TPP to remove government procurement barriers

Suppliers from each of the 12 member states will be put on equal footing when applying for government procurement contracts under the TPP.
Written by Corinne Reichert, Contributor

The newly agreed Trans-Pacific Partnership (TPP) will remove 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, has yet to be published, with the member states only releasing executive summaries thus far.

"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 added that it has "secured commitments from Australia at the sub-federal level".

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

"The parties agree to use fair and objective technical specifications, to award contracts based solely on the evaluation criteria specified in the notices and tender documentation, and to establish due process procedures to question or review complaints about an award," the Office of the United States Trade Representative said in its TPP summary.

According to the Canadian summary, the government procurement chapter "reflects" the approach taken by the World Trade Organization (WTO) 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.

The Chinese government has historically been stringent about its requirements for foreign companies providing services locally. In January, the Chinese government released a document outlining new rules for tech companies that provide Chinese banks with hardware and software, demanding that these companies reveal their source code, submit to audits, and build back doors into their software and hardware, according to a report by The New York Times.

Objections were raised by foreign business groups, including the US Chamber of Commerce, however, which prompted the Chinese government to say it would review its e-procurement rules.

Apple acquiesced to hardware inspection demands in January, allowing the Chinese government to carry out network safety evaluations on its goods in order to maintain access to one of the biggest smartphone markets in the world.

Questions over whether the Chinese government has been using its own tech companies to procure inside information on foreign governments could also affect the WTO GPA, however.

Chinese phone manufacturer Xiaomi was last year investigated by the Hong Kong government's privacy authority for purportedly sending user information back to servers in mainland China without its customers' consent, while Chinese tech giant Huawei was barred in 2013 from both the US and Australian governments' 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 Chinese government has also been repeatedly accused of being responsible for an "overwhelming" number of cyber attacks against US agencies and organisations. As a result, Chinese President Xi Jinping and US President Barack Obama last month reached a "common understanding" to not "conduct or knowingly support cyber-enabled theft of intellectual property".

"Overall, the United States is the strongest country in terms of cyber strength; China is the world's biggest country in terms of the number of web users," Xi said.

"We have broad common interests, but we need to strengthen cooperation and avoid confrontation, and nor should we politicise this issue.

"Confrontation and friction are not the right choice for both sides."

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," Obama said.

"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 that are parties to it.

"TPP negotiating parties are now finalising arrangements for the release of the TPP text, and it will be released well in advance of signature," said Robb. "Each country will then undertake its domestic treaty-making process."

"For Australia, this will involve tabling the treaty text in parliament along with a National Interest Analysis and a review by the Joint Standing Committee on Treaties to which all interested parties can make submissions."

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