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New WTO Ruling a Major Victory for U.S. Procurement Policy

A World Trade Organization (WTO) protocol amending the 1994 Government Procurement Agreement (GPA) is expected to provide U.S. companies with new advantages supplying good and services to foreign governments.

According to the report issued by the Office of the United States Trade Representative, the revision could generate as much as $100 billion annually for U.S. businesses. The GPA is already calculated to be worth $1 trillion before the amendment is activated. The crux of the change is that the requirements governing procurement practices have been significantly clarified and there will now be “work programs that facilitate participation by small and medium sized businesses in government procurement and fosters best practices in sustainable procurement.”

The updated agreement will go into effect thirty days following the formal adoption and notification to the WTO by two-thirds (which amounts to ten members) of the parties to the Government Procurement Agreement, as required under WTO rules. The revised agreement will affect the United States and the following parties:  Canada, Chinese Taipei, Hong Kong, Iceland, Israel, Liechtenstein, Norway, the European Union, and Singapore. Entry into force for each of the remaining five Government Procurement Agreement Parties (Armenia, Japan, the Republic of Korea, the Netherlands with respect to Aruba, and Switzerland) will occur thirty days after each party formally adopts and notifies the WTO.

United States Trade Representative Michael Froman praised the amendment as a boon to American business. “The revised agreement provides U.S. firms with new and expanded opportunities to sell their goods and services to foreign governments, which unlocks opportunities for American workers and supports American jobs,” said Ambassador Froman.  “This is a plurilateral success story in the WTO, and we should continue to build on it by expanding participation of developed and developing economies.”

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Recently Froman has stressed synergy between U.S. trade policy and the demands of the domestic economy, particularly with respect to job creation. Testifying before the House Committee on Ways and Means regarding the Obama administration’s trade agenda for 2014, he said, “The core of the Obama Administration’s economic strategy is to create jobs, promote growth, and strengthen the middle class. Our trade and investment policy contributes significantly to that strategy by opening markets for Made-in-America exports, leveling the playing field by raising standards and enforcing our trade laws and our trade rights.”

Froman continued, “Done right, trade policy creates opportunities for American workers, farmers and ranchers; manufacturers and service providers; innovators, creators, investors and businesses — large and small. The Obama Administration has a strong record of success in promoting U.S. exports and creating jobs here at home. Over the past four years, U.S. exports have increased to a record high of $2.3 trillion in 2013. In fact, a third of our total economic growth is attributed to this increase in U.S. exports.”

Government procurement, the acquisition of goods and services by government agencies, is commonly a central feature of international trade agreements. A press release from the United States Trade Representative discussed procurement policy as key to the current U.S. trade outlook. “A longstanding objective of U.S. trade policy has been to unlock new opportunities for U.S. goods, services and suppliers to compete on a level playing field for foreign government procurement. Government procurement typically comprises 10 percent to 15 percent of a country’s GDP.  The first major government procurement agreement was the 1979 Government Procurement Agreement, which entered into force in 1981. It was modified and expanded tenfold during the Uruguay Round negotiations which concluded in 1994 and led to the creation of the WTO.  In exchange for access to sub-central procurements in GPA countries, 37 U.S. states agreed to participate in the agreement.  The 2012 revised Agreement is an amendment of the 1994 Government Procurement Agreement and is not a new agreement.  State level participation was not modified under the revised Agreement.”