Bridges Daily Update #2 | Government Procurement Deal Heralds Start of WTO Ministerial

16 December 2011

The WTO's eighth ministerial conference kicked off in Geneva on Thursday morning, with 42 countries finalising a deal that would liberalise billions of dollars in public contracts. Along with this week's scheduled accessions of Russia, Samoa, and Montenegro, the announcement lifted the spirits of trade negotiators who had otherwise expected a relatively uneventful meeting.

Public procurement deal clinched

With only moments to go until the start of the high-level meet, the Government Procurement Agreement's 42 countries managed to eke out a conclusion to the decade-long discussions.

The revised GPA would liberalise US$100 billion in public contracts, in addition to the US$500 billion already covered by the pact.



The market access gains are largely expected to come from adding new entities to the pact's coverage, such as government ministries and agencies, as well as bringing more services and goods into the agreement.



Trade sources also particularly highlighted the importance of new and simpler rules on transparency and due process in helping fight hidden protectionism and corruption, as well as facilitating the accession of other parties.

Thursday's announcement was lauded by trade officials; on the corridors it was hailed as a new agreement for its substantial increase in market coverage and the tightening of legal obligations.

"The conclusion of these GPA negotiations is good news, and we don't have that much good news for the moment," WTO Director-General Pascal Lamy told reporters.



The ten years of negotiations were marred with difficulties, with long-standing disagreements between the EU, US, and Japan threatening to further delay the talks.

"Everyone didn't get all of what they wanted," senior Swiss diplomat Nicholas Niggli, who chairs the Government Procurement Committee, explained.

Overall, however, the global trading system "is much better off today with this decision taken," he added.



EU Internal Market Commissioner Michel Barnier called the revised agreement a win-win opportunity that would deliver growth and jobs, as well as enhance competitiveness.

"Although you can always hope for more, this is a balanced and positive agreement and all the member states of the EU have acknowledged it as such," he added.

Barnier said the EU had gained significantly expanded access to a number of strategic markets, particularly with regard to public spending on railway equipment in Japan, a key sector for the EU. The EU, as others, is also likely to benefit from the partial inclusion of Canada's provincial public procurement.



The next steps for the deal include final review and legal ratification, which is expected to take three months.

China

The new pact also sets the stage for a wave of new accessions, officials said, particularly that of China.

China, with its enormous government procurement sector, agreed to join the GPA in its 2001 WTO accession protocol but subject to special negotiations.

For long China has maintained that it was not ready to abide by the imprecise rules of the old GPA, but instead insisted on a review of rules. The old rules, China feared, did not provide sufficient clarity on the type of entities and actions covered - an issue of great relevance in China's complex governmental spending system.

The new GPA - also agreed to by China - substantially increases the likelihood of China eventually concluding its accession negotiations.

The final stumbling block in the GPA-group negotiations had also surrounded this issue, as members disagreed on the legal nature of the new accord. It now applies as a ‘revision', replacing the old GPA once it enters into force. China is thus effectively already negotiating its accession to the new agreement - an accession that, Lamy noted, will likely bring another US$100 billion "into the pot."

China's latest offer - submitted just last week - included sub-central entities, as well as agencies under the central government, although at the time of writing it was not clear which entities and/or services would be covered.



But the new offer drew a lukewarm response from some countries, with US Trade Representative Ron Kirk stressing that China "still has some distance to go" before its coverage is on par with that of current GPA parties.

Among the areas where the US is seeking changes, Kirk said, were the inclusion of state-owned enterprises in China's offer, along with more sub-central entities and services and reduced thresholds for the size of covered contracts.

WTO officials said they expected the final offers of all 42 GPA parties to be available next week.



Lamy: WTO anchors world economy as strong storm rages

In remarks at the opening of the ministerial conference, WTO Director-General Pascal Lamy warned members that, while the multilateral trading system had helped to "anchor" national trade policies, "strong storm waves are now loosening the anchor and now risk dislodging it."

Lamy pointed to the "turbulence and instability" that had characterised the global economy in 2011, as well as to "stuttering global growth" and high unemployment.

"In the midst of this tempest, citizens from across the globe have taken to the streets to demand stability, fairness, accountability," he said.

He told a packed room of assembled ministers - who had waited patiently for one hour, due to a technical glitch with translation equipment - that a "freer, fairer, and more development friendly trading system is part of the solution."

As evidence of the WTO's achievements, he cited the conclusion of a deal on the GPA, the accessions of Russia, Montenegro, Samoa, and Vanuatu as new WTO members, along with the peaceful resolution of trade disputes under the global trade body's Dispute Settlement System.

However, he also reprimanded the organisation's members for failing to tackle the root causes of the stalemate in the decade-long Doha round of trade talks. "So far, you have failed in your endeavours to amend the WTO rule-book to make global trade fairer and more open," said Lamy.

Echoing the words of the ‘political guidance' text that is widely expected to form the basis of the chair's summary to be issued at the end of the conference, the Director-General told the room that the Doha round was "at an impasse."

"We need to understand the root causes of our inability to advance multilateral trade opening and a regulatory agenda, and to build a collective response," he said.

To do this, members will need to address the "essential question" behind the blockage: "different views as to what constitutes a fair balance of rights and obligations within the trading system, among members with different levels of development," Lamy warned.

Although he offered no ‘silver bullet' that would allow members to do so, he did announce the creation in 2012 of a new panel of ‘multi-stakeholders' that would help countries look at "the real drivers of today's and tomorrow's world trade" so as "to keep transforming trade into development, growth,  jobs, and poverty alleviation."

‘Single undertaking' versus early harvests?

Pointing to the rapidly-growing ‘emerging economies' of the larger developing countries, US Trade Representative Ron Kirk told members that the world had "changed profoundly" since Doha began a decade ago. "Negotiations thus far do not reflect this change," he said.

Telling trade officials in the room that their current path is not leading to a successful outcome, he cautioned that members would "need every bit of creativity we can muster in developing a different approach."

Continued differences over the extent to which US companies would be able to access developing country markets, such as China and India, is widely believed to be at the heart of the current deadlock.

In contrast, India's commerce minister Anand Sharma told members that, "while the last few years of the Round have been disappointing, we cannot cast aside the mandate that was so arduously negotiated."

Capturing results from different areas of the talks where consensus was close - dubbed an ‘early harvest' by negotiators - was an option where "we must proceed with caution," the minister said, adding that what is currently on the table reflects years of effort.

Chinese trade minister Cheng Deming stated bluntly that "the Doha Round talks have hit the wall." Although noting that China was "open to any new pathway," he also argued that members would only be able meaningfully to discuss new issues "after the Doha Round is completed" - implicitly rebutting calls from some developed countries to tackle other trade-related questions in the absence of progress in the negotiations.

In separate statements, coalitions also expressed their views on the WTO and the future of the multilateral trading system. The Cairns Group of net agricultural exporters, including both developed and developing countries, warned that "agricultural trade policy reform is unfinished business," and argued that deadlines such as the 2013 elimination of export subsidies would remain "paper gains" until locked in through a finalised Doha deal.

Other groups - such as the small, vulnerable economies and the G-33 group that favours according additional market access flexibility to developing countries - emphasised the development dimension of the Doha talks in separate statements.

Five countries dissociate themselves from chair's text

Earlier on Thursday, five Latin American countries issued a statement criticising the process through which members reached agreement on the ‘elements for political guidance' that were agreed two weeks ago.

In the document, Bolivia, Cuba, Ecuador, Nicaragua, and Venezuela argued that the chair's political guidance document "contains elements that intentionally undermine the fundamental principles of the Doha Ministerial Declaration," thereby "sacrificing the priority of the principle of the single undertaking."

The sponsors therefore state that they dissociate themselves from the consensus set out in the document.

Some trade officials questioned the significance of the five countries' statement, pointing out that the political guidance document was intended just as the basis of an eventual chair's statement, which only the conference chair himself would be responsible for. They also argued that the General Council chair had given all countries an opportunity to make changes to the document, although none had blocked consensus at that stage.

Another source familiar with the sponsoring countries' position told Bridges that the statement was not intended to block agreement, but rather to raise concerns about the substance of the chair's summary, and the process through which it had been reached.



Ministers repeat protectionism pledge

At the close of the day, trade ministers of 22 countries and the 27-member EU issued a ‘pledge against protectionism', which they said should be included in the final ministerial chair's statement.

Together, the signatories account for more than two-thirds of global GDP, and each is a member of either the G-20 group of leading economies or the Asia-Pacific Economic Cooperation (APEC) forum, and in some cases both.

Their pledge faithfully reflects language repeatedly adopted by both groups, including a commitment to "refrain from raising new barriers to trade in goods and services, imposing new export restrictions, or implementing WTO-inconsistent measures in all areas, including those that stimulate exports."

Minister after minister denounced protectionism, with Canada calling it ‘poisonous.' They also regretted the Doha Round impasse, and called for a new way forward.

When asked whether the so-called ‘standstill' commitment would not be too restrictive for developing countries dependent on tariff revenue, Australia responded that resorting to protectionism under the guise of policy space would be "heading in the wrong direction."

With the first day of the conference having reached its conclusion, attention is now shifting to Russia's long-awaited accession to the global trade body, which will undoubtedly be the highlight of Friday's proceedings.

ICTSD reporting.

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