Why No BRICS in the GPA?

 The BRICS have not yet opened procurement under international agreements, but several have obligations to do so.

None of the BRICS countries (Brazil, Russia, India, China, South Africa) has joined the WTO Government Procurement Agreement (GPA). However, when two BRICS — China and Russia — became members of the WTO, they promised to become parties to the GPA. Those commitments were made in response to requests from WTO members. The other BRICS (Brazil, India, South Africa) were original members of the WTO and early members of its predecessor (GATT), and thus have no such commitments. Of those three, only India has become an observer to the GPA. Brazil and South Africa have shown little, if any, interest in that Agreement. Overall, the BRICS have been reluctant to undertake commitments to open their procurement to foreign firms. This post briefly reviews the current status of each of the BRICS from an international procurement perspective.

China: When China became a WTO member in 2001, it committed to join the GPA “as soon as possible”. But, it delayed commencing its GPA accession negotiations until 2007. Since then, it has submitted five offers of the procurement that it proposes to open under the GPA, and promised a 6th offer in 2014. China will be able to conclude its GPA negotiations only when it reaches an accord with the GPA parties on the procurement that it will cover under the GPA and its procurement regime meets the requirements of the Agreement.

Russia: When Russia became a WTO member in August 2012, it confirmed its intentions to join the GPA. In its Working Party report, it committed to start its accession to the GPA within four years of becoming a WTO member by tabling an offer of coverage (by August 2016). It also indicated it would become an observer to the GPA, which it did in 2013. Russia further promised that when it became a WTO member, its governmental agencies would conduct procurement in a transparent manner, according to published laws, regulations and guidelines. In advance of fulfilling its GPA commitment, Russia is undertaking procurement commitments, along with Belarus and Kazakhstan, under the Eurasian Economic Union, a customs union that will enter into effect on January 1, 2015. Armenia and Kyrgyzstan may also join it.

Brazil: In Brazil’s most recent WTO Trade Policy Review, its authorities indicated that the country had no plans to join the GPA. It has recently adopted policies that would need to be addressed if it were to pursue GPA membership. In 2010, Brazil significantly revised its procurement legislation to make the granting of domestic preferences a permanent feature of its procurement regime. It allows preferential margins of up to 25% to be granted for goods and services produced in Brazil and in accordance with Brazilian technical standards. It is a founding member of the Southern Common Market (MERCOSUR), together with Argentina, Paraguay and Uruguay. A MERCOSUR Protocol on Government Procurement, negotiated in 2006, has not been implemented. In other preferential trade agreements, it has avoided procurement commitments. The United States and Brazil engaged in procurement negotiations as part of the Free Trade Agreement of the Americas (FTAA), but the agreement was never concluded.

India: With regard to the GPA, India has not advanced beyond its observer status, which it obtained in 2010. It does not have an overarching government procurement policy.  Moreover, its procurement policies and practices lack transparency and consistency, as they vary among the ministries of the central government, as well as between states and between states and the central government. In addition, Indian state-owned enterprises give preferences for domestic firms. India’s National Manufacturing Policy calls for increased use of local content requirements in procurement in certain sectors, including information and communications technology and clean energy.

South Africa: While South Africa uses competitive tenders for its government procurement, its legal framework for evaluating tenders is based on its 2000 Preferential Procurement Policy Framework Act and implementing regulations. It has as an extensive array of domestic preferences, including a 2011 Local Procurement Accord that sets a target of sourcing 75% of procurement locally. Also, its National Industrial Participation Program imposes an industrial participation obligation on government and parastatal purchases and lease contracts. In addition, its Broad-Based Black Economic Empowerment strategy includes preferential procurement requirements. South Africa is a party to the Southern African Customs Union (SACU) with Botswana, Lesotho, Namibia and Swaziland, but it does not open procurement. The U.S. attempted unsuccessfully to negotiate an FTA with SACU.

Outside of the commitments of China and Russia to join the GPA, the prospects of GPA membership for the other BRICS are not bright, at least in the near-term. India may be the more likely to consider GPA membership, perhaps as part of the economic reforms being undertaken by its new government.

Jean Heilman Grier

October 20, 2014

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