztof Trepczynski of Poland, said that he understood what China was saying in that it would be difficult to offer further entities.
 
The EU noted that China unfortunately has indicated that there was no room left for further expansion of coverage. It would like to continue the negotiations in a constructive way with China. It would also like to invite China to reconsider its position on the scope of coverage.
 
Even though it understood the difficulties that China is facing, the EU said that it wants China to remain engaged and to consider possible further expansion of coverage.
 
The US also requested China to reconsider its approach regarding an expanded coverage offer.
 
According to trade officials, the EU, the US, Japan and Canada asked China to explain how it sees the negotiations going forward, including a timetable for a further revised offer.
 
China said it was willing to continue and conduct further negotiations. However, it was not sure about a further revised offer.
 
The Chair concluded that ‘we can't find any further solution at this stage.'
 
MOLDOVA/UKRAINE ACCESSIONS
 
According to trade officials, with respect to the accessions of Moldova and Ukraine to the GPA, a number of delegations expressed hope that the negotiations with both these countries could be concluded by early June (when the Committee is scheduled to meet next) or by the summer break this year.
 
The EU, US, Canada, Japan and Chinese Taipei said that they were pleased with Moldova's fourth and "final" offer submitted in late January.
 
The US and Chinese Taipei, however, said that a few items still needed to be clarified regarding the offer and domestic reforms on procurement.
 
Ukraine, which had submitted its first offer in March 2014, said that it had already discussed with GPA Parties a draft third offer that has yet to be circulated and that it believed this offer addresses all outstanding concerns.
 
While its membership will be the starting point towards creating a more competitive and transparent procurement market, Ukraine stressed the need for technical assistance from GPA Parties, the World Bank and other financing entities to achieve this aim.
 
The EU, the US, Canada, Japan, Norway, Chinese Taipei, Singapore, Switzerland and Korea cited Ukraine's positive engagement and hard work, with most hoping that the negotiations would be wrapped up by the summer.
 
PAKISTAN ACCEPTED AS OBSERVER
 
At the meeting on 11 February, the GPA Committee agreed to Pakistan's request for observer status.
 
According to trade officials, Pakistan said that it had already undertaken some domestic procurement reforms and had developed a strategy for achieving a "fair, transparent, efficient and effective" public procurement regime.
 
Despite the many challenges facing the country on different grounds, Pakistan said that it was determined to undergo the necessary reforms in view of joining the GPA.
 
Japan, the EU, the US, Canada, Norway, Hong Kong-China, Chinese Taipei and Switzerland welcomed Pakistan's decision. Some said that they hoped to soon receive Pakistan's application for its accession to the GPA and its first offer.
 
CONCERNS OVER US ‘BUY AMERICA' PROVISIONS
 
Concerns were raised by Canada and several others at the meeting relating to the US ‘Buy America' provisions.
 
According to trade officials, Canada noted that in the last two Committee meetings, it had raised concerns about a number of legislative initiatives in the US which would impose discriminatory measures against foreign companies for federal, state and municipal government contracts.
 
Canada again asked the US to explain how these initiatives were consistent with Article XXII: 6 of the revised GPA.
 
The Article states that each party "shall seek to avoid introducing or continuing discriminatory measures that distort open procurement," a provision Canada said applies to any measure taken in relation to procurement regardless of whether it applies to procurement not covered by the GPA.
 
Canada highlighted two new concerns over the US initiatives.
 
The first is a statement by US Secretary of Transport Anthony Foxx to the Senate Committee on Environment and Public Works on 28 January, where he had noted the Barack Obama administration's desire to strengthen ‘Buy America' forced localisation requirements for programmes funded by the US Department of Transportation.
 
The second is the Obama administration's budget proposal on 2 February for fiscal year 2015-2016 in which it had indicated its intent to resubmit the GROW America Act to Congress in the coming weeks.
 
Canada said that this proposed legislation would expand federal funding for infrastructure projects in the US to $478 billion over six years, and that much of this spending would be transferred to state and local governments and would be subject to ‘Buy America' requirements.
 
In addition, said Canada, under the GROW America Act, the Obama administration is proposing to raise the current 60% threshold for ‘Buy America' to 100% for public transportation projects.
 
Canada said that it would be unfortunate if forced localisation requirements became the de facto norm for the funding of infrastructure projects. It encouraged the US to address its concerns.
 
According to trade officials, Canada's concerns were shared by the EU, Japan, Israel, Hong Kong-China, Switzerland and Singapore.
 
The EU, Japan and Switzerland welcomed the decision on 5 February by New Jersey Governor Chris Christie to veto state legislation that would impose domestic procurement requirements.
 
Japan said that Christie's decision will benefit New Jersey and make it a more attractive investment location for Japanese companies. It expressed hope that others would take action to contain protectionism as Governor Christie did last week.
 
According to trade officials, the US said that it takes its international obligations seriously, including its obligations under Article XXII: 6, and ensures that all covered procurement complies with its commitments.
 
It was willing to engage with any GPA Party on the issue, said the US, also noting that a number of comments showed interest in expanded access to the US procurement market.
 
In this context, it questioned whether the Committee was the appropriate forum for this, or whether these issues were better addressed in the ongoing free trade agreement negotiations the US is currently engaged in with some GPA Parties.
 
Meanwhile, Mr John Newham of Ireland is expected to take over the chairmanship of the Committee in March. +