FOREWORD This pamphlet is one of nine in a new publication series summarizing issues that resulted from the most recent round of Multilateral Trade Negotiations (MTN) held under the General Agreement on Tariffs and Trade (GATT), called the Tokyo Round. Other titles in this series are: Agreement on Customs Valuation • Agreement on Import Licensing Procedures • Agreement on Technical Barriers to Trade • Enforcement of U.S. Trade Agreement Rights • Framework on Conduct of International Trade • Tokyo Round Tariff Reductions U.S. DEPARTMENT OF COMMERCE International Trade Administration June 1980 Introduction The most recent series of Multilateral Trade Negotiations (MTN) held from 1973-79 under the General Agreement on Tariffs and Trade (GATT)-the Tokyo Round-resulted in six major international agreements on nontariff measures. The one discussed in this pamphlet is the Agreement on Government Procurement. Its purpose is to provide for national treatment and nondiscrimination in purchases by government entities covered by the Agreement. The Agreement comes into effect on January 1, 1981. (See appendix for countries that have signed and intend to sign the Agreement.) Governments are among the world's largest purchasers of goods. However, access by foreign sellers to this vast and growing market has been extremely limited since international trading rules have heretofore permitted governments to maintain restrictive "buy national" policies. In some countries, such as the United States, these policies have taken the form of clearly stated preference margins for domestic goods. In other countries, buy national policies are carried out through less formal but often more restrictive means. To extend the benefits of international trade to government purchases, the United States joined with its major trading partners to draft. international rules for government purchasing practices. This effort started in the 1960's in the Organization for Economic Cooperation and Development (OECD) and was completed in the MTN. The resulting Agreement on Government Procurement should provide access for U.S. suppliers to foreign procurement markets exceeding $20 billion. Main Features of the Agreement The primary obligation of the Agreement on Government Procurement is that signatories to the Agreement will not discriminate against or among the products of other signatories in purchases covered by (i.e. subject to) the Agreement. The Agreement's coverage extends to purchases of goods by specified government entities (e.g. ministries and departments) listed in the Agreement, on contracts valued at 150,000 Special Drawing Rights (SDRs) (as of May 1, approximately $200,000). This list includes almost all the central government entities of the major developed countries. The Agreement does not apply to such things as purchases of service contracts (except those incidental to the purchase of goods), construction contracts, national security items, purchases by state and local governments (with or without Federal funds), or purchases by any entity that has not been specified as being covered. Also, the United States has specifically provided that purchases under its small and minority business setaside programs will not be subject to the Agreement's provisions. To eliminate discrimination against foreign products at all stages of the procurement process, the Agreement includes detailed requirements as to how government purchasing is to be conducted. Signatories must openly publish invitations to bid on all contracts, supply all documentation necessary to bid, apply the same qualification and selection criteria to both domestic and foreign firms, and generally provide full information and explanation at every stage of the procurement process. Signatories are permitted to purchase using one of two proceduresopen tendering or selective tendering. Under open tendering any interested firm may bid. Under selective tendering, suppliers on a list of qualified bidders are invited to bid. In this latter instance, all qualified bidders from signatories must be included on bidders lists upon request, and selections from the bidders lists must provide full opportunity for foreign bidders to compete. To ensure compliance with the Agreement, there are enforcement provisions to deal with both individual contract violations and larger, more systemic violations. On an individual contract basis, a firm will have the right to be told why its bid lost and why the winner was selected. If the firm is not satisfied with the explanation it receives, it must be provided with an opportunity to appeal the procurement action. In those cases where it is believed that a country has violated its overall obligations under the Agreement, there are strong dispute settlement procedures that can be initiated. If bilateral consultations fail to resolve a dispute, a signatory will be able to take a case before a Committee of Signatories, have the case heard by an international panel of experts and, if upheld, expect the Committee to authorize sanctions if the offending country does not mend its ways. The Agreement also provides for an exchange of data on purchases covered by the Agreement so that signatories can assess whether the results of the Agreement have been equitable. There will be regular meetings of the signatories to discuss the operation of the Agreement, and within 3 years the signatories will commence negotiations with a view to expanding Agreement coverage to purchases that are not covered currently, including service contracts. U.S. Implementation of the Agreement U.S. implementation of the Government Procurement Agreement is provided for in the Trade Agreements Act of 1979. Under the Act the President is empowered to waive any law or regulation relating to government procurement, such as the Buy American Act, which discriminates against products of specifically designated countries in any purchase subject to the Agreement. The Act also provides extensive reporting and monitoring requirements and a requirement to seek to negotiate an expansion of the Agreement's coverage to service contracts and purchases by entities in key product sectors that are not covered currently. Sectors that will receive priority attention include telecommunications equipment, power-generating equipment, and transportation equipment. To assure that U.S. firms receive the maximum possible benefits from the Agreement, the Administration plans to establish a program for assisting U.S. firms at every stage of the foreign procurement process, from receiving timely notice of bidding opportunities to submitting bidding documentation. There also |