End game in government procurement study becoming clear

Judging from the papers and non-papers put forward at a meeting of the WTO Working Group on Transparency in Government Procurement in July, it has become evident that major trading nations want to use any WTO agreement on transparency in government procurement to enhance the market access in developing countries for their suppliers of goods and services, and ultimately, to gain full market liberalization.

by Chakravarthi Raghavan

GENEVA: Developing countries have been left in no doubt that the major trading nations want to use any WTO agreement on transparency in government procurement for enhancing market access in developing countries for foreign suppliers of goods and services, and in long-term, full liberalization.

This is evident in the papers and non-papers put forward at a meeting of the WTO Working Group on Transparency in Government Procurement, in the last week of July.

The Working Group has scheduled its next meeting for the early part of November when it plans to discuss a WTO secretariat note on "transparency-related" provisions in existing international instruments on government procurement, as well as provisions in national procurement laws that are available, and/or information that could be obtained from elsewhere - such as the Asia-Pacific Economic Forum (APEC) and the Free Trade Area for the Americas (FTAA), whose secretariats have been provided such information by their members.

At the WTO Ministerial Conference in Singapore in December 1996, Trade Ministers agreed to "establish a working group to conduct a study on transparency in government procurement practices, taking into account national policies, and, based on this study, to develop elements for inclusion in an appropriate agreement."

In many developing countries, government purchases of goods and services, account for a sizeable part of the gross domestic product, and is an instrument to help and show preferences for domestic suppliers - a process that until recently, and even now through so-called military procurement, developed countries use to protect and help their enterprises.

But as in other areas of economic activity, the major industrial nations, under the banner of free market and free trade theories, are seeking to enhance the mercantalist interests of their corporations, and prevent future competition from new suppliers in their own markets.

Some leading developing countries like Malaysia and India made it appear at Singapore that nothing more was involved than the study which could lead to agreement to bring about "transparency", but that would keep in mind and take account of national policies and practices.

But the US Trade Representative, Ms. Charlene Barshevsky and the EC Commissioner, Sir Leon Brittan, in their press conferences at Singapore said that their ultimate objective is to win access to these markets for their corporations and enable them to bid, along with locals, on all such procurement accords.

A non-paper by the US, at the meeting of the Working Group, sets out both the immediate and end objectives of that country. And while the papers and presentations of Canada, and the EU, are more subtle, that they share the same aim as the US is also clear.

The Working Group, chaired by Ambassador Werner Corrales Leal of Venezuela, at its first meeting in May, heard presentations from the UN Commission on International Trade Law (UNCITRAL) about its model law on procurement, and from the World Bank on its guidelines for procurement procedures in projects financed by the World Bank.

At that meeting, the Working Group agreed to the Chairman's suggestion (formulated after consultations with members) that it would agree "to limit itself for the time being, to the organization of the work required under the first stage of the mandate, namely study of transparency in government procurement practices, taking into account national policies."

The WTO secretariat note also refers to the provisions of various WTO agreements, that create obligations for members, and as part of it, require them to notify their laws and regulations and so on þ implying that this is a normal, benign and a routine part of the international trading system that can be extended to government procurement.

The US "non-paper"

The US "non-paper" sets out what it calls "guiding principles" to assist participants to conduct the discussions and "decide how to develop a multilateral agreement on transparency in government procurement practices".

Says the US in its non-paper, that while the mandate is specifically limited to transparency and does not include the concept of national preferences, "participants should seek to identify how transparency elements by themselves can enhance market access in international procurement markets."

"Participants should also keep in mind," says the non- paper, "that the eventual completion of the Singapore Ministerial mandate, including the study and development of an agreement, may be for many countries only a first step in a longer term process of liberalizing international procurement markets."

In formulating the "guiding principles", the US disavows any intention that they become an agreed approach for continuing discussions and eventually commencing negotiations, but to enable participants to develop their priorities and suggest approaches for maximising efficiency and effectiveness in organization of discussions.

But in effect, the US has adopted a well-known principle in communications, and sets a "mental agenda" for participants. Whether they agree or disagree, the participants thinking would still be subconsciously guided by the US "guiding principles".

Among others, the US guiding principles would have:

* the examination of various elements take into account the wide variety of procurement systems that exists in member countries, including both centralized and decentralized systems;

* consider "transparency" in the broadest sense so as to include concepts such as access to information, and "meaningful opportunities" to participate in the procurement process without prejudice to national preferences and seeking reviews of procurement decisions;

* be forward-looking by giving special consideration to innovative procurement practices such as use of information technology (publication of procurement information on the Internet) and how this could increase market access.

The EC paper

The European Community, in its "factual contribution" has set out the requirements under EC law covering government procurement by its member-states who have an integrated, single market.

The paper sets out the rules and requirements in this area under the EC directives, largely applicable to procurement above the EC threshold levels (subject to periodic revisions) which currently is ECU 200,000 generally (but 400,000 for utility contracts and 100,000 for those falling within the realm of the WTO procurement agreement). These include the definition of "government procurement", the methods of procurement (by open tender, or restricted tenders, or negotiated contracts after consulting firms).

The EC paper also sets out a summary of the rules and directives relating to the "elements of transparency" required which is described by the EC as involving primarily the obligation to providing information relating to procurement opportunities and practices and, the right to have access to that information, so that potential suppliers and purchasing entities know in advance their rights and obligations.

These include the requirements about:

* availability of legislation (governing the procurement) to potential suppliers and procuring entities, including through publication in the official EC journal, as well as on Internet web sites;

* public announcement of procurement opportunities and procedural requirements;

* the information that such notices must contain;

* transparency of the procurement procedures and selection of contractors - by setting out in advance, the objective criteria for selection that would be followed;

* procedures governing the receipt and management of bids;

* publication of information on awarded contracts, and the contents of such information;

* informing unsuccessful bidders why their bids were rejected; and

* a mechanism to enable any potential contractor to appeal and seek a review by the contracting authority, and ultimately, a legally authorized body to resolve conflicts in this area.

The EC paper adds that in its view, ensuring transparency is an essential element in the procurement process to achieve a regime that safeguards the best interests of the procuring entity as well as of suppliers.

One thing can be said perhaps in favour of what the major industrial nations are seeking to achieve.

Its end result would be that while governments of developing countries will be forced, by the Fund/Bank structural adjustment programmes, to get rid of public employees, the administration of these obligations and systems would provide employment opportunities for public servants who have to enforce these laws for benefit of foreign suppliers. (TWE 166, 1-15 August 1997)

Chakravarthi Raghavan is the Chief Editor of the South-North Development Monitor (SUNS) from which the above article first appeared.