WTO Agreement on Government Procurement (GPA), IN FOCUS, CRS, Sep. 22, 2023.
Andres B. Schwarzenberg,
During the past 50 years, the United States has played a
prominent role in developing international trade rules on
government procurement. Most U.S. free trade agreements
include government procurement obligations. The most
notable international procurement agreement to which the
United States is a party is the World Trade Organization
(WTO)’s Agreement on Government Procurement (GPA).
The GPA has opened procurement opportunities around the
world to foreign competition, worth trillions of U.S. dollars
annually. It also requires parties to establish transparent and
nondiscriminatory rules for covered procurement. In
particular, the agreement enables U.S. businesses to bid for
certain government contracts in the markets of other GPA
parties. Likewise, it allows foreign businesses to bid for
contracts tendered by U.S. procuring entities in areas where
federal and state governments have agreed to open up their
procurement markets. The WTO estimates the size of the
procurement market covered by the GPA at over $1.7
trillion; data limitations make it difficult to quantify
accurately the extent to which governments acquire goods
and services from suppliers of other GPA parties.
The Coronavirus Disease 2019 (COVID-19) pandemic
increased Congress’ interest in better understanding the role
of international trade in U.S. government procurement. In
particular, some Members and the Trump and Biden
Administrations have sought ways to incentivize U.S.-based
production by prioritizing the procurement of domestic
goods and services by the federal government and limiting
waivers to statutory domestic preference provisions such as
the Buy American Act (BAA). Within this context, some
Members have raised questions about the GPA, including
how U.S. commitments under the agreement affect federal
agency acquisitions of goods and services.
Background
In recognition of the economic and political benefits of
open, transparent, and nondiscriminatory trade, the United
States and other major trading partners established the
General Agreement on Tariffs and Trade (GATT) in the
aftermath of World War II. The first six rounds of GATT
trade negotiations dealt primarily with tariff measures. The
seventh round—the Tokyo Round (1973-1979)—took a
significant step in addressing nontariff barriers, such as
government procurement policies. Negotiators addressed
many of these barriers in a series of codes, including the
Government Procurement Code, which went into effect in
1981. The Code imposed a set of rules that signatories had
to apply in their procurement procedures and practices.
Later, as part of the GATT’s Uruguay Round—which
resulted in the creation of the WTO in 1995—Code
signatories negotiated a new agreement, the WTO GPA. It
entered into force in 1996. The GPA extended the scope of
the 1981 Code to include additional entities and thresholds,
as well as applicability to procurements of services and
construction services. Signatories agreed to enter into
negotiations to expand the GPA’s membership and
coverage three years after the agreement entered into force.
In 2012, after more than a decade of negotiations, GPA
parties adopted a revision to the 1996 agreement, which
entered into force in 2014. It reflected new procurement
practices, clarified obligations, and expanded the scope of
procurement activity covered by the 1996 GPA.
General Obligations under the GPA
The GPA governs procurement by any contractual means
and applies to laws, regulations, and practices regarding any
covered procurement. It may thus cover procurement by
central and sub-central government entities, as well as
utilities and other government enterprises that a party
designates. The GPA does not cover every country or
sector. The parties bound by the GPA negotiate market
access commitments on a reciprocal basis. In its schedule of
commitments (i.e., Appendix), each party specifies
government entities, as well as categories of goods and
services—subject to limitations and monetary thresholds—
that are open to procurement bids by companies from other
GPA parties. For example, the U.S. Appendix covers 85
federal entities and voluntary commitments by 37 states.
Consistent with the overall framework of the WTO, the
agreement requires nondiscrimination and transparency in
contracting—the GPA’s two cornerstone principles. In
addition, the GPA contains obligations regarding tendering,
selection, and awarding requirements, qualification of
suppliers, offsets, and challenge procedures. It also contains
general exceptions from GPA obligations. For example,
countries typically exclude certain defense and national
security-related purchases, and in the case of the United
States, set-asides for small and minority-owned businesses.
In negotiating reciprocal GPA procurement commitments,
the United States has not required that other parties open all
of their markets to foreign competition in the same nominal
amounts, or offered to open all U.S. markets to foreign
suppliers. Rather, its general aim has been to gain access to
comparable opportunities in other parties’ markets.
Procurement Practices. A procuring entity must
conduct procurement in a transparent manner consistent
with the GPA, avoid conflict of interest, and prevent
corrupt practices. Additionally, parties are to ensure that
their procedures do not preclude competition or create
unnecessary obstacles to international trade. The GPA also
establishes general rules regarding the systems through
which suppliers engage in competitive bidding for contracts
(i.e., open, selective, and limited tendering procedures).
Offsets. Government entities may not impose, seek, or
consider offsets either in qualifying and selecting suppliers,
goods, or services, or in evaluating tenders and awarding
contracts. An offset is defined as any condition “that
encourages local development or improves a party’s
balance-of-payments accounts, such as the use of domestic
content, the licensing of technology, investment,
counter‑trade, and similar action or requirement.”
Dispute Settlement (DS). The WTO Dispute
Settlement Understanding applies—with certain
exceptions—to consultations and disputes involving the
GPA. For example, only GPA parties may participate in
decisions or actions by the DS Body in GPA disputes. In
the event of lack of compliance in a dispute, cross-
retaliation is not allowed with respect to the GPA. As such,
parties may not suspend GPA benefits as a countermeasure
in disputes brought under a different WTO agreement.
Modifications. A GPA party generally cannot modify the
procurement that it covers without the consent of—or
absence of objections from—the other parties. To make
changes, a party must notify the WTO Committee on
Government Procurement and explain the likely
consequences for the mutually agreed coverage of the
agreement. If parties are unable to reach an agreement over
the proposed changes, they may pursue DS procedures.
Accession Negotiations. Any WTO member may
accede to the GPA on terms agreed between that member
and all GPA parties. Since the GPA entered into force in
1996, its membership has grown from 23 to 48 parties
(counting EU members separately). The GPA accession
process is based on negotiations with the acceding member
on the procurement that it will cover and a determination by
the GPA parties that its procurement system complies with
the GPA. Many members that have joined the WTO since
1995 committed to seek GPA membership as part of their
terms for accession, including China and Russia—both of
which are engaged in GPA accession negotiations. North
Macedonia is set to become the 49th party to the GPA after
its accession terms were approved in June 2023.
Security and General Exceptions. The GPA contains a
national security exception, broadly in line with GATT
1994’s Article XXI. The exception states that a party is
allowed to take “any action or not [disclose] any
information that it considers necessary for the protection of
its essential security interests relating to the procurement of
arms, ammunition or war materials, or to procurement
indispensable for national security or for national defense
purposes.” In addition, the GPA also contains general
exceptions modeled after GATT’s Article XX. These
include—but are not limited to—safety, human, animal, or
plant life or health, and philanthropic institutions.
Issues for Congress
As Congress oversees the implementation of recent
legislation and the Biden Administration updates processes
and regulations on U.S. government procurement, Members
may consider the implications of such measures for the U.S.
economy and their consistency with U.S. commitments
under the GPA. For example, Members may engage with
the Administration to assess the extent to which domestic
producers are able to meet U.S. government demand and
satisfy various essential national needs with inputs and
products exclusively sourced from the United States.
The Trump Administration reviewed the benefits of the
GPA, and according to one news report, considered
withdrawal from the agreement. While some Members
reportedly contend that the GPA is “imbalanced” and
support U.S. withdrawal from it, others have called for
modifying U.S. commitments under the agreement and
modernizing rules regarding government procurement.
Others argue that participation in the GPA not only
maintains U.S. companies’ ability to compete for foreign
government contracts, but it also gives the United States
leverage to negotiate greater market access and better terms
with WTO members in accession negotiations (e.g., China).
U.S. government contractors often rely on global supply
chains to support their U.S. government contracts, including
networks of suppliers and manufacturing facilities in the
territories of other GPA parties. Even when manufactured
in the United States, many of the products that U.S.
suppliers deliver to federal and state entities may have
inputs from other GPA parties. Therefore, U.S. withdrawal
from the GPA, or modifications to U.S. commitments under
it, could potentially require U.S. businesses to restructure
their supply chains—including, for example, by changing
suppliers or relocating facilities—to comply with domestic
sourcing laws. Moreover, as countries compete to set global
standards (e.g., 5G technology), U.S. firms unable to bid for
government contracts in GPA parties’ markets may find
themselves at a disadvantage, ceding opportunities to
competitors from other countries.
https://sgp.fas.org/crs/row/IF11651.pdf