China revises WTO procurement bid

By Frank Ching

China has made a revised bid to join the Government Procurement Agreement of the World Trade Organization, less than three weeks after promising the United States that it would do so some time this year. Last month, at the annual session of the U.S.-China Joint Commission on Commerce and Trade, U.S. Trade Representative Michael Froman said China had “agreed to submit a revised offer in 2014 that would be commensurate on the whole with those of other GPA members.”

Previous Chinese offers, first made in 2007, were all rejected as far short of what was considered necessary by the United States, the European Union and other members. “We are looking forward to seeing the offer and seeing whether it’s a system that would consider accession to the GPA,” Froman said in December. The Government Procurement Agreement currently includes only 42 of the WTO’s 157 members, but it includes the world’s major economies, including the United States, the European Union and Japan.

China, the world’s second largest economy, is notable by its absence. Chinese membership would fill a major gap in the agreement. It would also give China access to the government purchases of other GPA parties.

Admission to the GPA depends on the current members’ acceptance of terms offered by China. The last Chinese offer, made in December 2012, was considered highly disappointing, covering only a tiny portion of the Chinese public procurement market. Although procurement by sub-central government units accounted for more than 93 percent of total government procurement, the last Chinese offer included only eight provincial level regions and none at the sub-provincial level, according to the European Union Chamber of Commerce in Beijing. “As such, total coverage of the third revised GPA offer likely covers just 2 to 3 percent of China’s total public procurement marketplace”, said the group, a consortium of 1,700 European corporate members.

China argued at the time that it was up to local governments to decide on their own. China’s preference for domestic products also has meant that few foreign companies are able to compete successfully where procurement is concerned. Foreign companies have pointed out that China’s promotion of “indigenous innovation products” also creates a bar to goods produced by foreign-invested enterprises in China, even though the GPA specifically forbids such discrimination. China has also not included procurement activities by state-owned enterprises. Last October, Liu Rui, a professor with the law department of the Chinese Academy of Governance, published an article in which he explained that China believes its SOEs should not be included in a GPA agreement because they are “in essence different from state firms in the west.”