Kodjo OSEI-LAH

1. Commonwealth Procurement Conference Mauritius, 28-29 September 2011 Protectionism vs open markets: the GPA as an instrument of market governance in the government procurement sector* Kodjo OSEI-LAH *The views and opinions expressed in this presentation are those of the author and should not be attributed to the WTO or its Secretariat

2. Outline • Significance of government procurement for development and trade • Open markets vs protectionism - costs & benefits • The GPA as a tool of market governance • basic disciplines, basic architecture of the GPA • Accession to the GPA – benefits and challenges • Recent and ongoing developments under the GPA • Considerations for developing countries

3. Significance of GP for development and trade • GP a significant economic activity • 15-20% of GDP • Often a significant part of national budgets • significance for public expenditure, public resource management • Significance for provision of public services • education; health • infrastructure: electricity; water and sanitation; public transport; ports/airports; ICT, etc. • Implications for trade, development and economic performance

4. Benefits of open markets* • Benefits of open markets • increased competition • enhanced value for money • improved governance, integrity, accountability • effective and efficient management of public resources • Other benefits associated with trade accords • recoup benefits arising from autonomous liberalization, namely • reciprocal market access *See, e.g. Arrowsmith 2003, Anderson 2010, Anderson et al2011a, Woolcock 2008, 2009

5. Costs of open markets/drivers for protectionism* • Costs of market opening/reasons to protect • ‘policy space’ – e.g. restrictions on domestic preferences • preparatory and negotiating costs • implementation and compliance costs • adjustment costs for industry • Other possible economic impact • possible impact on balance of trade • implications for local employment • Capacity challenges to accessing benefits *See, e.g. Arrowsmith 2003, Anderson 2010, Anderson et al 2011, Woolcock 2008, 2009

6. THE GPA AS AN INSTRUMENT OF MARKET GOVERNANCE IN THE GP SECTOR

7. GPA Purpose/Objectives • Current Agreement • liberalisation & expansion of world trade in GP markets • establishment of multilateral framework for GP • commitment to non-discrimination, transparency • mechanism for monitoring & surveillance of commitments • take into account development, financial and trade needs of developing countries • Additional elements in revised text • flexibility in procedural commitments • encouraging use of electronic tools • good governance • efficient management of public resources

8. GPA – growing membership • A plurilateral agreement – currently binds 42 WTO Members (15 Parties) – includes • Armenia;* Canada; European Union (incl. its 27 member States); Hong Kong, China; Iceland; Israel; Japan; Korea; Liechtenstein; Netherlands with respect to Aruba; Norway; Singapore; Switzerland; Chinese Taipei;** United States • Nine WTO members currently in process of acceding: • Albania, China, Georgia, Jordan, Kyrgyz Republic, Moldova, Oman, Panama, Ukraine • Further 4 with GPA accession commitments: • Croatia, FYROM, Mongolia, Saudi Arabia *As of September 2011; ** As of July 2009

9. GPA: basic architecture, core disciplines • Agreement applies to covered procurement • covered procurement defined in the text of the Agreement and • specified in Parties’ schedules set out in Appendix I • GPA approach provides flexibility for Parties (e.g. Arrowsmith, 2003) • Core disciplines: transparency, non-discrimination • Disciplines implemented through specified rules, e.g. • publication of information on procurement system, opportunities, and decisions/results (e.g., contract awards) • rules on solicitation/tendering – procurement methods, specifications, documentation, award criteria, time-periods • rules on treatment of tenders and contract awards • Monitoring & surveillance - notifications • Enforcement/institutional provisions • domestic review • WTO dispute settlement

10. GPA scope and coverage: Appendix I • Aspects of coverage (in Annexes to Appendix I) • All Parties cover entities at all levels of government applicable to them: central, sub-central, other • goods covered in principle, unless otherwise specified • services and construction services as specified • subject to specified thresholds, any derogations • Thresholds - general levels • goods/services: SDR 130,000 for central government; • higher for other entities, up to SDR 400,000 • construction services: SDR 5 million • Certain specified general exclusions, e.g. for • national security; public morals, order, safety; • animal/plant life or health • intellectual property

11. GPA accession: benefits and challenges* • Basic requirements for accession • consistency of national legislation with GPA • agreed coverage commitments • Benefits of GPA accession • access to foreign procurement markets • improved competition and governance in domestic procurement markets benefits of economic efficiency • internal policy coordination / harmonisation • Costs/Challenges of accession • preparatory and negotiating costs • implementation cost • adjustment cost for local industry *See, e.g. Anderson et al2011a

12. Relevance of GPA to global governance • Common, transparent, binding rules in $1.6 trn market • Effective in moderating protectionist tendencies in recent global financial crisis • e.g. saving clause in 2009 ARRA • Model/template for GP provisions in FTAs* • harmonising effect as a result • Negotiations to further enhance relevance • improve text of the Agreement • expand coverage • eliminate discriminatory measures *See, e.g. Anderson et al 2011b, Woolcock 2009

13. Ongoing GPA negotiations: state of play and expected benefits from conclusion • Negotiations at intensive, advanced stage • target conclusion date: MC8 (Dec 2011) • Direct benefits from conclusion • substantially expanded coverage • coming into force of improved, modernised text • flexibilities for Parties • improved governance aspects • tight integration of electronic tools • improved flexibilities for developing countries • Otherpotentialbenefits • stimulate membership expansion through future accessions • launch of further round of modernisation and adaption through future work programmes (FWP)

14. Revised GPA: relevance for developing countries • Enhanced tools to help address policy space, other DC challenges – Revised GPA Article V (GPA/W/313 & Corr.1)* • use of offsets (domestic content, technology transfer, etc.) • price preferences – new • market protections through coverage flexibilities: - phase-in of entities and sectors; higher initial thresholds – new • implementation period (to allow for institutional, legislative adaptation) – new • technical assistance/capacity building • FWP expected to include issues of particular interest to developing countries (see, e.g., GPA/106, dated 9 December 2011) • SME participation in public procurement markets • sustainability (e.g. environmental and social aspects) *See also, e.g. Müller 2011

15. Considerations for developing countries • Reasons to consider GPA accession • commonality, convergence in international norms* • part pre-paid price of participation** • opportunity costs of non-participation = lost accession benefits • Capacity, other constraints will not auto-resolve • need for complementary policies • use of all available tools, e.g. Aid for Trade for infrastructure devt • dearth of data: some improvement, but need for continuing research • what role of development assistance? • Changing trade patterns, global trends • integration in global value chains – e.g., WTO: ‘made in the world’ • GPA a key tool for regulating global procurement markets *See, e.g. Anderson 2010, Arrowsmith & Anderson 2011, Nicholas 2011, Woolcock 2009 **See, e.g. Anderson et al 2011a, Woolcock 2009

16. Concluding themes • Changing dynamics of world trade, development • increasing global integration, global value chains • convergence towards common norms in GP markets • GPA a tool of market governance in global GP markets • minimum standards across the board • prospects for modernisation and expansion of the Agreement • tools for achieving effective VFM/policy space trade-offs • Considerations for developing countries • current challenges, constraints will not auto-resolve • significant pre-paid costs of participation • opportunity costs of non-participation • Need for continuing policy analysis & review

17. Thank you Kodjo Osei-Lah (kodjo.osei-lah@wto.org)

18. Selected References Anderson, Robert D., "The WTO Agreement on Government Procurement (GPA): An Emerging Tool of Global Integration and Good Governance," in Law in Transition Online, EBRD, October 2010; available at: http://www.ebrd.com/downloads/research/news/lit102.pdf, accessed 18.7.11 Anderson Robert D., Philippe Pelletier, Kodjo Osei-Lah and Anna Caroline Müller, “Assessing the Value of Future Accessions to the WTO Agreement on Government Procurement (GPA): Some New Data Sources, Provisional Estimates, Suggested Approaches And Related Observations”, WTO Secretariat Working Paper, September 2011 (Anderson et al, 2011a) Anderson, Robert D., Anna Caroline Müller, Kodjo Osei-Lah, Josefita Pardo de León and Philippe Pelletier . "Government procurement provisions in regional trade agreements: a stepping stone to GPA accession?," chapter 20, pp. 561-656, in Arrowsmith and Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform, CUP, 2011 (Anderson et al, 2011b) Arrowsmith, Sue and Robert D. Anderson, "The WTO regime on government procurement: past, present and future," chapter 1, pp. 3-58, in Arrowsmith and Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform, CUP, 2011 Arrowsmith, Sue, Government Procurement in the WTO, Kluwer Law International, 2003. Müller, Anna Caroline, "Special and differential treatment and other special measures for developing countries under the Agreement on Government Procurement: the current text and new provisions," chapter 11, pp. 339-376, in Arrowsmith and Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform, CUP, 2011 Nicholas, Caroline, “Work of UNCITRAL on government procurement: purpose, objectives, and complementarity with the work of the WTO”, Ch. 24, in Arrowsmith and Anderson (eds.), The WTO Regime on Government Procurement: Challenge and Reform, (CUP), 2011 Woolcock, Stephen, “Public Procurement and the Economic Partnership Agreements: assessing the potential impact on ACP procurement policies”, The Commonwealth Secretariat / LSE, May 2008, available from: http://www.thecommonwealth.org/shared_asp_files/GFSR.asp?NodeID=179104; Accessed 18.7.2011 Woolcock, Stephen, “Public Procurement in the EPAs: Issues, Costs and Benefits for the ACP”, Commonwealth Trade Topics Issue 58, available from: http://www.thecommonwealth.org/files/190765/FileName/THT58PublicProcurementintheEPAs.pdf, Accessed 20.9.11