New TPP: Procurement Gains

On March 8, eleven countries signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a multilateral free trade agreement (FTA). They revived the Trans-Pacific Partnership (TPP), in which the United States had been a leading participant until President Trump – on his third day in office – ordered the U.S. withdrawal. Rather than accepting the U.S. departure as the death of the Agreement, the other participants moved forward with a renamed agreement to realize the TPP’s benefits, contribute to maintaining open markets and promote regional economic integration. The CPTPP signatories are: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. This post outlines the procurement that will be opened under the CPTPP.

Under the CPTPP, Malaysia and Vietnam will open their government procurement for the first time under an international agreement. While Malaysia’s opening is relatively modest, it will provide suppliers from CPTPP parties with more access than they currently enjoy. For Malaysia, the use of high thresholds and offsets during transitional periods, and permanent set-asides and price preferences, will enable it to carry out a national objective of protecting its Bumiputera – ethnic Malays that comprise a majority of its population.

Overcoming Malaysia’s reluctance to open its procurement had represented a significant achievement for the U.S. in the TPP procurement negotiations. Malaysia had refused to make procurement commitments in an earlier U.S. effort to negotiate a bilateral FTA; that refusal had contributed to the abandonment of those negotiations.

Vietnam will open the procurement of more than 55 government entities, subject to an extensive array of transitional and special measures. It has also committed to open its procurement under an FTA with the European Union, but it is unclear when that agreement will be implemented. Borderlex has reported that its ratification has been delayed due to a variety of issues, including the EU’s priority on ratification of its recent trade deal with Japan.

The other CPTPP participants have already opened their procurement under various agreements FTAs. In addition, Canada, Japan, New Zealand and Singapore are parties to the WTO Government Procurement Agreement (GPA), and Australia is expected to complete its negotiations to join that Agreement this year. The CPTPP builds on their existing commitments. With the exceptions of Brunei, Malaysia and Vietnam, the U.S. has access to the procurement of the CPTPP countries through FTAs or the GPA.

The CPTPP incorporates the TPP with the exception of 20-some provisions that it suspended but did not revoke. Most of the suspended provisions are in the investment and intellectual property chapters. Two are government procurement provisions. One clarifies that in setting conditions for participation in a procurement a procuring entity could promote compliance with labor laws in the territory in which the good is produced or the service is performed.

A second suspended provision removes a deadline for commencing negotiations to expand procurement covered by the Agreement, including for sub-central governments. The TPP had required such negotiations to start within three years of when the Agreement became effective. The U.S. was the likely proponent of both provisions: it had included a similar labor provision in its more recent FTAs and it had not covered any state procurement in the TPP. If the U.S. were to rejoin the Agreement, those provisions could be reinstated.

The CPTPP signatories will now undertake their respective domestic approval procedures. The Agreement will enter into force 60 days after at least six or 50% of its signatories, whichever is smaller, have ratified it. After it is implemented, it will be open for other countries to join. According to Inside U.S. Trade, potential candidates include South Korea, Thailand and perhaps the United Kingdom.

Jean Heilman Grier

March 9, 2018

Related Posts

TPP Procurement: Brunei’s Commitments

TPP Procurement: Malaysia’s Commitments

TPP Procurement: Modest Improvements in Existing Coverage

TPP Procurement: Vietnam’s Commitments

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