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Government Procurement in the WTO: A Case for Greater Integration
Published online by Cambridge University Press: 05 January 2016
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This article assesses the regulation of government procurement in the WTO, specifically under the WTO Government Procurement Agreement (WTO GPA), the General Agreement on Tariffs in Trade (GATT), the General Agreement on Trade in Services (GATS), and the Agreement on Subsidies and Countervailing Measures (ASCM). It compares these findings from leading regional trade agreements (RTAs) with government procurement regulation, most notably the North American Free Trade Area (NAFTA) and the Treaty on the Functioning of the European Union (TFEU).
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- Copyright © Kamala Dawar 2016
References
1 As of August 2015, the WTO GPA comprised 45 WTO members or 17 parties with the EU, representing 29 Members States. Another 29 WTO members participate as observers, and of these ten members are in the process of acceding to the Agreement.
2 J. Vickers, ‘How Does the Prohibition of Abuse of Dominance Fit with the Rest of Competition Policy?’, The Eighth Annual EU Competition Law and Policy Workshop at the EUI, Florence, 6 June 2003, p. 6.
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4 See Albert Sánchez Graells, Public Procurement and the EU Competition Rules (Oxford: Hart Publishing, 2011). This study argues that research into public procurement from the standpoint of industrial organization has received limited attention because its analysis belongs with the relatively secondary field of microeconomics dedicated to the study of monopsony and buyer power.
5 BetterCare Group Ltd v. DGFT [2002] CAT 7 (Case No. 1006/2/1/01).
6 See, for example, Robert D. Anderson, Josefita Pardo de Leon, Philippe Pelletier, Kodjo Osei-Lah, and Anna Caroline Müller, ‘Government Procurement Provisions in Regional Trade Agreements: A Stepping Stone to GPA Accession?’, in Sue Arrowsmith and Robert D. Anderson (eds.), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press, 2011); Asako Ueno, Multilateralising Regionalism on Government Procurement, OECD Trade Policy Paper No. 151.
7 Signed on 12 April 1979, as part of the Text of the Tokyo Round Agreements negotiated under the GATT. It became effective on 1 January 1981, was first amended by Protocol of 2 February 1987, which came into force on 14 February 1988. GATT, BISD 33S/190 [1987].
8 The Code was signed by eight developed countries plus the ten EC countries: Austria, Canada, the EC (consisting of Belgium, France, Netherlands, Germany, Luxembourg, the UK, Ireland, Denmark, Italy, Greece) Finland, Japan, Norway, Sweden, Switzerland, and the US, and three developing countries – Israel, Singapore, and Hong Kong’.
9 Footer, Mary, ‘International Developments: GATT ‒ Developments in Government Procurement Procedures and Practices’, Public Procurement Law Review, 6 (1993), CS193–204Google Scholar.
10 The coverage of the agreement is set out for each signatory party in Appendix I. This Appendix is divided into five Annexes concerning the specific coverage of the obligations. The Annexes address (1) central government entities covered by the Agreement; (2) covered sub-central government entities; (3) ‘other’ covered entities (e.g. utilities); (4) services coverage; and (5) coverage of construction services.
12 See, for example, Sue L. Arrowsmith, John Linarelli, and Don Wallace Jr, ‘Enforcement and Remedies’, Regulating Public Procurement: National and International Perspectives (Kluwer Law and Business, 2000), chapter 12; Gordon, Daniel I., ‘Constructing a Bid Protest Process: Choices Every Procurement Challenge System Must Make’, Public Contract Law Journal, 35 (2006), 3Google Scholar; Daniel I. Gordon, ‘Anti-Corruption Internationally: Challenges In Procurement Markets Abroad ‒ Part II: The Path Forward for Using Procurement Law to Help with Development and the Fight Against Corruption’, West Government Contracts Year in Review Conference Covering 2012 (Thomson Reuters, 2013).
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15 The WTO's Dispute Settlement Understanding is contained in Annex 2 of the ‘Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations’, 15 April 1994, Legal Instruments (GATT Secretariat (1994) 33 ILM 1140–1272).
16 See Article XXII Consultations and Dispute Settlement.
17 For further information on the World Bank definition of Build–Operate–Transfer (BOT), see: http://ppp.worldbank.org/public-private-partnership/agreements/concessions-bots-dbos.
18 Panel Report, United States ‒ Measures Affecting Trade in Large Civil Aircraft, Second Complaint, WT/DS353/R, 31 March 2011, para. VII.12.
19 Ibid. para. VII.79.
20 Appellate Body Report, US‒Large Civil Aircraft (2nd complaint), 12 March 2012, para. 620.
21 The First Session of the Preparatory Committee (London Report), UN Doc EPCT/33-CII-I-66page 9, para. (d)(iv) (1948).
22 Appellate Body Report, Canada – Measures Relating to the Feed-In Tariff Program, 6 May 2013, WT/DS412/AB/R and WT/DS426/AB/R, para. 1.31.
23 A FIT is an increasingly employed instrument for promoting investment in renewable energy typically through fixed pricing for the purchases of renewable energy power above the market price for electricity.
24 The Ontario FIT Programme is divided into two streams ‒ (i) the FIT stream, and (ii) the microFIT stream – for projects having a capacity to produce up to 10 kW of electricity. Participants under the microFIT stream are typically small household, farm, or business generation projects. Panel Report, Canada – Measures Relating to the Feed-In Tariff Program, WT/DS412/R, WT/DS426/R,19 December 2012, para. 7.66 (referring to FIT Rules Exhibit (version 1.5.1), Section 2.1(a)(iii); and microFIT Rules (version 1.6.1), Section 2.1(a)(iv)).
25 Panel Report, Canada–FIT, WT/DS412/R, WT/DS426/R, 19 December 2012. para. 130.
26 Canada–Renewable Energy, Third Party Written Submission of the US, paras. 13 and 14.
27 Canada–FIT, first Written Submission by the EU, paras. 118 –30.
28 The Appellate Body in the India–Patents dispute noted: ‘principles of interpretation neither require nor condone the imputation into a treaty of words that are not there or the importation into a treaty of concepts that were not intended’. Appellate Body Report, India – Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R, para. 45.
29 Appellate Body Report, Canada–FIT, WT/DS412/AB/R and WT/DS426/AB/R, 6 May 2013, para. 5.74 stated that Article III.8(a) is a derogation from the Article III national treatment obligation.
30 Ibid., para. 5.59.
31 The Appellate Body further noted that the characterization of the provision as a derogation does not pre-determine the question as to which party bears the burden of proof with regard to the requirements stipulated in the provision. Canada–FIT, para. 5.57.
32 Ibid., paras. 5.59, 5.60, 5.61.
33 Ibid., para. 5.69.
34 Ibid., para. 5.85.
35 Appellate Body Report, Canada – Certain Measures Affecting the Automotive Industry, WT/DS139/AB/R, WT/DS142/AB/R, 31 May 2000, para. 82.
36 Most notably GATT Article XXIV on regional trading arrangements. GATT Article XXIV provides a conditional exemption from GATT most-favoured-nation obligations for developing countries, free trade areas, and customs unions. See J. H. Mathis, Regional Trade Agreements in the GATT (The Hague: Asser Press, 2002).
37 Hufbauer, G. C., Shelton Erb, J., and Starr, H. P., ‘The GATT Codes and the Unconditional Most Favored-Nation Principle’, 12 Law and Policy in International Business (1980), 59Google Scholar.
38 John H. Jackson, The Jurisprudence of GATT & WTO (Cambridge University Press, 2000), 63.
39 Mary Footer, ‘International Developments’, CS193–204.
40 S. Arrowsmith, Government Procurement in the WTO (Kluwer Publishers, 2003).
41 Hufbauer, Gary Clyde, Erb, Joanna Shelton, and Starr, H. P., ‘The GATT Codes and the Unconditional Most Favored-Nation Principle’, Law and Policy in International Business, 12 (Spring 1980)Google Scholar.
42 In a paragraph similar to the government procurement exemption provision in Article III:8(a), the dispute concerned Article III:8(b) which states that ‘The provisions of this Article shall not prevent the payment of subsidies exclusively to domestic producers, including payments to domestic producers derived from the proceeds of internal taxes or charges applied consistently with the provisions of this Article and subsidies effected through governmental purchases of domestic products.’
43 EC–Commercial Vessels, WT/DS301/R, para. 7.83.
44 Ibid. para. 7.87.
45 R. Hudec, ‘The Policy Goals of GATT Article I.1’, reprinted in Andrew T. Guzman and Joost H. B. Pauwelyn, International Trade Law (Wolters Kluwer Law and Business, 2009), 292.
46 Horn, Henrik and Mavroidis, Petros C., ‘Economic and Legal Aspects of the Most-Favored-Nation Clause’, 17 European Journal of Political Economy (2001), 233–279 CrossRefGoogle Scholar.
47 Appellate Body Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India, Recourse to Article 21.5 of the DSU by India, WT/DS141/AB/RW, 8 April 200, para. 84; see also: Panel Report, EC – Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/R, 7 March 2003, para. 98; Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R, 14 December 1999, para. 109.
48 The historical development of the existing GPA is traced in Annet Blank and Marceau, Gabrielle, ‘The History of the Government Procurement Negotiations Since 1945’, 5 Public Procurement Law Review (1996), 77–147 Google Scholar.
49 The Code, which came into effect on 1 January 1981 (and subsequently amended in 1987), was signed by Austria, Canada, EC, Israel, Finland, Hong Kong, Japan, Norway, Singapore, Sweden, Switzerland, and the US.
50 In the Vienna Convention on the Law of Treaties Section 3: Interpretation of Treaties, Article 31 covers the general rule of interpretation; Article 32 covers supplementary rules of interpretation; and Article 33 covers Interpretation of treaties authenticated in two or more languages.
51 Appellate Body Report, India – Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R, 19 December 1997, para. 45.
52 There is no doctrine of stare decisis or binding precedents in international law. Article 59 of the Statute of the International Court of Justice explicitly provides that the decision of the Court has no binding force except between the parties and in respect of that particular case. Additionally, Article 38 states that judicial decisions constitute only ‘subsidiary means for the determination of rules of law’ United Nations, Statute of the International Court of Justice, 18 April 1946, http://www.refworld.org/docid/3deb4b9c0.html [accessed 16 November 2015].
53 For an extended discussion of de facto and de jure and binding and non-binding stare decisis in the GATT WTO and international law, see Bhala, Raj, ‘The Myth About Stare Decisis and International Trade Law (Part One of a Trilogy)’, American University International Law Review, 14 (1999), 4, 845–956 Google Scholar.
54 Lauterpacht, Hersch, cited in Jeffery P. Commission, ‘Precedent in Investment Treaty Arbitration: A Citation Analysis of a Developing Jurisprudence’, Journal of International Arbitration, 24 (2007), 2, 134Google Scholar.
55 Appellate Body Report, United States – Final Anti-Dumping Measures on Stainless Steel from Mexico, WT/DS344/AB/R, 30 April 2008, paras. 160–162.
56 For more discussion on cogent reasons, see Appellate Body Report, China ‒ Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum, WT/DS431/AB/R, WT/DS432/AB/R, WT/DS433/AB/R, 7 August 2014, para. 761.
57 Matching clauses are regulatory provisions that authorize increased subsidies if foreign competitors have directly or indirectly received, or are going to receive, aid of an equivalent intensity for similar projects programmes, research, development, or technology. A matching clause is included, for example under Section 5.1.7 of the Community Framework for State Aid for Research and Development and Innovation (“the R&D&I Framework”) with the stated aim of unilaterally addressing actual or potential, direct or indirect distortions of international trade.
58 Appellate Body Report, United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, 29 April 1996, paras. 22–23; Appellate Body Report, United States ‒ Measures Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R, 25 April 1997, paras. 15–16.
59 Weiler, J. H. H., ‘The Geology of International Law: Governance, Democracy and Legitimacy’, 64 Heidelberg Journal of International Law (2004), 547Google Scholar.
60 The Appellate Body Report in US–Gambling somewhat qualified this task by noting that a responding party need not identify the universe of less trade-restrictive alternative measures and then show that none of those measures achieves the desired objective, for indeed this would be ‘an impracticable and impossible burden’. Appellate Body Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/AB/R, 7 April 2005, paras. 309–311.
61 The GATT and the Subsidies Code of 1979 did not provide an express definition of this term.
62 Appellate Body Report, Canada — Measures Affecting the Export of Civilian Aircraft, WT/DS70/AB/RW, 21 July 2000, para. 157.
63 This was reinforced by the EC–Drams Panel finding that: ‘In sum, if the financial contribution is not provided by the government (or directed or entrusted by the government), it is of no concern to us. If the financial contribution is provided (or directed or entrusted) by the government but still does not confer an advantage over what was available on the market, there is no need to discipline such government behaviour which lacks a trade distorting potential’. Panel Report, European Communities – Countervailing Measures on Dynamic Random Access Memory Chips From Korea, WT/DS299, 17 June 2005, para. 7.175.
64 Luca Rubini, Amicus curiae brief, Canada–Renewable Energy, Appellate Proceeding, DS412, 426.
65 Rubini, Luca, ‘Ain't wastin’ time no more: Subsidies for Renewable Energy, the SCM Agreement, Policy Space and Law Reform’, 15 Journal of International Economic Law, (2012) 2CrossRefGoogle Scholar; Marie Wilkes, ‘Feed-in Tariffs for Renewable Energy and WTO Subsidy Rules: An Initial Legal Review’, ICSTD Issue Paper No. 4, 2011; Steve Charnovitz and Carolyn Fischer, ‘Canada–Renewable Energy: Implications for WTO Law on Green and Not-So-Green Subsidies’, Resources for the Future, October 2014, RFF DP 14–38.
66 Whitsitt, E., ‘A Modest Victory at the WTO for Ontario's FIT Program’, 20 Journal of International Law and Policy (2013), 75–103 Google Scholar.
67 Appellate Body Report, Brazil ‒ Measures Affecting Desiccated Coconut, WT/DS22/AB/R, 21 February 1997, para. 13.
68 In addition to Luca Rubini, supra note 63, see Condon, Bradly J., ‘Climate Change and Unresolved Issues in WTO Law’, 12 Journal of International Economic Law (2009), 895Google Scholar.
69 Appellate Body Report, Canada–FIT, para. 5.8
70 Appellate Body Report, United States ‒ Measures Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R, WT/DS33/AB/R/Corr.1 1997:I, p.18.
71 Panel Report, India – Measures Affecting the Automotive Sector, WT/DS146/R, WT/DS175/R, 21 December 2001, para. 7.161.
72 See, for example, Robert D. Anderson, Josefita Pardo de Leon, Philippe Pelletier, Kodjo Osei-Lah, and Anna Caroline Müller, ‘Government Procurement Provisions In Regional Trade Agreements: A Stepping Stone to GPA Accession?’, in Sue Arrowsmith and Robert D. Anderson (eds.), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press, 2011); Asako Ueno, ‘Multilateralising Regionalism on Government Procurement’, OECD Trade Policy Paper No. 151.
73 Although the US–Morocco RTA makes a reference to the WTO ASCM Article18 when addressing voluntary export restraints.
74 NAFTA Article 1018 Exceptions relating to security, public morals, human, animal or plant life, intellectual property rights, and relating to goods or services of handicapped persons, of philanthropic institutions, or of prison labour.
75 NAFTA Chapter 12 ‘Cross Border Trade In Services’ explicitly excludes subsidies from the coverage of the chapter in Article 1201.2(d), which states: ‘This Chapter does not apply to: (d) subsidies or grants provided by a Party or a state enterprise, including government-supported loans, guarantees and insurance’, http://www.sice.oas.org/trade/nafta/chap-12.asp.
76 NAFTA Article 1907.2 Consultations states: ‘The Parties further agree to consult on:
(a) the potential to develop more effective rules and disciplines concerning the use of government subsidies’, http://www.sice.oas.org/trade/nafta/chap-192.asp.
77 Article 502.4, paragraph 3 does not apply to procurement by governmental agencies of goods or services for governmental purposes and not with a view to commercial resale or with a view to use in the production of goods or the provision of services for commercial sale.
78 Public Sector: Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC; Concessions: Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts; Utilities: Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC.
79 See Albert Sánchez Graells, ‘Public Procurement: A 2014 Updated Overview of EU and National Case Law, 31 March 2014’, http://ssrn.com/abstract=1968371.
80 See Assessment of the Commission of 30 May 2007, in case N 46/2007 – Welsh Public Sector Network Scheme, C(2007) 2212 final; and Nóra Tosics and Gaál, Norbert, ‘Government procurement and State Aid Control ‒ The Issue of Economic Advantage’, EC Competition Policy Newsletter 15 (2008)Google Scholar.
81 See Judgement of the Court in case C-94/99 – ARGE [2000] ECR I-11037.
82 The revised Directives have introduced a ‘light touch’ regime for services described as being of a ‘social’ nature. The Directives largely leave the detailed requirements surrounding the procurement of social services to the Member States, and as such this is another area that will require additional clarification.