Chinese GPA accession will be significant, but won't happen soon

Paul Snell is managing editor at Supply Management
9 November 2015

China’s accession to the World Trade Organization’s (WTO) Agreement on Government Procurement (GPA) could be as significant as the country’s membership of the WTO in 2001.

But don’t expect it to happen soon, according to experts who spoke at a CIPS Fellows and Institute of Directors City of London event in London last week.

The GPA is a reciprocal agreement between nations that grants access to public procurement markets. There are currently 45 members, who have to reach a consensus through negotiation for new countries to join. Membership of the GPA also commits nations to certain standards in public procurement, such as transparency and non-discriminatory practices. It currently offers access to government deals worth around $1.7 trillion. China began its attempt to join the GPA in 2007.

Nicholas Niggli, who was chairman of the GPA between 2007 and 2012, told the audience: “My take is that this will have a comparable effect on China and on the rest of the world as when China became a WTO member.”

He added previous calculations had estimated China’s accession would open up contract opportunities worth between $113-$289 billion a year to suppliers in member nations.

In addition to market access, GPA membership would provide China with external validation of its procurement reforms, making it a more attractive place for foreign investment.

And, Niggli said, Chinese accession would also motivate other emerging nations to join to ensure they were not left behind. “Those who want to attract foreign direct investment will start asking for GPA membership to engage. So more market access opportunities will materialise, in places like India, Brazil, the ASEAN countries, Mexico, etc. Some of them have already started making reforms, and they will have to validate this through accession.”

He added China's application had moved forward in a “predictable and progressive way”, with the nation having learnt the lessons of its application for WTO membership. He was optimistic about future progress, but warned other members need a long-term approach to the negotiations.

“What is needed is a long-term strategic vision. Instead of insisting on little concessions from China, what is really need now is a global vision. What will be the benefit if China comes in? And I hope political leaders will understand that.”

China has so far submitted five offers to join the agreement, traditionally before Christmas. But Ping Wang, assistant professor in law at the University of Nottingham, said the Chinese government had made clear there would be “no Santa this year”.

Wang was less positive about the prospects of a quick accession. He said there is currently a “fight between the dragon and the tiger”, referring to two powerful government ministries – the NDRC [National Development and Reform Commission], which controls procurement, and the Ministry of Finance (MoF), which handles the GPA negotiation with other countries.

“The MoF is actually the chief negotiator, but they cannot make any more concessions without the NDRC, and [the NDRC] are in fighting mode and gaining the upper hand,” Wang said. “Without harmonisation in the government procurement arena in China, accession won’t happen in the near future.”

But Niggli said the revised GPA, which came into force in April 2014, allows for a more tailored approach for countries in a way the previous version could not.

“The former GPA was very much a one-size fits all type approach. And you had to essentially reach a very high level from day one to enter. My feeling is that we now have enough inbuilt flexibility and good tools in this agreement available so we can essentially bring in China in a way the core of the agreement will be in place on day one, but then there will be expansions on the way,” he said.

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