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The US Department of Defense (DoD) is considering the negotiation of Reciprocal Defense Procurement (RDP) Agreements with Brazil, India, and South Korea. An RDP agreement allows the so-called “qualifying country” to participate in DoD procurement without having to comply with domestic preferences. If agreements are executed with Brazil and India, they will join Egypt and Türkiye as the only qualifying countries that are not parties to the WTO Government Procurement Agreement (GPA). This post explores whether such RDP agreements take away an incentive to join the GPA. It also considers the need for greater scrutiny of the agreements. 

The defense department commenced the consideration of negotiating RDP agreements with the publication of Federal Register notices with Brazil in September 2023, India in October 2023, and South Korea in February 2024. It solicited comments on each proposed agreement, seeking industry’s experience in participating in the public defense procurements of the three countries. DoD asked whether their defense entities conducted procurement “with transparency, integrity, fairness, and due process in accordance with published procedures, and if not, the nature of the problems encountered.”

The agreements generally require the parties to conduct their defense procurement in accordance with basic procedures such as publication of notices of proposed purchases, the content and availability of solicitations, notifications and feedback to unsuccessful offerors, and a process for hearing complaints regarding the procurement process. They are narrow in scope and less detailed than those prescribed by the GPA.

An RDP agreement obligates each country to provide access to their procurement on a reciprocal basis consistent with national laws and regulations. Before it enters an agreement, DoD seeks industry comments on the extent to which the candidate country provides reciprocity in terms of its openness to offers of foreign products. It also seeks information on “the degree to which U.S. industry feels that it would have equal and proportional access” to the other country’s defense market as that country would have under an RDP agreement to US procurement.

When DoD enters an RDP agreement, it executes a blanket public interest waiver for the new qualifying country to participate in its procurement. It exempts that country’s products from the domestic preferences (price differentials) in the Buy American Act of 1933 and its Balance of Payments Program. The defense department also does not apply the specialty metals restriction (10 U.S.C. 4863) and the chemical warfare protection clothing restrictions (10 U.S.C. 4862) to products manufactured in the qualifying country. The RDP agreement generally applies to all DoD procurement, including military items, unless the procurement is excluded for national security purposes. 

In reporting on the proposed RDP agreement with South Korea, The Korea Herald described the agreement as “a defense-sector free trade agreement [FTA] designed to reduce trade barriers and bolster bilateral exchanges.” While South Korea is a GPA party, it will still gain greater access to DoD procurement under an RDP agreement than it does under the GPA or its FTA with the United States.

For Brazil and India, obtaining access to the procurement of the US’s largest purchasing agency through an RDP agreement is very significant. As a consequence, it may reduce any interest or incentive to seek accession to the GPA. India is an observer to the GPA but has never sought membership. It has implemented only one agreement with procurement obligations. In 2022, it implemented an FTA with the United Arab Emirates.

Brazil applied for GPA membership in 2020 and tabled several market access offers. When it was close to completing its accession negotiations, it abruptly withdrew its market access offers. Its surprising action was prompted by several factors, including a change of government. President Lula’s administration (and private industry) thought his predecessor had offered too much procurement to GPA parties and that would reduce its leverage in negotiating bilateral agreements, especially with the European Union. They were also concerned that the country would not be able to use procurement to advance public policies. Brazil may return to the negotiating table with a new offer, but it would likely include provisions reserved for developing countries. Will an RDP agreement with the US reduce its incentive to continue pursuit of GPA membership?

In a May 13 press release, California Congressman John Garamendi and Michigan Senator Debbie Stabenow urged review of RDP agreements. They pressed the White House’s Made in America office to complete a congressionally mandated review on the impact of these agreements as soon as possible. They also indicated they have asked the US Government Accountability Office to conduct a review of all RDP agreements. The legislators expressed concern that DoD apparently does not track purchases by foreign militaries under the agreements, and thus is unable to determine whether they actually provide reciprocal access. They also suggested the agreements need greater interagency input and Congressional oversight. (It is unclear whether the US trade agencies, namely the Office of the US Trade Representative and the Department of Commerce, have any role in assessing candidates for RDP agreements or provide input on the potential impact on GPA accession.)

To date, DoD has entered RDP agreements with 28 countries: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, Israel, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Poland, Portugal, Slo­venia, Spain, Sweden, Switzerland, Türkiye, and the United Kingdom. As noted above, all, except Egypt and Türkiye, are GPA parties. 

Jean Heilman Grier

May 23, 2024

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The US Department of Defense (DoD) is considering the negotiation of Reciprocal Defense Procurement (RDP) Agreements with Brazil, India, and South Korea. An RDP agreement allows the so-called “qualifying country” to participate in DoD procurement without having to comply with domestic preferences. If agreements are executed with Brazil and India, they will join Egypt and Türkiye as the only qualifying countries that are not parties to the WTO Government Procurement Agreement (GPA). This post explores whether such RDP agreements take away an incentive to join the GPA. It also considers the need for greater scrutiny of the agreements. 

The defense department commenced the consideration of negotiating RDP agreements with the publication of Federal Register notices with Brazil in September 2023, India in October 2023, and South Korea in February 2024. It solicited comments on each proposed agreement, seeking industry’s experience in participating in the public defense procurements of the three countries. DoD asked whether their defense entities conducted procurement “with transparency, integrity, fairness, and due process in accordance with published procedures, and if not, the nature of the problems encountered.”

The agreements generally require the parties to conduct their defense procurement in accordance with basic procedures such as publication of notices of proposed purchases, the content and availability of solicitations, notifications and feedback to unsuccessful offerors, and a process for hearing complaints regarding the procurement process. They are narrow in scope and less detailed than those prescribed by the GPA.

An RDP agreement obligates each country to provide access to their procurement on a reciprocal basis consistent with national laws and regulations. Before it enters an agreement, DoD seeks industry comments on the extent to which the candidate country provides reciprocity in terms of its openness to offers of foreign products. It also seeks information on “the degree to which U.S. industry feels that it would have equal and proportional access” to the other country’s defense market as that country would have under an RDP agreement to US procurement.

When DoD enters an RDP agreement, it executes a blanket public interest waiver for the new qualifying country to participate in its procurement. It exempts that country’s products from the domestic preferences (price differentials) in the Buy American Act of 1933 and its Balance of Payments Program. The defense department also does not apply the specialty metals restriction (10 U.S.C. 4863) and the chemical warfare protection clothing restrictions (10 U.S.C. 4862) to products manufactured in the qualifying country. The RDP agreement generally applies to all DoD procurement, including military items, unless the procurement is excluded for national security purposes. 

In reporting on the proposed RDP agreement with South Korea, The Korea Herald described the agreement as “a defense-sector free trade agreement [FTA] designed to reduce trade barriers and bolster bilateral exchanges.” While South Korea is a GPA party, it will still gain greater access to DoD procurement under an RDP agreement than it does under the GPA or its FTA with the United States.

For Brazil and India, obtaining access to the procurement of the US’s largest purchasing agency through an RDP agreement is very significant. As a consequence, it may reduce any interest or incentive to seek accession to the GPA. India is an observer to the GPA but has never sought membership. It has implemented only one agreement with procurement obligations. In 2022, it implemented an FTA with the United Arab Emirates.

Brazil applied for GPA membership in 2020 and tabled several market access offers. When it was close to completing its accession negotiations, it abruptly withdrew its market access offers. Its surprising action was prompted by several factors, including a change of government. President Lula’s administration (and private industry) thought his predecessor had offered too much procurement to GPA parties and that would reduce its leverage in negotiating bilateral agreements, especially with the European Union. They were also concerned that the country would not be able to use procurement to advance public policies. Brazil may return to the negotiating table with a new offer, but it would likely include provisions reserved for developing countries. Will an RDP agreement with the US reduce its incentive to continue pursuit of GPA membership?

In a May 13 press release, California Congressman John Garamendi and Michigan Senator Debbie Stabenow urged review of RDP agreements. They pressed the White House’s Made in America office to complete a congressionally mandated review on the impact of these agreements as soon as possible. They also indicated they have asked the US Government Accountability Office to conduct a review of all RDP agreements. The legislators expressed concern that DoD apparently does not track purchases by foreign militaries under the agreements, and thus is unable to determine whether they actually provide reciprocal access. They also suggested the agreements need greater interagency input and Congressional oversight. (It is unclear whether the US trade agencies, namely the Office of the US Trade Representative and the Department of Commerce, have any role in assessing candidates for RDP agreements or provide input on the potential impact on GPA accession.)

To date, DoD has entered RDP agreements with 28 countries: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, Israel, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Poland, Portugal, Slo­venia, Spain, Sweden, Switzerland, Türkiye, and the United Kingdom. As noted above, all, except Egypt and Türkiye, are GPA parties. 

Jean Heilman Grier

May 23, 2024

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