TPP removes barriers for government procurement

The TPP has put suppliers from each of the 12 member states on equal footing when applying for government procurement contracts.
Written by Corinne Reichert, Contributor

The Trans-Pacific Partnership (TPP) has removed the barriers from government procurement, opening up equal market access to tech companies from each of the 12 member countries.

The full text of the notoriously secretive TPP, which aims to regulate trade between Australia, the United States, New Zealand, Canada, Singapore, Vietnam, Malaysia, Japan, Mexico, Peru, Brunei, and Chile, was published on Thursday, a month after the treaty reached agreement.

Under the Government Procurement chapter [PDF], member states must treat vendors from each other's countries on equal footing with domestic suppliers in awarding government contracts.

"With respect to any measure regarding covered procurement, each party, including its procuring entities, shall accord immediately and unconditionally to the goods and services of any other party and to the suppliers of any other party, treatment no less favourable than the treatment that the party, including its procuring entities, accords to: (a) domestic goods, services, and suppliers; and (b) goods, services and suppliers of any other party," Article 15.4(1) says.

Accountability and transparency over decision making will also be improved by instituting a committee to review decisions by governments on their procurement decisions when challenged by a services provider.

Under Article 15.23, the parties must establish a "Committee on Government Procurement", comprised of representatives from each member's government to oversee the procurement process.

Parties may request the committee to meet in order to address such matters as procurement cooperation; facilitating SME participation in procurement; the use of transitional measures; and further negotiations on procurement contracts.

Article 15.22 supplies that the parties must cooperate on opening up their procurement markets to SMEs; exchanging information, statistics, and legal frameworks; implementing electronic tendering processes; strengthening government capabilities in best practices for procurement; fulfilling all parts of the TPP chapter; and improving multilingual access to procurement opportunities.

"The parties recognise their shared interest in cooperating to promote international liberalisation of government procurement markets with a view to achieving enhanced understanding of their respective government procurement systems and to improving access to their respective markets," the TPP says.

An exhaustive list of the Australian departments, agencies, and other entities subject to the TPP chapter can be found in Annex 15A [PDF].

Of note is that while Australia has opened its federal government procurement market to all member states -- apart from the procurement of motor vehicles, the government solicitor, and some Defence functions -- it has only offered procurement access to state and territory governments to Canada, Chile, Japan, Mexico, and Peru. However, it stated that it would extend this once the remaining parties negotiate on "mutually acceptable concessions".

Procurement access also does not cover health and welfare, education, utilities, and motor vehicles in the Australian Capital Territory; health and welfare, education, motor vehicles, Transport for NSW, and the Privacy Commission in New South Wales; Charles Darwin University in the Northern Territory; health and welfare, education, training, arts, government advertising, and motor vehicles in Queensland; health and welfare, education, advertising, and motor vehicles in South Australia; health and welfare, education, and advertising in Tasmania; and motor vehicles in Victoria.

Procurement of goods and services for central government entities must be worth 130,000 SDR or above before being opened to member states for participation, while construction services must be worth 5 million SDR or more.

For sub-central government entities -- the states and territories -- goods and services must be worth at least 355,000 SDR, while construction services are again 5 million SDR or above. For all other entities, such as regulators, goods and services must be valued at 400,000 SDR or higher, and construction services 5 million SDR or more.

In October, prior to the full TPP text being published, the Australian government said the treaty would equalise market access to tech companies between member states.

"The TPP includes provisions that focus on procedures to ensure fair, transparent, and non-discriminatory treatment of suppliers in government procurement," the Australian Department of Foreign Affairs and Trade said in its TPP overview [PDF].

"It seeks to deliver improved access for Australian suppliers to the government procurement markets in the other 11 TPP countries."

According to Foreign Affairs, Trade, and Development Canada's summary of the TPP's government procurement chapter, government purchasing constitutes a significant portion of each country's revenue.

By removing foreign barriers to this, it will improve suppliers' chances of securing million-dollar contracts throughout the Pacific Rim countries, which will in turn encourage competition and ensure that all governments gain the best value for their taxpayers' dollars.

"The Organisation for Economic Cooperation and Development (OECD) and the World Trade Organization (WTO) estimate that government purchases represent approximately 15 percent of a country's gross domestic product, while other estimates value the global government procurement market at over $1.3 trillion," the Canadian technical summary said.

"Canadian suppliers will be ensured equal treatment with domestic suppliers to TPP parties for covered procurement."

The Canadian government confirmed at the time that it had "secured commitments from Australia at the sub-federal level".

According to the Canadian summary, the government procurement chapter "reflects" the approach taken by the WTO's Government Procurement Agreement (GPA), of which Australia is also a member.

Australian Minister for Trade and Investment Andrew Robb announced in June that Australia would be acceding to the revised, modernised WTO GPA that allows for timely and efficient e-procurement applications, submitting its offer to the WTO Committee on Government Procurement on September 16.

The WTO GPA covers 45 member states: Australia, the United States, New Zealand, Canada, the European Union, South Korea, Japan, Hong Kong, Taiwan, Singapore, Switzerland, Norway, Iceland, Liechtenstein, Aruba, and Armenia.

The government procurement market of these parties was estimated to be worth $1.7 trillion in total, with member parties required to treat the applications by other members' suppliers on equal footing with domestic suppliers.

"The fundamental aim of the GPA is to mutually open government procurement markets among its parties," the WTO GPA website says.

"As a result of several rounds of negotiations, the GPA parties have opened procurement activities worth an estimated $1.7 trillion annually to international competition -- ie, to suppliers from GPA parties offering goods, services, or construction services."

Trade and commerce giant China has yet to accede to the GPA, but is currently involved in negotiations on the matter. Its government procurement market is worth $1.5 trillion alone, and would provide foreign companies with non-discriminatory access to its market for the first time should it become a party to the GPA.

Chinese tech giant Huawei was barred in 2013 from procurement contracts for both the US and Australian government high-speed broadband network projects, after the tech giant was linked with the Chinese government.

Then-Huawei CEO Ren Zhengfei denied the company's involvement in government espionage, while the US National Security Agency (NSA) was revealed to have itself conducted surveillance on Huawei's networks, email archives, and communications between its top executives, according to documents leaked by Edward Snowden.

The TPP is endeavouring to push China into conforming to the trade regulations imposed on its Pacific neighbours by the TPP.

"When more than 95 percent of our potential customers live outside our borders, we can't let countries like China write the rules of the global economy," United States President Barack Obama said in October.

"We should write those rules, opening new markets to American products while setting high standards for protecting workers and preserving our environment."

The TPP has yet to be signed and ratified by the 12 Pacific Rim nations.

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