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ANALYSIS: The most important procurement agreement you’ve never heard of

 

May-09-Procurement_28

Australia is seeking to be admitted to an international trade group on government procurement. The agreement will mean local suppliers will gain access to the government procurement markets of all member states, which include the 28 members of the European Union and the US.

The group is called the WTO Agreement on Government Procurement (GPA). The WTO – the World Trade Organisation – initiated the GPA in 1981 as the ‘Tokyo Round Code on Government Procurement’. It has been expanded and renegotiated ever since, with the most recent round concluded in 2014.

When (it is unlikely to be ‘if’) Australian joins the GPA, Australian businesses will be able to sell goods and services into the government markets of other member countries – and suppliers in those countries will be able to sell into all levels of Australian government on the same basis as local suppliers.

The Government says that joining the GPA will mean “legally-binding access to government procurement markets estimated at US$1.7 trillion”, a number so large it is difficult to comprehend. China, which is also seeking to join, could add another trillion dollars to the sum.

But probably the most remarkable thing about the agreement is that it is so little known. The Department of Foreign Affairs and Trade (DFAT) has a web page on the subject, but it has not exactly advertised the pact’s existence, or the fact that Australia is seeking to join.

“The GPA is a WTO plurilateral agreement which opens government procurement markets between its members,” says DFAT’s website. “The Agreement’s main principles are transparency and non-discrimination. It requires GPA members to offer other members’ suppliers conditions ‘no less favourable’ than domestic suppliers. In addition, the GPA provides for domestic review procedures to enable aggrieved firms to seek a review of procurement decisions.”

DFAT says it consulted over 45 peak bodies, industry associations and firms during 2014. It also called for public submissions, with a closing date of 30 January 2015. Six submissions have been made public, and are on the website. Although submissions have closed DFAT says it welcomes further comment, which probably indicates it was not happy with the number of submissions it received.

The Government has been criticised for conducting many of its treaty negotiations in secret. The Trans-Pacific Partnership (TPP) Agreement needed disclosure by whistleblower Ed Snowden to tell us what was being agreed to, and it has become something of an issue. And the China Australia Free Trade Agreement (ChAFTA) has become a political football and ‘barbie stopper’.

While Australia’s efforts to join the GPA are not exactly secret, nor are they being made widely known. Trade and Investment Minister Andrew Robb announced in early June that Australia would seek accession to the GPA, but it went completely unreported. There was not a single article in the Australian press about it (Government News was as guilty as the rest of them).

Why? The Government is quick to highlight its achievements, but it has been almost silent on the GPA. It has certainly not entered the public consciousness, nor even that of the commentariat, who both set and follow the public agenda but its possible consequences are profound.

The submission from the Australian Manufacturing Workers’ Union (AMWU) says that because government procurement is not guided by the profit motive, but often takes other considerations into account, the agreement is an opportunity to add some principle to procurement guidelines.

“… it should act in accordance with good principles of value for money and it should act in accordance with the highest social welfare standards. But in addition, it should act to promote Australia’s economy including industry capabilities, jobs, skills and innovation.”

The AMWU says Australia’s current government procurement policies “emphasise a narrow definition of value for money at the expense of broader industry development and economic goals. Specifically, contract cost is seen as the paramount factor when deciding on procurement outcomes, with little consideration given to explicit jobs, skills and industry capability impacts.

“The AMWU sees this as an abrogation of the government’s responsibility to support and promote a strong, diversified and advanced economy. In our view, a procurement decision that does not take explicit and if possible quantified economic benefits into account, as well as explicit contract costs, cannot achieve real value for money.

“As a response to this policy failure, the AMWU has advocated for a procurement policy that incorporates a broader definition of ‘value for money’ than contract price, in particular, an explicit and if possible quantitative assessment of the benefits of contract options.”

That seems a distant dream. If it is not happening now, it is much less likely to be the case under the GPA. The Export Council of Australia, in its very short submission, says: “Not being party to this agreement is a factor limiting the ability of Australian businesses to compete on a level playing field in international procurement markets.

“Therefore, the Australian Government should endeavour to see that Australia accedes to the GPA as soon as is reasonably possible. Given China’s potential accession in 2015, it would be beneficial for Australia to accede before that time to secure equal access to the ensuing procurement opportunities for Australian suppliers.”

The employers want access to more markets, the workers are concerned about the wider social implications. No surprises there.

The GPA has the potential to radically transform government procurement in Australia. For a start, it is totally at odds with any ‘buy Australian’ guidelines, and a literal reading of the GPA rules suggests that government authorities could be dragged before the Agreements tribunal system if they attempted to implement such a policy.

The same is true of procurement guidelines that support small business, or local business, or indigenous suppliers. Defence and national security considerations are specifically excluded, but not much else.

The GPA may or may not be a good think. But whatever the case, it deserves more scrutiny than it is getting.

 

 

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One Response to ANALYSIS: The most important procurement agreement you’ve never heard of

  1. Randy September 8, 2015 at 6:12 pm #

    Interesting, the AUSFTA has a government procurement chapter that does pretty much the same thing on a bi-lateral basis with the USA.

    That’s been in place for 10 years now.

    In that time, has anyone run the numbers on that to determine the subsequent inflows and outflows of $ or other dimensions ? Do we give more than we get ? The other way around ?

    Might be a good idea to get clear on that before we go into a ‘plurilateral arrangement’ ?

    A related consideration… many of the BIG value contracts that the Australian Government signs go to big US corporations (yes, many local SME’s get a good sized slice of the pie too).
    On paper they are US firms but the $ may be going via Ireland or other low corporate tax jurisdictions (double Irish anyone ?).

    Anyone looked into that ? At the very least, you’d think that we could arrange it so that the profits derived from Australian Government contracts are subject to Australian tax ?
    Does the GPA cater for that ?

    If not, it sounds like a job for the people’s champion, Sen. Sam Dastyari !

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