TPP Procurement: Trade Advisory Committee Reports

In December 2015, the U.S. trade advisory committees submitted reports on the Trans-Pacific Partnership (TPP) to the President, the Congress and the U.S. Trade Representative. The reports were required by the Trade Act of 1974, which established the advisory committee system, and the legislation that provided the President with trade promotion authority. The President’s Advisory Committee for Trade Policy and Negotiations (ACTPN), 16 Industry Trade Advisory Committees (ITACs) and three trade policy advisory committees, as well as agricultural trade advisory committees, submitted reports. Each committee addressed the elements of the TPP of particular interest to it. This post examines the committees’ assessment of the TPP’s government procurement commitments.

All of the committees that commented on the TPP’s procurement chapter, except for one, generally supported its provisions. Most applauded the TPP’s expansion of access to procurement markets and the application of strong rules on transparency and fairness, in particular in relation to the three countries that are opening their procurement to the U.S. for the first time: Brunei, Malaysia and Vietnam. The supporters of the TPP procurement provisions include the ACTPN, a number of ITACs (Aerospace Equipment; Automotive Equipment and Capital Goods; Forest Products; Information and Communications Technologies, Services and Electronic Commerce; Service and Finance Industries; Small and Minority Business; and Steel), and the Intergovernmental Policy Advisory Committee (IGPAC).

Several committees, in particular IGPAC, raised concerns relating to the coverage of sub-central entities in the TPP. IGPAC members, which represent a broad array of state and local governments and governmental associations, focused on the TPP’s built-in mandate to initiate negotiations to expand sub-central coverage three years after the TPP enters into force. IGPAC registered its objection to any expansion of state-level coverage, including the removal of existing exceptions, lowering of procurement thresholds or expansion of coverage of state procurement entities “without explicit state consent”. That Committee also noted the importance of preserving the “authority of state and local governments to adopt legislation, standards and procedures consistent with their experience and interests.” IGPAC members were divided on the question of whether sub-federal governments should agree to adhere to procurement agreements.

The Steel ITAC opposes covering the procurement of state and local governments under TPP, while the Automotive Equipment and Capital Goods ITAC expressed disappointment that sub-central procurement was not covered by all parties, as in (most) other FTAs. The Aerospace Equipment ITAC urged the Administration to engage with the advisory committees before it entered negotiations on sub-central coverage.

Some ITACs noted particular benefits for their sector. For example, the Services and Finance Industries ITAC noted the importance of the TPP procurement protections for energy services companies since that sector is “frequently dominated by government-led project development”. Other ITACs raised concerns with specific provisions. For example, the Automotive Equipment and Capital Goods ITAC criticized the transitional thresholds allowed Brunei, Malaysia and Vietnam as “higher than necessary” and Malaysia’s exemptions of procurement under set-asides and price preferences, including under its Bumiputera program. Another ITAC noted that U.S. firms are hesitant to participate in foreign markets that lack high standards, transparent procurement rules and strong protections in contracts.

Several ITACs appreciated the inclusion of special efforts in the TPP to facilitate the participation by small and medium-sized businesses (SMEs) in procurement. However, the Small Business ITAC expressed concerns with certain provisions that may preclude SME participation in government procurement such as a requirement that a business must have a singular corporate or tax ID issued by the national-level government. It also requested that the Committee on Government Procurement consider additional measures to assist SMEs, including in sub-central procurement.

The ITACs representing the steel and the textile and clothing industries emphasized the importance of protecting those sectors. The Steel ITAC noted that strong Buy America programs are vital to the health of the domestic steel industry and commended the TPP for not weakening such programs. The Textiles and Clothing ITAC pointed to the importance of Berry Amendment protections in the TPP. (That measure requires the U.S. to exclude textiles and apparel and other certain goods purchased by the Defense Department from trade agreements.)

The Labor Advisory Committee (LAC) strongly objected to the TPP’s procurement provisions as not meeting its negotiating objectives. It had sought the omission of a procurement chapter because it could undermine job creation programs. As an alternative, it wanted a carve-out of projects funded by stimulus programs, such as the 2009 American Recovery and Reinvestment Act (ARRA), which had excluded projects covered by trade agreements. The LAC also criticized the TPP provision that allows a procuring entity to promote compliance with labor laws, as not as strong as the so-called “May 10” provision included in the U.S.-Peru FTA. That FTA allowed procuring entities to apply technical specifications to require a supplier to comply with labor laws. The LAC also took issue with the offsets that Malaysia and Vietnam may apply under the TPP for 12 and 25 years, respectively.

The ITACs that did not comment on the TPP’s procurement provisions were: Chemicals, Pharmaceuticals, Health/Science Products and Services; Consumer Goods; Distribution Services; Energy and Energy Services; Building Materials, Construction, and Non-Ferrous Metals; Customs-Matters and Trade Facilitation; and Intellectual Property. The Trade and Environment Policy Advisory Committee and the agricultural technical advisory committees also did not weigh in on procurement.

Jean Heilman Grier

January 5, 2016

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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.