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Brussels, 14 December 2011

FAQs: Revised GPA agreement

What is the Government Procurement Agreement?

The Agreement on Government Procurement (GPA) is a plurilateral agreement in the WTO on the subject of government procurement (not all WTO members are parties to the GPA). Prior to today's Agreement, the Agreement in place had been negotiated in parallel with the Uruguay Round in 1994, and entered into force on 1 January 1996.

The GPA is to date the only legally binding agreement in the WTO on the subject of government procurement.

The Commission represents and negotiates for the European Union within exclusive competence.

IThe purpose of the GPA is to open up as much of procurement as possible to international competition. It is designed to make laws, regulations, procedures and practices regarding government procurement more transparent and to ensure they do not protect domestic products or suppliers, or discriminate against foreign products or suppliers. At the same time, it provides important flexibilities for developing countries, wishing to join the Agreement, to manage their transition to a more internationally competitive government procurement regime.

It has two elements — general rules and obligations, and schedules of national entities in each member country whose procurement is subject to the Agreement (referred to as "coverage"). A large part of the general rules and obligations concern tendering procedures.

Participation in the Agreement is entirely optional. Nonetheless, based on an assessment of potential benefits and costs, a growing number of WTO Members are evaluating their options and showing renewed interest in potential accession, recognising the important economic and systemic benefits that accession can bring to them.

On September 15 this year, (2011) the Republic of Armenia became the 42nd WTO Member to accede to the Agreement, and from that date became the 15th Party to the GPA (counting the EU and its 27 Member States as one Party).

Suppliers of each of the 15 GPA members (including the EU, the United States, Canada, Hong Kong, China, Japan, Korea, Switzerland etc.) have the right to participate in procedures for the award of government contracts of other GPA members, under the conditions laid down in the GPA. In return, suppliers from other GPA Parties have been given the same access to the government procurement markets of the EU.

Governments are not expected to open up all their procurement, and they might specifically exclude some sensitive sectors like defence-related procurement. The disciplines only apply to the entities and sectors, and procurement above financial value thresholds, specified in an Appendix to the Agreement, and which are the result of negotiations.

Typically, the Parties cover entities at all the respective levels of government applicable to them. Goods are covered in principle (for instance, medicines, machinery and associated products, fuels and petroleum products, and textiles products), except as otherwise specified. In addition, a broad range of services and construction services are open to international competition, including:

  • Transport infrastructure, such as highways, ports and airports;

  • Telecommunication services;

  • Computer and related services;

  • Financial services; and

  • Management consulting and related services.

New agreement on GPA: main elements

The main gains of the negotiation:

  • More transparent rules for international public procurement: The international procurement of GPA Parties will be now be subject to more transparent rules. These rules are broadly similar to the EU's procurement rules, known for their fairness and clarity.

  • New market access opportunities: The EU and U.S. expanded access to their central level entities, including important US Federal agencies. Canada offered access to procurement of all its Provinces and Territories. Korea provides access to railway and urban transport procurement and Japan offered access to Public private partnerships and construction projects. Israel committed to phase out its offsets schedules and to lower its construction thresholds.

  • Accessions and benefits for developing countries: The new text facilitates future accessions of other WTO members, including China and developing countries.

  • Future work: The Parties agreed on work programmes that address issues such as sustainable procurement, support for small and medium enterprises and monitoring of exclusions and restrictions.

GPA in figures

  • Public procurement represents a substantial part of the EU's and other trading partners' economies. The GPA covers trade in the domain of public procurement worth 500 billion Euros globally annually.

  • In most countries, government procurement accounts for 15% to 20% of GDP. In the EU, it corresponds to around 18% of GDP (more than 2000 billion euros).

  • Under the 1994 agreement, the value of the total market access commitments were estimated at US$1.6 trillion in 2008, representing 2.64% of the world's GDP.

  • Previous to today's agreement, whereas €312 billion of EU public procurement was open to bidders from member countries of the WTO agreement on procurement, the value of US procurement offered to foreign bidders was just €34 billion and €22 billion for Japan.

  • WTO staff estimated today's agreement could add $100bn to the world economy – less than 0.2 per cent of global gross domestic product but more than half of the estimated gains of the entire Doha round, which envisaged agreements on goods, services and agriculture.

  • China has indicated that the central government procures more than US$88 billion in goods and services annually, and that its sub-central government level procurement is even more significant.

  • The European Union Chamber of Commerce in China, a private sector body, calculates the overall public procurement market in China, including central, sub-central and other government entities, to be worth approximately US$1.02 trillion, representing 20% of China’s GDP.

  • In India government procurement has been estimated to constitute about 30% of GDP or US$347.8 billion in 2008.

  • In nominal terms the covered procurement markets of some key GPA Parties have grown by up to 300% over a 10 year period to 2006/2007.

The way to the today's GPA agreement

The previous Agreement on Government Procurement contained a built-in commitment to negotiations on both the text and coverage of the Agreement.

In December 2006, negotiators reached provisional agreement on a revision of the text of the 1994 plurilateral Agreement. The agreement of the negotiators was provisional in that it was subject to (i) a legal check; and (ii) a mutually satisfactory outcome to the other aspect of the negotiations on a new Government Procurement Agreement, namely those on an expansion of coverage (i.e. the lists of government entities whose procurement is opened up).

Agreement was also reached on a process to conclude the coverage negotiations. These negotiations were conducted on the basis of the revised text.

The EU launched the market access negotiations with a very comprehensive initial offer to its GPA partners. The market access negotiations were met with diverging ambition. Many parties originally simply preferred to maintain the status quo without adding entities and categories/type of procurement to their commitments, unlike the EU which favoured further, preferably generalised openings of procurement markets.

The generous EU initial offer remained un-responded and in 2007, the Commission received a mandate from the Council to rebalance the Agreement and to introduce country specific restrictions against countries, which maintained discriminatory set aside regimes, notably for national SMEs.

The revised offer was at first perceived very negatively by most of the GPA parties, in particular the US. The EU nevertheless stuck to its line in explaining to the GPA Parties that signing a revised agreement without further opening of markets was not acceptable to the EU.

Since then, the negotiations resumed and intensified with the view to finding an agreement on all outstanding issues, including market access. In 2010 many parties (including the EU) submitted market access offers or revised their previous offers that represented an extension of their coverage.

The negotiations further accelerated this year. The EU prepared a third revised offer tabled in Geneva on December 12. The revised offer helped to seal the deal with those GPA Parties who offered satisfying additions to their coverage. In this respect, the EU reciprocated to them and offered also important enlargements of its coverage. Thanks to flexibility and ambition shown by all sides, a final agreement was found on 15th December.

Role the EU in the framework of the WTO GPA and its negotiating position

The EU has consistently been a strong advocate for an ambitious opening of international public procurement markets.

The EU is a major systemic player in the WTO and firmly believes in the importance of the institution in the global trade economy. Through the GPA, European companies obtain greater access to procurement markets outside the EU and more equal competition on the EU's public procurement market. In addition, European procuring entities would enjoy a clarification of the legal framework regarding participation in public contracts of companies, goods and services from outside the EU.

The EU has always been very active since the beginning of the GPA review and has been also for quite some time the only Party advocating a significant expansion of market access opportunities before all the others Parties started to engage into market access negotiations. The EU has always been very clear on the fact that it would fully reciprocate to any significant new market opening.

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