U.S. Agreements Open Foreign Procurement

Over nearly 35 years, the United States has negotiated trade agreements that provide U.S. firms with opportunities to participate in 57 foreign government procurement markets.

In 1981, the United States implemented the first agreement that opened federal government procurement to foreign firms and provided opportunities for U.S. firms to participate in procurement of other countries.  Since then, the United States has participated in the negotiation of numerous other agreements, the revision and expansion of existing agreements and the addition of new parties to those agreements.  As a consequence, the United States is a now party to international agreements that obligate 57 countries or economies to allow US. suppliers to participate in their government procurement.

U.S. interest in opening procurement markets predated the 1981 agreement.  It began in the 1946 negotiations that led to the establishment of the first international trade agreement — the General Agreement on Tariffs and Trade (GATT).  In those negotiations, the United States proposed treating procurement the same as other trade measures.  However, other delegations were not ready to open up their procurement to foreign suppliers.  As a result, government procurement was excluded from GATT commitments.  It would remain outside international trading rules for 35 years.

In the 1970s, the United States joined other GATT Members in again seeking to bring government procurement under the international trading system. They succeeded in negotiating the first international procurement agreement — the GATT Code on Government Procurement (GATT Code).  But, it was a narrower opening than the U.S. had proposed in the 1940s.  Instead of bringing procurement under the GATT rules and opening the procurement of all GATT Members, the GATT Code set out special rules that applied only to procurement.  Moreover, it was designed as a “plurilateral” agreement that applied just to its 12 signatories, not all GATT Parties.  Its scope also was limited to the procurement of goods by specified central government entities.

The United States followed its entry into the GATT Code in 1981 with negotiations of bilateral free trade agreements (FTAs) with two GATT Code partners – Israel (1985) and Canada (1989).  The U.S.-Canada FTA set a precedent of including a separate government procurement chapter in a broader trade agreement, as it built on the GATT Code commitments.  Subsequently, the United States and Canada joined in expanding their FTA into the North American Free Trade Agreement (NAFTA) with Mexico.  NAFTA was the first U.S. agreement to cover procurement of services and government enterprises.  It also included a yet-unused provision for the future coverage of sub-central government procurement.

While the NAFTA negotiations were underway, the United States worked with its GATT Code partners to transform that agreement into the WTO Government Procurement Agreement (GPA).  The GPA, like NAFTA, covered services and government enterprises, but also added coverage of sub-central entities.

Beginning in 2000, the United States negotiated a number of FTAs with its neighbors:  Chile, five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua), Colombia, the Dominican Republic, Panama and Peru.  The Chile FTA was the first FTA to include coverage of states.  In Asia, the United States expanded its access to foreign procurement through FTAs with Australia, the Republic of Korea and Singapore.  In the Middle East and North Africa, the United States negotiated FTAs with Bahrain, Morocco and Oman.  All of the FTAs had similar government procurement chapters.

The United States also negotiated an FTA with Jordan, but its only government procurement provision was a commitment that the parties would engage in negotiations on Jordan’s accession to the GPA.  Jordan has not yet completed its GPA accession.

In 2010, the United States and Canada negotiated their third procurement agreement in which they exchanged coverage of U.S. states and Canada’s provinces and territories.

In the 2000’s, the United States joined with the other GPA Parties in negotiations to revise the GPA.  Those negotiations concluded – after more than a decade – in December 2011 with an agreement that overhauled the GPA text and expanded the procurement that it covered.  The revision was formally approved in March 2012, and is now awaiting implementation.

As a result of all of these negotiations, the United States is now a party to agreements that provide its suppliers with rights to participate in the procurement of 57 countries or economies.  Of that total, 42 WTO Members are covered by the GPA:

  • Armenia, Canada, the European Union and its 28 Member States (Austria, Belgium, Bulgaria, Croatia, Czech Republic, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden, and the United Kingdom), Hong Kong China, Iceland, Israel, Japan, the Republic of Korea, Liechtenstein, the Netherlands with respect to Aruba, Norway, Singapore, Switzerland and Taiwan (Chinese Taipei).

The other 15 countries have opened their procurements under FTAs with the United States:

  • Australia, Bahrain, Chile, Colombia, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Morocco, Nicaragua, Oman, Panama and Peru.

Currently, the United States is negotiating two FTAs that will include government procurement provisions.  The Trans-Pacific Partnership (TPP) will add four new partners to the U.S. list of procurement partners (Brunei Darussalam Malaysia, New Zealand and Vietnam).  The Transatlantic Trade and Investment Partnership (TTIP) negotiations are with the European Union.

Jean Heilman Grier

November 8, 2013

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    Book: The International Procurement System Government procurement required 40 years and substantial efforts to become part of the international trade regime, even though it comprises a significant part of the global economy. The international system requires governments to balance protectionist forces favoring local suppliers against the pressures of liberalization, which expand procurement markets and lower prices.