A ) A NTECEDENTES J URÍDICOS Y L EGALES DEL A LTAR DE LA P ATRIA

There are important limitations to the scope and coverage of the Agreement on

Government Procurement. As a plurilateral agreement, it applies only to member countries and then only to procurement by specified government departments and enterprises, and non-central levels of government. Moreover, its coverage is limited to specified goods, services and

construction services, above certain monetary thresholds. The rule is: if it’s not specified, it’s not covered.

The first limitation is that membership in the Agreement has so far embraced only the major industrialized countries. No developing countries have yet joined, although some are observers. Developing countries generally have the most discriminatory procurement practices, either out of misguided efforts to promote economic development or out of simple corruption. Consequently, they are the members that need to be brought under the agreement the most, both for their own sakes as well as for the sakes of other members. Their taxpayers would benefit from lower cost goods and services, and other countries would benefit from expanded markets. The United States is pushing to extend the AGP to all WTO Members.

The second important limitation is peculiar to Canada. It’s Canada’s lack of access to the procurement of non-central levels of government under the Agreement. Since the Canadian Government was not prepared to make commitments with respect to Canada’s provincial and local government procurement, other countries are allowed to have derogations from most-

favoured-nation status for Canada with respect to their own sub-central government procurement. Canadian exporters are thus not able to benefit fully from the Agreement in obtaining access to procurement by non-central levels of government in other member countries.

Motivated in part by worries about opening up procurement in the health and education sector to foreign suppliers, the Canadian provinces have refused to go along with any deals negotiated by the Canadian Federal Government that would allow the United States to retain Buy American and small business carve-outs. While the concerns about the impact of the GPA in their areas of jurisdiction are legitimate, provinces are going beyond their jurisdiction when they try to dictate to the Canadian federal government on the exact nature of the access deal that must be negotiated with the United States.

It is particularly ironic that Canada, which has a preferential trading relationship with the United States under the NAFTA, has less favorable access to state and local government

procurement in the United States than other countries such as the European Union and Japan, which have no such special trading arrangement. Canadian suppliers have their provincial governments to thank for this.

The third important limitation pertains to the scope and coverage of the Agreement that is set out in the general notes provided in the appendix of each signatory. Important listed

exclusions include urban transportation and defence, and set asides for small and minority businesses.

There are also technical problems with the Agreement. Many of the procedures specified are unnecessarily complex and need to be updated to reflect the way business is currently being done using computers and modern telecommunications. For instance, the forty-day period for tendering is considered unduly long now with computerized bidding for many goods and services, and the requirements that invitations to participate in an intended procurement be published in a listed publication and that “tenders normally be submitted in writing either directly or by mail” are not consistent with computerized procurement systems. Accepted modes of transmission of information in the Agreement need to be brought into the information age and should include e-mail.

A review of the Agreement on Government Procurement as required under Article XXIV:7 is currently underway in the WTO Committee on Government Procurement, which is made up of representatives of signatories of the Agreement, and is scheduled to be ready this fall. The review is aimed at simplifying the administrative rules in the Agreement and making them consistent with current business practice. It is also seeking to cover more procurement and to eliminate “discriminatory measures” or exceptions to coverage. An effort is being made to complete these negotiations before the Seattle Ministerial. These improvements are expected to increase the attractiveness of the GPA to other prospective new members.

The Canadian Government, under pressure from the provinces, has been preoccupied with bilateral Canada-US issues in government procurement. These include Buy American provisions and the small business “set-asides.” This is how they work. In the United States, the Federal Government often provides funds to state and local governments requiring that the

money be spent on suppliers and products that have a certain minimum proportion of US content. This is allowed under both the GPA and the NAFTA because it is not a direct purchase of the Federal Government that is covered by the Agreements. For example, the Transportation Equity Act for the 21 Century (TEA-21), which provides financing for transit, highway and airportst

projects carried out by state and local governments and private sector organizations, has Buy American provisions that require all steel and manufactured stock to be 100 per cent American content and all rolling stock to be 60 per cent American and assembled in the US.

The small business “set-asides” are Federal Government procurement preferences in the United States that reserve a certain proportion of government contracts for small business. These set asides are large, amounting to 23 per cent of the Federal Government’s contract budget, and have usually been met or exceeded. And the US businesses benefitting are not so small either by Canadian standards, having as many as 500 employees in manufacturing (even 1,500 in some sectors) and revenue of up to US$17 million in services.

Without assurances that the United States will eliminate, or at least reduce, such

discriminatory measures, the provincial governments have been unwilling to make commitments with respect to the procurement under their jurisdiction. These provincial government concerns are understandable. But, without the ability to commit provincial government procurement, the Canadian Government has come under heavy fire in the WTO Committee on Government

Procurement for failing to deliver on its own commitments in its Annexes 2 and 3 of the GPA to cover procurement under provincial jurisdiction. Canada’s response to this criticism is that these commitments were conditional on getting commitments from the provinces, and, since no such commitments were received, there was no obligation to make an offer under these Annexes.

Regardless of who is right or wrong, the result is still the same: Canadian suppliers are deprived of preferred access under the GPA to the procurement market of sub-central levels of government in the other signatory countries. In addition, Canada’s inability to get agreement from provinces to make procurement commitments is a major embarrassment that makes it difficult for the Canadian Government to provide the necessary leadership in the government procurement negotiations leading up to the Seattle Ministerial and that will undermine its credibility at the bargaining table.

The GPA has been important in opening up the large government procurement market of the major industrial countries to suppliers from other countries. Extending the Agreement to other, particularly developing, countries and improving its functioning is important for the future of the international trading system. The industrialized countries that are members of the GPA need to push harder to get developing countries, particularly the newly acceding countries, to join the GPA.

If Canada is to play a key role in negotiating a new strengthened Agreement on

Government Procurement that will open up sub-central procurement markets in other countries to Canadian suppliers, the provinces need to be much more cooperative with the federal

government. Only then will the Canadian Government be able to offer access under the GPA to provincial procurement in return for access to sub-central levels of procurement in other

countries, including at the state and local level in the United States.