FINANCE-TRADE: Government Spending Comes Under WTO Scrutiny

By IPS Correspondents Reprint | | Print |

Analysis - Martin Khor

PENANG, Malaysia, Feb 16 1997 (IPS) - Officials at the World Trade Organisation (WTO) are mulling over a proposal that would effectively see national procurement procedures become part and parcel of a deregulated global marketplace.

This could have major implications for developing countries where a large part of the economy is made up of federal government spending in the purchasing of goods, payment for social and commercial services, and major construction projects.

Under the current system, procuring goods and services and the tendering, scrutiny of applications and award of projects is mainly is pretty much a national government prerogative – subject to each country’s laws and procedures.

This situation seems set to change however, with the Geneva-based WTO in the process of creating a working group to examine how its member governments procure goods and services. The decision to form such a working group was taken at the WTO’s first Ministerial Conference in Singapore last December when it was decided that a study should be conducted into the “transparency” in government procurement practices.

The prime mover of this initiative, the United States, has made it clear that in its scenario, this is only a first step towards a full- scale opening up of the “market” for government procurement for foreign companies.

With the support of the European Union (EU), the United States plans that an “interim” agreement on transparency emerging from this working group will eventually be upgraded into a full-blown agreement on government procurement practices.

This would give “national treatment” rights to foreign companies — that is they would be given the same chance as locals, to bid for and win public-sector contracts.

The U.S. game-plan on the government procurement issue was candidly presented to WTO members at its so-called heads-of- delegation (HOD) process in Geneva ahead of the December meeting in Singapore.

After initial objections from several delegations of developing countries, WTO member countries agreed in Singapore to “establish a working group to conduct a study on transparency in government procurement practices, taking into account national policies, and, based on this study, to develop elements for inclusion in an appropriate agreement”.

It would appear that developing countries only agreed on the text of the Singapore declaration because it refers only to “transparency” in procurement practices.

In other words, the implied commitment was to make procurement practices more transparent (for instance, through greater information flows) but does not include changing present procedures.

However, post-ministerial conference statements by the United States and the EU make it clear that for them, the working group is only an interim measure and a means toward an ultimate goal of multilateral rules to ensure full access to the multi-billion dollar government procurement business in developing countries.

U.S. Trade Representative Charlene Barshefsky said: “The study on procurement is intended to be the first step toward an agreement on transparency practices in government procurement which should serve to reduce the influence of corruption.

“This initiative will, as we continue to push it, help create an environment where businesses can expect a fair shake in competing for contracts with foreign governments,” she added/

EU Commission vice-president Leon Brittan put it this way: “We have agreed to a study on transparency in government procurement. Europe is determined to see the proposed study forming the basis of a wider multilateral agreement providing for non-discrimination in government procurement.”

Thus, as far as Western countries are concerned, the transparency issue is only a first and tactical measure to draw developing countries, step by step, into the larger area of national treatment for foreign firms to obtain contracts for government procurement and projects.