TTIP Negotiations: US-EU Procurement Commitments

The current U.S. and EU commitments on government procurement will be the basis for the procurement negotiations in the Transatlantic Trade and Investment Partnership.

In July 2013, the United States and the European Union (EU) commenced negotiations of the Transatlantic Trade and Investment Partnership (TTIP).  One aim of the negotiations is  to expand the current U.S. and EU government procurement commitments. Two U.S.-EU agreements set out the current procurement commitments that the United States and the EU have exchanged with each other.  They are the WTO Government Procurement Agreement (GPA) and a 1995 U.S.-EU Exchange of Letters.  WTO GOVERNMENT PROCUREMENT AGREEMENT The United States and the EU have been parties to the WTO Government Procurement Agreement (GPA) and its predecessor (GATT Code on Government Procurement) since 1981.  The GPA does not apply to all of the government procurement of the United States and the EU.  Each has specified the procurement that it covers under the GPA in annexes to Appendix I of the Agreement. In March 2012, the GPA Parties approved a revision of the GPA, which will enter into force when two-thirds of the Parties have ratified it.  Even though it has not been ratified yet, the U.S. and EU will base their negotiations under the TTIP on the revised GPA.  As a consequence, this posting describes the U.S. and EU commitments in the revised GPA. Thresholds under the GPA:  Procurement at or above specified thresholds is covered under the GPA.  The U.S. and EU apply the following thresholds:

• Central and federal governments’ procurement of goods and services:  Both apply a threshold of 130,000 Special Drawing Rights (SDRs) ($202,000).
• Sub-central governments’ procurement of goods and services:  U.S. applies a threshold of 355,000 SDRs ($552,000); EU applies a threshold of 200,000 SDRs ($311,000).
• Utilities and other government enterprises’ procurement of goods and services:  EU applies a 400,000 SDRs ($622,000) threshold; U.S. applies a $250,000 threshold for its federal government enterprises and a 355,000 SDRs ($552,000) threshold for its sub-central government enterprises.
• Construction services procured by all entities:  Both apply a 5 million SDRs ($7,777,000) threshold.

Coverage of Federal and Central Government Entities (Annex 1) The United States covers 89 Federal government entities under the revised GPA, which it lists in an annex.  In the revision of the GPA, it added 12 federal agencies. Under the 1994 GPA, the EU provided all GPA Parties with access to the procurement of  the central government entities of its 28 Member States, which it lists in an annex.  In the revised GPA, the EU covers all central government entities of its Member States (both existing and future entities).  However, it does not give the United States (and several other Parties) rights to participate in the procurement of all of the entities.  The EU only gives Iceland, Norway, Liechtenstein and Switzerland its full coverage.  The EU also covers three EU-wide entities. Coverage of Sub-central Entities (Annex 2) Under the GPA, the United States covers the procurement of specified state government entities in 37 states:

• Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, Wisconsin and Wyoming.

A variety of restrictions apply to the procurement covered by the states.  For example, the GPA does not apply to restrictions attached to federal funds given to the states for mass transit and highway projects. The 13 states that are NOT covered by the GPA are:  Alabama, Alaska, Georgia, Indiana, Nevada, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, South Carolina, Virginia and West Virginia. The EU covers all sub-central entities in two categories:

• All regional or local contracting authorities; and
• All contracting authorities which are bodies governed by public law as defined by  EU procurement directive.  (The EU includes an indicative list of these entities in an annex to the GPA).

The EU does not provide the United States with the benefits of the services procured by its  sub-central entities.  That means that under the GPA, U.S. suppliers only have rights to participate in the procurement of goods by the EU’s sub-central entities.  While those entities are not prohibited from procuring services from U.S. suppliers, they have no obligation under the GPA to allow them to participate in such procurement. Coverage of Utilities and Other Government Enterprises (Annex 3) The United States covers the procurement of the following entities:

• Five federal entities that are engaged in the electricity sector: Tennessee Valley Authority and four Power Marketing Administrations (Bonneville, Southeastern, Southwestern and Western Area)
• St. Lawrence Seaway Development Corporation
• Port Authority of New York and New Jersey (its operations includes three airports -- JFK, LaGuardia and Newark)
• Port of Baltimore
• New York Power Authority

The United States also covers the financing of power generation and telecommunications projects by the Rural Utilities Service (RUS) of the U.S. Department of Agriculture.  The United States commits that the RUS will not impose “any domestic purchase requirement as a condition of its financing” of such projects that are above 5 million SDRs ($7.7 million). The EU covers:

• “All contracting entities whose procurement is covered by the EU utilities directive which are contracting authorities (e.g. those covered under Annex 1 and Annex 2)” and “public undertakings," and 
• That undertake activities in sectors that include drinking water, electricity, airports, maritime or inland ports and transportation (railways, urban railways, automated systems, tramway, trolley bus, bus and cable).  The EU includes indicative lists of the entities that are covered.

The EU only extends its coverage of the electricity sector to the United States, “until such time, the EU has accepted that the [United States] provide[s] satisfactory reciprocal access to EU goods, suppliers, services and service providers" in its procurement markets. Coverage of Goods (Annex 4):  All goods are covered, except for defense goods and other specified goods. Coverage of Services (Annex 5):  The U.S. bases its coverage on a negative list (covering all services except those it lists in its Annex).  The EU uses a positive list (covering only the services it lists in its Annex). Coverage of Construction Services (Annex 6):  Both cover all construction services, except the United States excludes dredging. Exclusions:  The exclusions include the U.S. exclusion of its small- and minority-owned business set-asides from its GPA commitments (set out in the its Annex 7). 1995 U.S.-EU EXCHANGE OF LETTERS Under an 1995 U.S.-EU Exchange of Letters, the United States provides EU suppliers with access to the procurement of:

• Two states not covered by the GPA (North Dakota and West Virginia) and Illinois state procurement that is not covered under the GPA (best of out-of-state treatment where the state considers non-state suppliers);
• Massachusetts Port Authority (best of out-of-state treatment where the Port Authority considers non-Massachusetts suppliers); and
• Seven cities: Boston, Chicago, Dallas, Detroit, Indianapolis, Nashville and San Antonio (best of out-of-city treatment where the city considers out-of-city suppliers).

The exchange of letters does not include any EU commitments. Jean Heilman Grier October 25, 2013