By Nikhita Pais
This document was drafted with the intent and focus on free trade and the eventual benefits to the general Brazilian population pursuant to the accession of Brazil to the Government Procurement Agreement (GPA) of the World Trade Organization (WTO).
While the accession of Brazil to the GPA would give Brazil access to a market worth US$ 1.7trillion per year, in order to determine whether a country must accede to the WTO GPA, it is essential to analyze not only the benefits of acceding to the WTO GPA but also what are the costs that would be incurred by the Member pursuant to the accession.
The main purposes of the GPA can be seen in the provisions contained by the GPA itself. The core principles of the GPA are non-discrimination and fair and equal treatment to the WTO members. The GPA not only ensures that there is non-discrimination but also makes it difficult for members to discriminate between the other members on the sly. It also increases competition between the members by removing any kind of obstacles to foreign participation. Due to the increase in foreign participation, the members are thereby required to act in a transparent manner and this reduces the corruption in the political systems of these members.
Also by acceding to the GPA, it would result in improving the efficiency of the government expenditure. Given the increase in the efficiency and number of bidders for the procurement, the government would be in a position to procure more goods and services with lesser resources. Further, the risks and costs to local companies would be greatly offset with the accession if the GPA accession increases efficiency of the government.
With the transparency in the system and also the requirement for each member acceding to the GPA to have an independent domestic review mechanism in place, the corruption in the political system would be reduced. This in turn would also reduce the supplier collusion problems that exist in the system. The reduced corruption and increased transparency will thereby encourage foreign investment in the country and therefore the country would see a surge in the inbound foreign investment.
The accession to the GPA opens up a plethora of possibilities and export related opportunities to the members acceding to the GPA. With the increased competition faced from foreign suppliers, the domestic industries are compelled to strive harder in order to deliver quality products and thereby the domestic industries are boosted.
However, while carrying out the negotiations to the GPA, there are certain aspects that the Brazilian Government must consider. Mentioned below are those points.
First, the most important factor to be considered by Brazil while it is in the process of acceding to the GPA is that the domestic regulation of Brazil is in line with the WTO GPA. In the event there are disparities between the terms of the GPA and the domestic legislations in Brazil, it would lead to complexities and confusion as to which laws would be applicable in a given situation.
Second, the GPA prescribes three methods of tendering to be followed by the procuring government: (i) open tendering; (ii) selective tendering; and (iii) limited tendering. It is to be noted that each party has the right to determine its own methods of tendering provided the same fall within the ambit of the tendering methods prescribed by the GPA. Therefore, the Brazilian Government while carrying out the negotiations to the accession must ensure that the tendering process determined by it is in compliance with that prescribed under the WTO GPA.
Third, there are numerous contracts that would be entered into by the government upon acceding to the GPA. A key point that must be taken care of by the government is that the award procedures under all these contracts are kept uniform and are not specific only to the GPA contracts. This would ensure that the terms are uniform between all contracts and this would be easy to enforce even when it comes to foreign suppliers. This would make things less complex and confusing to the various stakeholders. Further, legal disputes as to the applicability of the rules would be avoided.
Fourth, Article X of the GPA states the technical specifications to be considered while a government is procuring goods or services from another member. It is the responsibility of the procuring government to ensure that there are no technical barriers created that would create unnecessary obstacles to international trade.
Fifth, Article XI of the GPA states the time-periods to be mentioned by the procuring government to the suppliers for them to respond to the request of the procuring government. While the minimum time period mentioned is about 40 days, the countries acceding to the GPA have the discretion to determine the time periods as per their policies.
In addition to the aforesaid, there are certain costs to be considered by the governments acceding to the GPA.
There are negotiation costs involved during the process of acceding to the GPA. However negligible these costs maybe, it must still be taken into consideration by the government in drawing up the budget for the accession process. Further, there are costs involved in relation to bringing about necessary changes in the legislative setup of the government. There are also various contracts to be entered into by the parties which increases the costs further. Also, due to the increase competition faced by the foreign suppliers, many of the local and domestic industries cannot withstanding the increasing competition and thereby face the looming threat of closing down. It thus becomes the responsibility of the government to ensure that the domestic industries are protected from this increased external competition and therefore the costs of the government goes up.
Overall, the pros of acceding to the GPA outweigh the cons and therefore it is a feasible proposition to accede to the GPA.