Even as member countries of the World Trade Organisation (WTO) struggle to move the overall agenda of the Doha Round forward, one element – government procurement – is reportedly close to a possible completion. Reports said Nicholas Niggli, a senior Swiss negotiator who chairs the committee, has said members should aim to complete the negotiations by the ministerial meeting in December this year in Geneva.
Government procurement is a plurilateral agreement, meaning that it is optional to join and only a subset of the WTO membership are part of this agreement. India is not a member of this agreement and has only taken an observer status in these negotiations. A recent report on the Agreement on Government Procurement (GPA) by the WTO secretariat has said India is evaluating a possible interest in acceding to this agreement. As of now, there are slightly over 40 members of this agreement.
Countries have been keen to enlarge the membership of this agreement since it provides new market access opportunities. Organisation for Economic Cooperation and Development (OECD) estimates show that government procurement could be to the tune of 15-20 per cent of the total GDP of a country. A recent estimate by the European Union (EU) shows that government procurement accounts for about 17 per cent of the EU GDP at over euro 2,000 billion.
A new discussion paper by the WTO on the markets available through government procurement states that central government in China procures goods and services worth about $88 billion. If the sub-central entities are added then this will add up to a much larger number, according to the paper.
The WTO paper states that the total commitment by the countries that are part of the GPA in 2008 through government procurement added up to $ 1.6 trillion, which accounted for 2.64 per cent of the world GDP. Interestingly the rate of government procurement has been growing substantially across countries, especially in countries like China or India where development activity is high. China has witnessed an over 60 per cent growth in government procurement over the years.
The potential market access that would be available to countries who are signatories to the GPA is expected to be large. The WTO paper states that if all the Brics become members of the GPA, then it could add over $500 billion to the market access potential under government procurement. Of this over $100 billion will come from China alone.
The potential, therefore, is high and countries, especially in the developed world, have been very keen on ensuring that countries like India join this agreement. There may, therefore, be a need to identify the possible gains and losses before moving forward on this issue.
The government, till now, has rightly been of the view that there does not seem to be any immediate need to join the agreement. Some sectors of the industry, however, are of the view that by joining the agreement there are potential gains in market access for India.
However, there may be a need to make sure that government continues to insist on ensuring that enough safeguards are available before opening up the country to government procurement. For instance, some developed countries have laws that warrant that the market that is available under the GPA is over and above a certain benchmark value so that the small and medium sector in the country is not hurt because of tough foreign competition.
Also, as countries progress forward on the GPA the focus has to be more towards creating transparency in government procurement and not just in seeking market access. That in itself will create new avenues for trade and will remove the possibilities of non-tariff barriers creeping into government procurement.
The potential areas in which opportunities will be high for government procurement would be in construction, computer related products and services, health and pharmaceuticals and telecommunication services. In all these areas India, too, has the potential to gain access in other markets.
The GPA can prove to be an interesting new area for higher market access if enough safeguards are provided to small companies and vulnerable sectors that may be important players in the market at present. Industry will have to take a view on whether opening up this sector can provide a new window of opportunity to global markets.
The author is Principal Adviser with APJ-SLG Law Offices