BOT Contracts and Works Concessions in TTIP

 The U.S. and the EU should exchange coverage of build-operate-transfer contracts and works concessions in the TTIP.

 In the negotiations of the Transatlantic Trade and Investment Partnership (TTIP), the United States and the European Union (EU) should aim to close the gaps in their coverage of government procurement under the WTO Government Procurement Agreement (GPA).  This could begin in areas where exchanging access would be relatively easy.  One such area involves construction projects.  While both the EU and the U.S. cover all construction services under the GPA (with the exception of the U.S. exclusion of dredging), they have not exchanged access to public works concessions or build-operate-transfer (BOT) contracts.  But, exchanging that coverage in the TTIP should be relatively straightforward since the EU and the U.S. provide such coverage to other trading partners.

EU Coverage of Works Concessions:  In the recent revision of the GPA, the EU added works concessions under a national treatment regime to its commitments.  This commitment applies only when the contracts are awarded by central or sub-central government entities that are covered under the GPA; it does not extend to contracts awarded by EU utilities.  The EU also limits access to those contracts to six GPA parties: Iceland, the Republic of Korea, Liechtenstein, Norway, the Netherlands on behalf of Aruba and Switzerland.  It denies the U.S. the right to participate in these construction projects.

U.S. Coverage of BOT and Public Works Concession Contracts:  Although the U.S. did not cover BOT contracts or public works concession contracts under the revised GPA, it does cover them under its recent free trade agreements (FTAs).  Beginning in 2004 with two FTAs — the U.S.-Chile FTA and the U.S.-Singapore FTA, the U.S. has included BOT contracts and public works concession contracts in all of its FTAs.  The FTAs treat BOT and public works concession contracts as a type of contract for construction services covered under the FTA.

While the EU and U.S. have not extended such coverage to each other, they have both given it to the same third country — the Republic of Korea.  The U.S. exchanged access with Korea to BOT and public works concession contracts in the U.S.-Korea FTA (KORUS FTA). Those contracts are defined in the FTA as:

  • any contractual arrangement the primary purpose of which is to provide for the construction or rehabilitation of physical infrastructure, plant, buildings, facilities, or other government-owned works and under which, as consideration for a supplier’s execution of a contractual arrangement, a procuring entity grants to the supplier, for a specified period, temporary ownership, or a right to control and operate, and demand payment for the use of, such works for the duration of the contract.

While the U.S. and Korea have the same commitments in the KORUS FTA with respect to such contracts, the EU and Korea have taken slightly different approaches in their exchange of commitments.  In both the EU-South Korea FTA and the revised GPA, Korea offered the BOT coverage that it provided to the U.S. in the KORUS FTA.  However, the EU does not cover BOT contracts, but rather covers public works concessions, as in the revised GPA, though the FTA offers more detail than the GPA.  Since the EU has treated Korean coverage of BOT contracts as reciprocal to its coverage of public works concessions, it should be able to accept U.S. coverage of BOT contracts in the TTIP.

For the U.S. and EU to exchange coverage of BOT contracts and public works concessions would not be a monumental step.  But, it could remove one gap in their coverage and contribute to a foundation for addressing the more difficult procurement issues in the TTIP negotiations.

Jean Heilman Grier

March 24, 2014

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