Global Perspectives on Public Procurement. Edition №1

The World Trade Organization and the WTO Agreement on Government Procurement

The first edition of the new Q&A rubric «Global Perspectives on Public Procurement» dives into the fascinating world of the World Trade Organization (WTO) and its Agreement on Government Procurement (GPA).

Question 1. When and why was there a need to create the World Trade Organization?

After the end of the World War II against the background of reorganization and the creation of new international institutions, the USA and the countries of the future EU began work on the liberalization of international trade. The main goal of this process was to reduce customs tariffs and eliminate non-tariff restrictions in international trade.

Since 1948, a number of negotiations (rounds) have been held between the countries – in Havana (Cuba), Annecy (France), Torquay (the UK), Tokyo (Japan), Punta del Este (Uruguay), Montreal (Canada), Brussels (Belgium) ) and, finally, Marrakesh (Morocco) in 1994, during which the activities of the World Trade Organization (WTO) were launched. During this period, the trading system was governed by the General Agreement on Tariffs and Trade (GATT).

At the time of this significant event in international trade relations, the countries managed to significantly reduce tariffs and agree on the rules of conducting international trade. It also brought to life, but in a different form, the failed attempt of 1948 to create the International Trade Organization.

Question 2. How big is the WTO?

Currently, the WTO has 164 members, of which 117 are developing countries or separate customs territories. The activities of the WTO are supported by a Secretariat with about 600 employees under the leadership of the Director General of the WTO. The Secretariat is located in Geneva, Switzerland, and has an annual budget of approximately 200 million Swiss francs.

Question 3. What tasks does the WTO perform?

The WTO is a forum for negotiating agreements aimed at reducing barriers to international trade, liberalizing it and ensuring a level playing field for all, thus contributing to the economic growth and development of countries.

The WTO also provides a legal and institutional framework for the implementation and monitoring of various WTO-specific agreements, as well as for the settlement of disputes arising from their interpretation and application, covering various aspects of trade in goods, services and intellectual property.

The main areas of activity of the WTO are:

Question 4. What is the structure of the WTO agreement?

WTO agreements cover goods, services and intellectual property (General Agreement on Tariffs and Trade (GATT), General Agreement on Trade in Services (GATS), Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). They spell out the principles of liberalization and allow exceptions and include the obligation of individual countries to reduce customs tariffs and other trade barriers, as well as to open and keep service markets open. They also establish dispute settlement procedures and establish a special regime for developing countries. These agreements are referred to as WTO trade rules, and the WTO is often described as a rules-based system. But it is important to remember that the rules are actually agreements reached by governments in the process of accession negotiations.

Moreover, there are additional agreements and annexes dealing with special requirements and regulation of specific sectors or issues.

Finally, there are detailed schedules (or lists) of commitments made by individual countries that allow certain foreign products or service providers access to their markets. For GATT, they take the form of binding commitments on tariffs for goods in general and combinations of tariffs and quotas for certain agricultural goods. As for the GATS, the commitments specify how much access foreign service providers have for certain sectors and include lists of the types of services to which individual countries say they do not apply the “most favored nation” principle of non-discrimination.

Question 5. Does the candidate have to join all WTO agreements?

Each candidate acquiring WTO membership is automatically compensated to the above conditions. At the same time, another group of agreements that are not included in the mandatory ones is also important: two “multilateral” agreements signed by not all WTO members: the agreement on trade in civil equipment and the agreement on government procurement.

WTO agreements are not static; they are used from time to time and new deals may be added to the package.

Question 6. What is the WTO Agreement on Government Procurement (GPA) and what is its significance in international trade?

The GPA is a multilateral agreement within the framework of the WTO, meaning that not all WTO Members are Parties to the Agreement. Currently, the Agreement has 22 Parties, including 49 WTO Members. Thirty-five WTO members/observers participate in the Public Procurement Committee as observers. Of these, 11 members were in the process of joining the Agreement.

The main purpose of the GPA is the mutual opening of public procurement markets between its Parties. As a result of several rounds of negotiations, the parties to the Government Procurement Agreement have opened to international competition (i.e. suppliers from the side of the Agreement offering goods, services or construction services) procurements valued at more than $1.7 trillion annually.

Question 7. What is the structure of the GPA?

The GPA consists mainly of two parts: the text of the Agreement and the parties’ market access schedules. The text of the Agreement establishes rules that require ensuring open, fair and transparent conditions of competition during public procurement. However, these rules do not automatically apply to all purchases by each party. In contrast, coverage schedules play a critical role in determining whether a procurement activity is covered by the Agreement or not. The agreement covers only those procurement activities carried out by covered entities that purchase listed goods, services or construction services at a value that exceeds the established thresholds.

The GPA is managed by the Committee on Government Procurement, which includes representatives from all GPA Parties. The implementation of the Agreement is implemented using two mechanisms: the internal review mechanism at the national level and the WTO dispute settlement mechanism at the international level.

The Parties continue to improve the GPA. The GPA 2012 stipulates that the Parties should conduct further negotiations with the aim of gradually reducing and eliminating discriminatory measures and achieving the greatest possible expansion of coverage.

Question 8. Who can join the WTO and what are the requirements?

Any state or customs territory that complies with the basic principles of the WTO and has successfully passed the negotiation process can become a member of the WTO. The main of these principles are:

That is, according to these principles, the candidate (observer) must have an active and transparent internal and external trade policy.

At the same time, if you look at the list of countries that have been members of the WTO for a long time, it can be rightly noted that not all of them meet or even come close to meeting these requirements. What really matters is how “desirable” a certain candidate is and how willing members are to provide this candidate with more attractive opportunities to enter their markets. On the other hand, how “desirable” are the markets of this candidate, including from the point of view of raw materials.

Each country tries to find a favorable balance between protectionism and liberalization of foreign trade. That is, each joining process, regardless of the generally established rules, has individual features and deadlines. The political will of the leadership to join the WTO is also of great importance.

Ukraine became a WTO member in 2008 and joined the WTO Agreement on Government Procurement in 2016.