Graeme Philipson
September 8, 2015

Trade agreement goes unnoticed

Trade agreement goes unnoticed

World Trade Organisation deal will see Australian technology companies compete on the world stage

Australia is about to sign up to a massive new trade deal that virtually nobody knows anything about. It is called the WTO Agreement on Government Procurement (GPA), and will create an open international market for government procurement of goods and services.

Trade Minister Andrew Robb announced in June that Australia would be ‘seeking accession’ to the agreement, which will almost certainly mean we will join in the next 12 months. The World Trade Organisation initiated it as far back as 1981 as the ‘Tokyo Round Code on Government Procurement’. It has been expanded and renegotiated ever since, with the most recent round concluded in 2014.

The GPA opens up the government procurement market in any member country to suppliers in any other member country (which include all 28 members of the European Union and the US). That means Australian companies will be able to sell their products and services to government agencies in other countries just as the locals do.

But it also opens up the Australian government market to foreign competitors. It will mean the end of ‘buy Australian’ – such a restriction would not be allowed under the terms of the agreement.

Governments, at all levels, are massive purchasers, and represent a significant customer base for many suppliers. Government contracts, or being placed on a government panel, are prizes many suppliers fiercely compete for.

But many Australian companies already find it hard to sell to government. They complain that it is hard to get on to preferred supplier panels, that many agencies prefer large suppliers over SMEs, and that there seems to be a reluctance in some quarters to believe that a locally grown product can be as good as its international competitor (a concern often voiced in the ICT industry). And governments are also notoriously slow payers.

There is no indication that the GPA will improve the situation in any of these areas. There are concerns that it will only make things worse, by increasing competition from overseas suppliers.With its many free trade agreements and relatively low tariff barriers, Australia is already one of the most open trade regimes in the world. Free trade is generally agreed to be a positive, across the political spectrum. But the atmosphere in Australia has become politically charged in recent months, with concerns about the labour market consequences of the China Australia Free Trade Agreement (ChAFTA) and the intellectual property provisions of the Trans-Pacific Partnership (TPP) Agreement, still being hammered out behind closed doors.

In light of these well-publicised concerns it is remarkable that the GPA has received so little mention, especially given its potentially massive effects. The Government says that joining the group will mean “legally-binding access to government procurement markets estimated at US$1.7 trillion,” with China’s imminent membership adding another trillion dollars to the sum.

Yet there has not been a single mention in the Australian media on the subject. Andrew Robb’s press release on 2 June went unnoticed. The earlier consultation process, submissions for which closed in January, did not rate a mention either.

The Government has now published the submissions it has received, on the Department of Foreign Affairs and Trade (DFAT) website. There are only six submissions, which the Government says are the only ones it can make public. It does not say how many submissions there were, but the fact that it has taken the unusual step of announcing that it is still prepared to listen to any further stakeholder comment may indicate that there weren’t too many other submissions.

The whole thing seems to be operating under the Official Secrets Act. The Government may not be hiding anything, but it is certainly running dead on the subject.

Two of the submissions are from unions, who understandably express concerns about Australian jobs and the “promotion of Australia’s economy including industry capabilities, jobs, skills and innovation” (submission from the Australian Manufacturing Workers’ Union).

The Australian Service Roundtable (ASR), in a submission written by the late Ian Birks, welcomes the move to join the GPA, but with substantial reservations.

“The mere opening of markets is not, by itself, enough to ensure good economic performance. What is required is a deepening and broadening of international trade disciplines to ensure that, as far as possible, all aspects of government procurement are carried out in a transparent and non-discriminatory manner that maximises value for money for governments and taxpayers.”

The ASR submissions says that some of its members have raised concerns about any changes to selective tendering and negotiations procedures, timeframes and technical specifications at the state level. “Streamlining procurement processes, and reducing costs of tendering especially for SMEs is a key advocacy focus for ASR. If the GPA carries any risk for existing contract standards, panel arrangements and appeal mechanisms at a state level, our members may query the benefit of the Agreement.

“For example, a ‘bid challenge mechanism’ as required under the GPA may raise costs significantly for Australian bidders if it goes far beyond current processes to review tender decisions.”

DFAT, as you might imagine, sees only good things flowing from the agreement. “The GPA is a WTO plurilateral agreement which opens government procurement markets between its members,” says its website. “The Agreement’s main principles are transparency and non-discrimination. It requires GPA members to offer other members’ suppliers conditions ‘no less favourable’ than domestic suppliers. In addition, the GPA provides for domestic review procedures to enable aggrieved firms to seek a review of procurement decisions.”

DFAT says it consulted over 45 peak bodies, industry associations and firms before submissions closed in January 2015. Did you hear about it? Who were these bodies?

An extensive Google search reveals not a single published article on the subject in any Australian newspaper and – apart from Andrews Robb’s short and unreported press release and the single page on the DFAT website – not a single comment on the agreement from any Australian government or government agency, at any level.

This Government is quick to highlight what it regards as its achievements, but it has been almost silent on the GPA. Why?

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