TWN Info Service on Free Trade Agreements

06 November 2006


How much Malaysian firms realistically likely to be able to sell to the US Government

I was interested to see the reports in Bernama last week that ‘The US government will open approximately US$250 billion worth of procurement to Malaysia under the US-Malaysia Free Trade Agreement (FTA) currently being negotiated, said US senior procurement negotiator, Jean Hillman Grier Wednesday.’

I was curious as to how much of this US$250 billion Malaysian companies were likely to be able to access if a Malaysia-USFTA was signed.

In the WTO Secretariat’s 2006 trade policy review for the USA (WT/TPR/S/160/Rev.1), it mentioned the US Government’s Federal Procurement Data System (FPDS), the upgraded version of which is now at https://www.fpds.gov/. Anyone can use the database and access data about the US Federal Government’s procurement, including how much went to companies located in which countries each year, individual contract amounts, the names of companies receiving contracts, contracting department (eg Department of Defense) etc.

Based on a very quick analysis of the data in the FPDS database, it seems that for the year 1/1/2005-31/12/2005:
• 94% of the action obligation (payments made or initial contract value) went to companies located in the USA.
• The remaining 6% was split between companies located in 170 countries and territories. (WT/TPR/S/160/Rev.1 explains how so many countries are eligible to supply to the US Government (countries who have signed the WTO Government Procurement Agreement, bilateral/regional trade agreements which include government procurement, the WTO plurilateral Agreement on Trade in Civil Aircraft, the 50 least developed countries, countries eligible under the Caribbean Basin Economic Recovery Act, defence equipment produced in countries with an MOU and other exceptions to the Buy American Act, eg if it is determined that domestic preference is inconsistent with the public interest, in case of U.S. non-availability of a supply or material, or for reasonableness of cost)).
• 99.1% of that 6% went to: unspecified, Kuwait, Canada, South Korea, Germany, UK, Australia, Switzerland, Netherlands, Russia, Japan (in order of most to least). Of course this may change from year to year (although the 94% to companies located in the USA seemed to be about the same for the few years I checked).

I also had a preliminary look in the FPDS at the changes in the US government procurement market access Chile and Australia achieved after their USFTAs were signed and found that:
• For Chile:
o contracts signed between 1/1/2003 and 31/12/2003 had an action obligation of US$32,090.
o Chile’s USFTA came into force on 1/1/2004
o contracts signed between 1/1/2004 and 31/12/2004 had an action obligation of US$635,516
o contracts signed between 1/1/2005 and 31/12/2005 had an action obligation of US$233,570
• For Australia:
o contracts signed between 1/1/2004 and 31/12/2004 had an action obligation of US$10,311,944
o Government procurement chapter came into force for USA on 1/1/2005
o contracts signed between 1/1/2005 and 31/12/2005 had an action obligation of US$34,095,229
• Of course it may be too early to tell and I did not check long term trends before their USFTAs were signed.

Furthermore, according to WT/TPR/S/160/Rev.1, the 100 top federal contractors in FY2003 accounted for 57.1% of federal procurement and the majority of these were U.S. or foreign-based multinational companies.

Best wishes,
Sanya
Sanya Reid Smith
c/o Third World Network
Ph: +60 3 2300 2585
Mobile: +60 17 221 6818
Fax: +60 3 2300 2595