*{REVISED BIAC STATEMENT ON GOVERNMENT PROCUREMENT
June 1998
This statement supplements and updates the BIAC Statement of April 1997}

*partie=titre Policy Recommendation *partie=nil

BIAC looks forward to the completed WTO study of transparency in government procurement
practices which was mandated in Singapore. We urge OECD member governments to support a
WTO decision at the earliest possible date to begin negotiations on an interim agreement that
would increase transparency, openness and due process in government procurement by all WTO
members. Such an agreement would establish basic procedural guarantees for all WTO members
and would apply to all procurement including national and subnational government authorities as
well as state owned enterprises. This type of agreement would provide a foundation for further
needed improvements in AGP in terms of increased membership, broader sector coverage and
better transparency.

*{Background}

At the WTO Ministerial in Singapore, an agreement was reached to conduct a study on
transparency which could be a vehicle to negotiate a binding agreement on transparency. That
study is being completed, and while some nations are resisting moving forward based on fears that
opening the process will undermine local industry, there is a strong sentiment to move forward on
negotiating a transparency agreement, perhaps to be completed in 1998.

Globally, there are a number of fora in which liberalisation of government procurement is being
advanced. The TABD meeting in late 1997 produced a strong statement on government
procurement. FTAA last year produced a strong first step but is struggling to move forward
toward negotiations. Subsequent meetings suggest progress is probable. The APEC nations have
accelerated their work schedule to reach some level of agreement.

In each of those venues, there are business voices promoting a similar set of principles which
include openness, transparency, due process, and ultimately an avenue toward reciprocal national
treatment.

While each of these efforts is moving forward at some pace, serious obstacles and concerns exist
which could slow progress. More pointedly, on the overall issue of liberalisation of government
procurement, many nations remain unconvinced of the economic benefits to be gained within local
markets. More alarming is the case being made by some parties that local industry will suffer in
the short and long-term when national markets are opened. In absence of good empirical analysis,
such assumptions take on a special power to impede progress.

Parallel to that effort to improve transparency are WTO meetings to revise and streamline the
AGP, which is now considered to be several years out of date, not accommodating of current
practices in electronic and catalogue purchasing, and overly prescriptive in detail in a way that has
caused many nations not to become signatories.

One element of the “streamlining” exercise at WTO is experiencing problems because of a lack of
substantive analysis. While most business and national representatives (including the US and EU)
have urged that the AGP be updated to accommodate current and near future practices in electronic
procurement, some national representatives are resisting such moves, remaining unconvinced the
protocol should be changed or unclear just what elements in current practice are impeded by the
protocol. A lack of systematic analysis of current practice contributes to this reluctance to move
forward.

The OECD Trade Committee’s initial market size exercise of last September has provided some
useful economic analysis. We understand the Trade Committee is still considering other work in
this area, and given the above mentioned difficulties, BIAC believes the OECD could continue to
make an important analytical contribution to advance the WTO negotiations. We understand that
the AGP policy discussions are on-going at the WTO and we therefore propose that such OECD
analysis be aimed at identifying potential benefits to governments (and economies) and practical
options, without prejudicing policy discussions. With the benefit of a year’s consideration, we
suggest three specific efforts from (or related to) our recommendation last year.

*partie=titre Recommendations for OECD Analysis *partie=nil

Specifically, we believe the OECD should undertake three efforts:
• The OECD could focus an analysis on the benefits derived to government procurement. A
case study of successful transition, for example, would be very useful in making the arguments
to the more hesitant nations.
• One effort could encompass a next step beyond the global market sizing work already
conducted by OECD. This next step would take the same methodology of sizing and apply it
to the regional and even national market level.
• Regarding the efforts to streamline the AGP, contribution could be made by identifying best
practices in electronic procurement in its broadest definition, accompanied by an analysis of
what elements in the current AGP serve as an impediment to current procurement. This would
be a fruitful topic for a joint OECD-BIAC symposium. BIAC would be prepared to contribute
a paper outlining the major issues and options available to governments. This exercise would
be timely given the interest in benefiting from new technology, which has been demonstrated
in the ITA and Telecom Service Agreement.

In summary, a number of multinational efforts to dramatically liberalise the global market for
government procurement are on the cusp of major breakthroughs. OECD, with its reputation for
independent rigorous economic analysis, has a potentially significant role to play. We recommend
the OECD undertake a work plan on the issue of government procurement which encompasses
these above mentioned efforts.