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Procurement and the WTO

Posted by Richard Monday, November 15, 2004

Continuing with the theme of the procurement rules so sadly abused by our continental "partners", see here and here, Mr Brown, with the aid of The Times, is bleating that the EU commission is "impotent" and that it should take more action. This, of course, plays into the hands of the integrationists, who would dearly love the commission to have more powers to enforce its laws.

However, one of our readers has very kindly informed us of the existence of the WTO Agreement of Government Procurement, which, to my shame, I have to admit I did not know existed.

As UK negotiator for the original agreement, our reader informs us that the UK would have more quote rights under its WTO membership than it has within the framework of the EU. The WTO would allow us to take action against France, Germany, etc., whereas the EU version depends much on EU commission input. "And," he adds, "we all know what that means in terms of corruption, factionalism etc."

The WTO website (link above) observes that in most countries the government, and the agencies it controls, are together the biggest purchasers of goods of all kinds, ranging from basic commodities to high-technology equipment. At the same time, the political pressure to favour domestic suppliers over their foreign competitors can be very strong.

Therefore, an Agreement of Government Procurement was first negotiated during the Tokyo Round and entered into force on 1 January 1981. Its purpose was to open up as much of this business 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.

The agreement has 28 members (including all the EU member states). It has two elements - general rules and obligations, and schedules of national entities in each member country whose procurement is subject to the agreement. A large part of the general rules and obligations concern tendering procedures.

The present agreement and commitments were negotiated in the Uruguay Round. These negotiations achieved a 10-fold expansion of coverage, extending international competition to include national and local government entities whose collective purchases are worth several hundred billion dollars each year. The new agreement also extends coverage to services (including construction services), procurement at the sub-central level (for example, states, provinces, departments and prefectures), and procurement by public utilities. The new agreement took effect on 1 January 1996.

It also reinforces rules guaranteeing fair and non-discriminatory conditions of international competition. For example, governments will be required to put in place domestic procedures by which aggrieved private bidders can challenge procurement decisions and obtain redress in the event such decisions were made inconsistently with the rules of the agreement.

The agreement applies to contracts worth more than specified threshold values. For central government purchases of goods and services, the threshold is SDR 130,000 (some $185,000 in June 2003). For purchases of goods and services by sub-central government entities the threshold varies but is generally in the region of SDR 200,000. For utilities, thresholds for goods and services is generally in the area of SDR 400,000 and for construction contracts, in general the threshold value is SDR 5,000,000.

The text of the Agreement is also on the website here and is a useful addition to the armoury of those who would seek to counter the propaganda that the EU is the answer to all evils.