Australia: The WTO Agreement on Government Procurement: A world of opportunity or a threat to local business?

The Australian Government's accession negotiations to the WTO Agreement on Government Procurement (GPA) seem to have fallen under the radar. This is strange given that (if China and Australia successfully conclude negotiations) the market for government procurement accessible to Australian businesses is estimated at around USD$3.2 trillion.

It seems like a world of opportunity for Australian businesses looking to sell goods and services into other countries, but what does it mean for competition in Australian markets?

AUSTRALIA'S ACCESSION NEGOTIATIONS

The GPA is a plurilateral WTO agreement in which parties agree to give other parties access to procurement for nominated government agencies above a chosen threshold.

Parties are legally bound not to discriminate against other parties' tenderers and must have an independent review body available to aggrieved tenderers.

On 2 June 2015, the Minister for Trade and Investment announced that Australia will engage in negotiations with a view to acceding to the GPA.

Currently, 45 countries are parties to the GPA, with China and 9 others anticipated to join in the near future. New Zealand recently joined on 12 August 2015.

IS IT GROUND BREAKING?

The Australian Government has been (understandably) eager to espouse the benefits of access to government markets around the world, especially China's procurement market (if China accedes).

But there has been limited commentary about the specific nature of the opportunities in overseas markets, as well as what the GPA means for Australian suppliers competing within Australia.

Australia has free trade agreements with numerous GPA parties but not all of these include access to government procurement.

Notably, the recently-signed China-Australia Free Trade Agreement (ChAFTA) contains an express commitment to negotiate a reciprocal agreement only after China accedes to the GPA.

It is reasonable to expect that the GPA will significantly expand markets available to Australian businesses, especially in China and the European Union. However, the devil will be in the detail – it remains to be seen just what procurement markets the other parties allow access to under the GPA.

LOCAL INDUSTRY

The Commonwealth Procurement Rules enshrine the principle of non-discrimination, but state-level government procurement often mandates or prescribes weight to the presence of the tenderer in Australia or the State/Territory.

The State and Territory governments reportedly support Australia's accession negotiations. However, given a preference for local industry is clearly incompatible with the GPA, it is unclear whether States or Territories will be required to abandon their consideration of local presence, or whether their procurement markets will not be nominated for the GPA.

Interestingly, just as New Zealand has expressly reserved favourable treatment to Maori under the Treaty of Waitangi, Australia may be able to preserve support for indigenous corporations.

SMALL TO MEDIUM ENTERPRISES

Australia's ability to set its own procurement policy uninhibited has allowed it to flexibly balance policy considerations with the concept of 'value for money'.

In particular, the Commonwealth and numerous States' procurement policies specifically support SMEs.

Australia's preferential treatment for SMEs would prima facie be prohibited on the basis that it indirectly discriminates against foreign entities. This may mean that Australian SMEs see a decline in the tenders they are successful in.

In its submission, the Australian Fair Trade & Investment Network stated that Australia should ensure that it preserves the preferential treatment of SMEs.

AUSTRALIA'S PUBLIC INTEREST

It is commonly accepted that sensitive industries such as defence and national security should be sourced internally (ie not from offshore companies) on the basis that it is in Australia's public interest.

But just how many other national values and public interests are at odds with opening our procurement markets to overseas competitors?

The Textile Clothing and Footwear Union of Australia (TCFU) argued in its submission to DFAT that goods sourced from organisations with minimum ethical and labour standards are in our public interest.

The TCFU argues that it would be improper for Australia to bind itself to the WTO GPA, given that (among other considerations) preferring labour, environmental, or human rights standards is arguably discriminatory and would breach a commitment to the GPA.

Sensitive areas such as the privacy of personal information should also be considered. Australia has strict privacy laws that could be challenging for suppliers from countries in which governments can access information within their jurisdiction.

How will Australia balance its privacy laws and policy when tendering for sensitive data storage contracts? Perhaps these will need to be carved out of the GPA.

HAVE YOUR SAY

The process of identifying markets that should be included or excluded from the GPA is complex.

At the moment, there are many unanswered questions about how DFAT will frame Australia's proposed accession to the GPA.

Looking at it optimistically, the GPA should give Australian businesses an opportunity to open their eyes to – literally and figuratively – new lands of opportunity.

But there is already concern that the Commonwealth's non-discrimination principles harm Australian businesses and accession may make it more difficult to support local industry, small businesses, and public values.

DFAT is still accepting submissions on its proposed accession and negotiations here. If you are an interested stakeholder, now is the time to have your say on how this proposed action may impact competition (positively or negatively) and the government procurement industry.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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