India and the WTO procurement deal
The Hindu Business Line, February 21, 2013
By Archana Jatkar, Vinitha Johnson
Government procurement holds out
promise in the context of slowdown, but India should weigh its
In 2010, India attained an ‘observer status’ in the WTO Government
Procurement Agreement (GPA). Its ascension to full member status in
GPA hangs in the balance. It gathered momentum with the slowdown in
world trade and increase in current account deficits of several major
The potential size of the market for government procurement is
estimated at $1.6 trillion and the need for principles of good
governance is felt all the more in these difficult economic times,
making active participation of developing countries in the WTO GPA a
The literature on government procurement suggests two key objectives
for countries anticipating accession to the WTO GPA: a) to enhance
export markets as provided by GPA member countries, and b) to embrace
reforms to internal market and administration so as to benefit from
good governance aspects of the WTO GPA.
While a country can employ a combination of objectives, its strategy
of accession to the Agreement would need to be considered on its own
merits, based on an assessment of potential benefits and costs.
In the WTO GPA, commitments are made in the form of ‘government
entities’ apart from committing certain sectors of goods, services and
concession contracts. These commitments are further qualified by
thresholds (value of the government purchase) above which the
agreement begins to apply, and exclusions and exceptions are
Despite the touting of good governance principles of transparency and
integrity, these reasons appear to pale in comparison with tangible
economic reasons of “market access”.
The GPA members present huge figures as indicative of potential market
access opportunities. In practice, a large number of contracts granted
by the Government are below the threshold value, which is out of the
purview of the commitments under the WTO GPA. Further, countries
maintain significant ‘exceptions’ and ‘exclusions’ for social purposes
or for procurement pertaining to certain utilities, or exclude
procurement by their sub-central entities.
For instance, in case of Chinese Taipei, data reveals that more than
95 per cent of total procurement contracts above threshold are awarded
to domestic firms while in the EU, less than 5 per cent of the size of
its total government procurement market — that is, out of €292 billion
only €13 billion contracts in value terms was awarded to other GPA
Furthermore, owing to the absence of the principle of
non-discrimination, WTO GPA members prohibit the access of certain
markets to certain other member countries unless comparable market
access is dealt out.
In WTO GPA negotiations, once the size of one’s government procurement
market and resultant “negotiating capital” is calculated, a complex
game of layering one’s demands with respect to different negotiating
countries comes into play. Several newer challenges are experienced,
such as certain countries refusing to commit their sub-central
government entities or procurement pertaining to the provision of
certain utilities to the disciplines of the WTO GPA.
Countries may also offer certain restricted markets to selective
countries in return for increased market access distinct from the
market access available to other member countries of the WTO GPA.
Where does all this leave India? India may desist from joining the WTO
GPA indefinitely. However, such a decision to ‘abstain’ from joining
this agreement will not be passive anymore and will have to be taken
after defending and foraging for market access opportunities
The following are some specific factors that India should consider
while deciding its possible accession to the WTO GPA:
India remains outside an elite club which is currently formulating
modalities and disciplines for participation in government
The members of the club will evolve newer channels of inducing
increased participation and impel exclusion of countries through
increased application of “Buy Local” laws which may exempt WTO GPA
countries in certain countries.
If India considers joining the agreement at a later point of time, it
may encounter harsher demands from the then existing members.
The WTO GPA contains certain flexibilities for developing country
members — it allows them to phase-in entry of certain entities and
social exceptions can be maintained when concomitant market access
opportunities are pledged.
Keeping these factors in mind, a CUTS study on government procurement
has done some quantitative analyses of market access opportunities for
India in GPA and non-GPA countries. It argues that other than
construction services, pharmaceuticals and computer and related
services offer biggest opportunities for the Indian firms.
Most of the opportunities in these sectors are expected to emerge from
the EU, Japan and the US, who are members of the WTO GPA.
By calculating market access opportunities in government expenditure,
our study reveals that there is a sizeable market in many major
economies who are currently not members of the WTO GPA but expected to
be — for instance, $1.7-trillion market in China, $ 960-billion market
Among those who are members of the WTO GPA, government expenditure
accounts for as much as 56.2 per cent of gross domestic product in
France, a market worth $1.56 trillion and as much as 42.4 per cent in
the US amounting to a market of $ 6.37 trillion. These countries
present opportunities for Indian suppliers to develop their
competitiveness and contest for procurement contracts internationally
in sectors such as information technology, pharmaceuticals, minerals,
machinery and electrical equipment.
Thus, membership to the WTO GPA may not be entirely bad news for India
but it is important to bear in mind that potential benefits of joining
this agreement will be determined by various factors, such as India’s
ability to compete with other member countries, willingness of other
countries to make their procurement market available to Indian firms.
Hence, it is advisable to enter this negotiation armed with pertinent
information seeking to optimise value for both parties. In this
regard, inputs from stakeholders in different government departments,
industries, public sector undertakings are crucial, keeping in mind
the value that our commitment can generate and what we expect from
other GPA members.
authors are lawyer and policy analyst, respectively, with CUTS
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