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Rich countries eye WTO’s Government Procurement Agreement as model for future trade talks

The Financial Times reports a small group of governments, including the U.S. and EU, are exploring a plurilateral agreement on services trade as a way out of the standstill in WTO negotiations. The model for such an arrangement, where willing countries could sign up if and when they wanted to (as opposed to the WTO’s all-in philosophy), is based in part on the plurliateral Government Procurement Agreement, which 15 mostly rich countries are trying to update this week in Geneva. Canada is a member of the GPA and would almost certainly join a “coalition of the willing” on services trade.

“The (services) deal, although it could be concluded under the aegis of the World Trade Organisation, would mark a significant retreat from the multilateral principle that WTO member governments offer the same trade benefits to all other members,” writes the Financial Times. “A draft proposal for services negotiations, seen by the Financial Times, suggests ‘a fast-track option for liberalisation for those prepared to move quickly’ and mentions financial services, shipping, professional services and arrangements for senior executives and skilled employees to make temporary visits to each other’s countries.”

Yesterday I suggested Canada’s trade minister, Ed Fast, only went to Europe to sell CETA to German businessmen and that the WTO was an afterthought. Canada would prefer to see the current Doha negotiations sidelined because in the minds of rich countries they are too development focused. It’s the furthest thing from the truth but it’s the main reason for the breakaway discussions on services, and the explosion of bilateral free trade deals since the 2006 Hong Kong WTO Ministerial. The minister will participate at the WTO this week, but mainly for the GPA discussions, which exclude the vast majority of WTO member countries.

According to Inside Trade, “on Dec. 12, GPA parties remained engaged in last-minute plurilateral negotiations in Geneva following the Dec. 9 submission of revised market access offers by the U.S. and EU and subsequent bilateral meetings. The EU, which the U.S. has criticized for holding up a GPA deal, last week signaled it had moved closer to resolving its outstanding market access issues with the U.S. but flagged Japan’s unwillingness to budge as the biggest hurdle.”

Inside Trade elaborates:

According to the (unnamed EU Commission) official the major issues to be resolved with Japan relate to “discriminatory” clauses and practices, including a barrier in Japan’s railway sector that limits procurement by foreign companies due to purported safety concerns.

The EU has long pressed Japan to remove this so-called “operational safety clause” from its GPA schedule, and also to reduce the threshold that Japan applies to sub-central entities for the procurement of construction services.

It had demanded that the United States bind additional sub-central and federal entities to the GPA and to remove an exemption from its GPA coverage for highway and mass transit procurement. U.S. government efforts to enlist additional states failed in recent months.

Recently the U.S. State of Georgia, which had agreed to be bound by the WTO procurement agreement, changed its mind and has pulled out. U.S. municipalities are not covered by any procurement agreements and are likely not part of the revised U.S. offer. EU member states are divided on whether to press ahead for a deal this week during the WTO session, which would be signed December 15 at 11 a.m. (according to Inside Trade), or else to hold off for a better deal in the future.

It’s difficult to know whether Canada has added to its most recent GPA offer, which was registered at the WTO in February 2010 at the same time Harper signed a bilateral procurement agreement with the United States. Canada’s recent GPA offers (see Annex 2 in particular) include provincial governments and many of their agencies, though not municipal governments. There are reports the temporary bilateral arrangement with Obama — Harper’s “Buy American” solution, which did include municipal construction — expired (thank goodness) at the end of October this year.

Canada is considering significantly expanding coverage of procurement at all levels, including municipal, in its proposed EU free trade agreement (CETA), though again this would be bilateral. In other words, Canada would make commitments to the EU that other GPA member states would only get after negotiating some kind of reciprocal arrangement with Canada. For more information on Canada’s position with respect to the GPA, see the DFAIT website.

So GPA members, including Canada, hope they can sign a deal this week as a signal to other countries that like-minded countries can get along. Says Nicholas Niggli, the Swiss diplomat who chairs the GPA talks, in the Financial Times article, “If we finalise this agreement now, the countries involved send out to the WTO members who are not part of this agreement the signal that they are serious and credible partners.”

But credible partners for whom? For each other as rich countries, that’s who. A plurilateral services pact, like the GPA, is a desperate attempt to seize back control of the global trade agenda from countries seeking to make it more balanced. With any luck the idea will suffer the same fate as the now deceased Doha Round.