EU, US, China haggle hard on WTO procurement deal

Trade talks on opening the huge market for government contracts to wider international competition face a deadline on Friday, with the United States and EU still haggling and a Chinese bid to join the club falling far short of expectations.

The world's biggest trading powers are conceding little as time runs out for a deal on the Government Procurement Agreement (GPA) potentially worth hundreds of billions of dollars at the World Trade Organization.

The GPA is a voluntary pact that allows countries to win access for their companies to each other's government spending. and win access for their own companies, resulting in larger markets abroad and better value for money at home.

Members of the GPA, which dates from 1994, have been trying for a decade to modernise and broaden the pact, aiming to open up an estimated $80-100 billion of contracts and attract new members such as China, multiplying the benefits several times over.

The chairman of the talks, Swiss diplomat Nicholas Niggli, has said the deadline is a last-ditch negotiating session this Friday, when the GPA's 42 member countries could clinch a deal just in time for a meeting of WTO trade ministers next week.

The talks are a whisker away from success but the European Union and the United States are still haggling and officials say the outcome is impossible to call.

"Maybe it will fall in place. Maybe it will not. I do not know," WTO director general Pascal Lamy told reporters last week. "They are negotiating, seriously."

The EU is expected to dilute its offer to the United States after U.S. negotiators said the U.S. state of Georgia would no longer be covered by the deal. The GPA covers procurement by regional governments as well as national governments, and only 37 of the 50 U.S. states are currently covered.

If the United States thinks the EU has taken too much off the table, the whole agreement could fail.

Attractive Offer

Officials had hoped that the negotiations could be rapidly wrapped up if China made an attractive offer to join. Bringing China into the GPA, which would require more talks, is widely believed to depend on success in reforming the current GPA.

Gaining access to China's huge procurement budget, which the European Chamber of Commerce in China has estimated at about $1 trillion, would be far more significant than the finer points of the EU-U.S. negotiations.

But in its offer, which has been circulated among member states and obtained by Reuters, China included far less of its spending than many diplomats had hoped, covering only five of its 31 provinces and regions and no state-owned enterprises at all.

"Whether or not the current offer is sufficient to meet the other GPA parties' expectations, I have a big question mark," said Wang Ping, an expert on government procurement at the school of law at Nottingham University in Britain.

"It's welcome and encouraging but nonetheless it's only three out of the seven biggest regions and five out of the 31," said Wang. "So there's still a long way to go."

The regions included in China's offer are five of its most developed coastal regions -- Zhejiang and Jiangsu provinces and the municipalities of Beijing, Tianjin and Shanghai.

Wang said Jiangsu's annual procurement spending was worth 90.2 billion yuan ($14.2 billion)in 2010, the most of any region apart from Guangdong. Shanghai and Zhejiang's budgets were 40.8 billion yuan and 42.5 billion yuan, while Beijing's and Tianjin's were both below 40 billion yuan.

But Chinese regions would initially apply the GPA only to construction contracts worth more than about 150 million SDRs ($233 million) and for supply and service contracts above 750,000 SDRs ($1.167 million). That is far less than U.S. state procurement contracts, for which the thresholds are 5 million SDRs and 355,000 SDRs respectively.

Wang said the Chinese offer would mainly open up spending on office supplies and cars, rather than big infrastructure projects such as bridges or ports.

But he added that many big car companies were already present in China, while markets for items such as photocopiers were already highly competitive and unlikely to represent rich pickings for new entrants from abroad.

As if that was not enough, China has added a get-out clause which could apply widely. Under its terms, the GPA would not apply if particular procurement deal "may impair important national policy objectives".

Source: Reuters