Over the past three decades, the World Trade Organization’s (WTO) Government Procurement Agreement (GPA) has drawn active membership from the developed world without exception. However, a significant gap exists in membership and participation from developing and least developed countries. Accession negotiations to date have centered primarily on trade coverage and market access, despite the fact the GPA promotes a broad range of capacity building transitional measures and special differential treatment for developing countries. Developing countries are deterred from accession due to compliance requirements, commodity dependence, perceived lack of economic incentives, and market exposure risks. More effective use of transitional measures could assuage these concerns and attract developing countries to the GPA. Developed countries also stand to benefit from inclusion of the developing world in the GPA. The long-term economic, national security, and compliance gains for developed countries far outweigh potential short-term market losses resulting from transitional measures and offsets. A shift towards an interest-based negotiation strategy—that identifies the challenges and interests of all parties at the negotiating table—as well as broader and more creative use of transitional measures and GPA provisions, could be the key to bridging membership gaps and enticing countries of all economic stature to the negotiating table.
An old man, going a lone highway, Came at the evening, cold and gray, To a chasm, vast and deep and wide, through which was flowing a sullen tide. The old man crossed in the twilight dim; The sullen stream had no fears for him; But he turned when safe on the other side And built a bridge to span the tide.
The World Trade Organization’s (WTO) Government Procurement Agreement (GPA) has been the leading instrument in international government contracts for over one quarter of a century. It boasts a $1.7 trillion dollar market and includes all thirty-nine of the world’s most advanced economies. The GPA has attracted new membership over the past two decades and generated a long list of observing countries that have initiated accession negotiations, including Brazil, Russia, and China. The GPA’s growth and impact has defied many critics’ expectations, showing that the GPA has the potential to be a leading force of market liberalization, worldwide free trade, and bridge-building between nations. With eleven WTO members currently in the negotiation process, many experts anticipate a new wave of accessions in the near future.
Despite this success, however, the WTO’s GPA has struggled to bring developing countries into the fold. Of the forty-seven current members, forty-three are developed nations. While six countries have entered under a limited form of developing country status, not a single least developed country has obtained GPA membership, and only one, Afghanistan, has ever requested observer status. The past twenty-seven years of accessions have been conducted by and on behalf of the wealthiest nations of the world, with negotiations focused on market coverage and access. There has been very little regard for capacity building and transitional measures. This void has established a precedent that underutilizes special treatment for developing countries and overlooks accessions by developing countries.
Lack of accessions by developing nations is detrimental to both developing and developed countries. A failure to bridge this gap will undermine the WTO, stall GPA expansion and free trade growth, stagnate development and public procurement, and give credence to critics who lament free trade as a one-sided coin that benefits the rich at the expense of the poor.
This article examines the gaps standing between developing countries and GPA membership and how bridges can be built to increase accessions. It ultimately seeks to answer three questions: (1) Why has the developing world embraced the WTO’S GPA?; (2) Why does inclusion of developing nations matter; and (3) How can inclusion work? This article discusses these questions and potential solutions in three sections. Part II of the article outlines the background of the GPA, where it came from, and why the developed world has embraced it. Part III focuses on answering why inclusion matters. It identifies why gaps have emerged and how they will continue to deter accessions if there are no adjustments to current practice. The gaps include the lack of capacity to comply with GPA requirements, a perceived lack of economic incentives, over-dependence on commodities, and market exposure risks. This part also discusses the benefits of inclusion for the developed world, including significant and long-term economic, national security, reputational, and legal gains.
Part IV focuses on solutions to bridge these gaps and increase GPA accessions by developing countries. A three-step negotiations process could ensure accession terms are mutually beneficial to developing and developed countries. This process includes (1) considering the full spectrum of interests and challenges facing the acceding country; (2) identifying specific GPA transitional measures or provisions to address those challenges; and (3) proposing creative accession terms that address the challenges and interests in mutually beneficial ways. This part applies the three-step process to several case studies to demonstrate how some of today’s most controversial issues (largest gaps) in the developing world can be bridged.
The purpose of this proposed solution and its application are not to promote an end-all solution, but to stimulate novel negotiation strategies and new thinking regarding accession to the GPA by developing countries. This article concludes that, despite long-standing challenges to the GPA’s growth, the widest gaps between the developing world and accessions can be bridged. The requisite tools are at the feet of both parties, but the building cannot begin until they reach down and pick them up.
Recognizing the need for an effective multilateral framework for government procurement, with a view to achieving greater liberalization and expansion of, and improving the framework for, the conduct of international trade.
This section discusses the emergence of the GPA in a historical context and the impact of international conflict on free trade. It examines why government procurement was not initially incorporated into free trade agreements and how the GPA attracted the developed world, namely, through increased market access and the perpetuation of public procurement best practices. The section explores the GPA accession process, which consists of three phases: checklists, market coverage, and special provisions for developing countries. Finally, it assesses current GPA membership—which is comprised almost exclusively of developed countries that have joined the GPA without the need of transitional measures—and a negotiations precedence that risks stagnating future GPA growth by underutilizing transitional measures.
The GPA emerged as a plurilateral agreement within the WTO framework, meaning it only applies to WTO members who sign and adopt it. It is regarded as the premier agreement for regulating and unifying government procurement markets internationally. Of the 159 current WTO members, 47 have acceded to the GPA, with an additional 35 countries in observer status, and 11 in the process of negotiating accessions.
In 1948, following the end of World War II, the General Agreement on Tariffs and Trade (GATT) emerged as the leading international free trade framework for importing and exporting goods. Its purpose was to increase cooperation and strengthen international relations through trade by reducing protectionist policies such as tariffs and quotas that created harmful economic and development gaps during the previous century.
By 1995, the GATT was updated to incorporate trade in the form of services and intellectual property and emerged as the World Trade Organization. The parties eliminated government procurement from the GATT to avoid stalling the underlying trade agreements. During subsequent GATT negotiations in Tokyo in 1979, the idea of implementing a new and separate Government Procurement Agreement (GPA) was introduced, with a comprehensive version being completed in 1994 during a GATT negotiations meeting in Uruguay informally referred to as the “Uruguay Round.”
During this time, the GPA incorporated rules to require transparency and competition in international government contracts and prohibitions against discriminatory policies. For example, mandating most-favored nation (MFN) clauses ensured all participating parties would receive equal treatment. Trade coverage for the GPA was expanded to incorporate sub-central and state-level entities and to include service and construction contracts. Thresholds were also established to mandate GPA application any time that a government contract surpassed a specified dollar amount. The changes expanded market access, also referred to as coverage, between member nations ten-fold.
In March 2014, the GPA was revised to expand coverage even further and make needed improvement. Market access was updated by an estimated $100 billion annually to include more government ministries, agencies, and broader services. The revised texts also incorporated updated best practices, including electronic tools, improved special and differential treatment for developing nations, and obligations to avoid conflicts of interests and prevent corrupt practices.
Different terminology is used among the major international organizations to categorize development status. This article follows the WTO classifications, which refer to countries as developed, developing, or least developed (also referred to as LDC). The GPA and WTO do not use formulas or metrics to classify countries; instead, members assign themselves one of the three categories. If an acceding nation claims developing status, the WTO members can challenge the designation and attempt to prevent the WTO from granting special provisions. To date, the WTO recognizes forty-six LDCs, which mirrors the UN’s list of LDCs. The GPA does not currently have any LDC members, and Afghanistan is the only LDC observer.
Today, the GPA has two primary functions. First, GPA members agree to grant free, competitive access to one another’s government procurement markets. GPA membership includes, without exception, every nation categorized as an “advanced economy” by the International Monetary Fund (IMF). The combined gross domestic product (GDP) of current member states and those seeking accession constitutes over seventy percent of the global economy. This figure is an annual opportunity of $1.7 trillion USD to buy and sell goods and services internationally. Unlike other markets, GPA access is legally insured and backed by enforcement mechanisms contemplated in the agreement. These copious economic opportunities have been the principle incentive for accession by developed countries.
Second, the GPA solidifies government procurement norms and perpetuates uniform best practices internationally. Developed countries are motivated by the systematic benefits that can occur when more nations adopt these principles. For example, GPA members must ensure, among other things, that their procurement systems promote transparency and competition, prohibit corruption and collusion, and provide avenues of appeal and redress for award disputes. More efficient and secure procurement provides significant savings to developed states, allowing them to spend more. Compliance with these terms increases foreign contractor confidence and outside investment, which in turn leads to greater competition, improved quality of goods and services, and more equitable and efficient distribution of funds. Increased efficiency and competitiveness, access to better and less expensive goods, more scrutiny and transparency, and improved governance can occur with each new GPA accession.
The GPA’s international spotlight and pressure by members to conform to global norms drastically improve domestic procurement policy, practices, and anticorruption efforts. Foreign contractors are better positioned and more likely to challenge corrupt and inefficient practices than local contractors, who could face retaliation for challenging domestic systems entrenched in collusion or cartelization. This is due to the fact that most government contractors operate primarily from and within their own country and are entirely dependent on the local government to compete for contracts awards and business license approvals. Offending dishonest state officials or failing to acquiesce to corrupt practices could result in insolvency for the contractor.
Foreign contractors that have the capacity to compete abroad typically have a firm base in their home country, with mature resources and experience. This reduces dependency on any one country, softens the blow that corrupt foreign officials can deliver, and makes it more likely that foreign contractors will call attention to and challenge disruptive local practices that are incompatible with the GPA.
Once a country is a GPA member, it has a permanent seat at the negotiating table and can dictate the coverage, checklists, and special differential treatment of subsequent GPA applicants. This opportunity is a significant advantage for regional competitors that accede to the GPA prior to neighboring countries, and that can reject or promote terms according to their own interests.
Access to the GPA is not automatic or guaranteed and must be negotiated by each country seeking accession. Article XXII of the GPA states that any WTO member may accede to the GPA upon an agreement of terms between parties. In practice, countries seeking accession formally submit a request to the WTO GPA committee and then schedule negotiations. The negotiation teams from participating countries consist of attorneys, government officials, economists, trade experts, and a wide range of advisors. Three phases must be completed before accession: checklists, coverage, and special differential status.
Applicants must first demonstrate that their country has a procurement system in place that complies with the best practices and fundamental principles of the GPA. This step is often referred to as the “checklist” phase because the applicant must check off or certify to GPA members that they are in compliance with basic government procurement requirements as outlined in the text of the GPA. These requirements include transparency, fair and open competition, non-discrimination against other GPA parties, public notice of contracting opportunities, contractor qualifications, public record keeping of source-selection decisions, and appropriate appeals procedures for challenges.
The acceding country has wide latitude and flexibility to fulfill these requirements in the manner they determine appropriate. Regardless of how it is accomplished, the checklist phase is essential because it establishes safeguards for the GPA. It protects the WTO against reputational damage and individual contractors and investors from unpredictable procurement systems, corrupt practices, lack of redress, or discriminatory barriers to competition.
For example, Taiwan (Chinese Taipei) acceded to the GPA in 2009 and has been considered a success story by many due to the domestic legislative reform it triggered. The local government enacted the Government Procurement Law (GPL) to comply with GPA commitments. The updated law established transparent measures, requirements to post awards online to the public, competitive negotiations, and a forum for bid challenges. These measures broke from decades of inefficient and protectionist-based trade policies that stifled growth and investment. The past decade of government contracts in Taiwan (Chinese Taipei) has been heralded for reduced corruption, improved efficiency, and increased foreign trade.
After successful completion of the checklists, GPA applicants move to the second phase of accessions, during which they discuss coverage terms. Coverage refers to the portions of a domestic procurement market that an applicant is willing to open to GPA members. Most countries have sectors they want to remain closed to outside investors, including production of military equipment, essential chemicals or minerals, or markets exclusively controlled by the government (e.g., healthcare, natural resources, or agriculture). Countries negotiate thresholds wherein no procurements below a certain monetary value are covered by free trade extensions. For example, a threshold of $250,000 would mean a country could exclude foreign competitors from bidding on government contracts valued less than $250,000.
Upon approval by other GPA members, the acceding country documents its final coverage terms within seven annexes. The annexes are organized by central and sub-central government entities, other entities, goods, services, construction services, and general notes. There are no fixed rules to what can or cannot be negotiated; however, the thresholds and coverage terms that have been established over the past three decades during negotiations of the current forty-eight members establish a precedent of norms and expectations for subsequent negotiations.
If a country is too restrictive in its coverage or sets excessively high thresholds, it is likely to face rejection or delays in negotiations. GPA members are understandably wary of opening their markets to outside competition if the acceding country is unwilling to do the same. Multiple rounds of negotiations and delays (for years) can result as trade experts, government officials, and advisors struggling to agree on the coverage terms.
The third phase of GPA accessions is the opportunity for discussions regarding any requests for special and differential treatment (SDT). GPA Article V mandates that parties give special consideration to the development, financial and trade needs, and circumstances of developing countries. This mechanism is reserved for developing and least developed countries and contemplates a wide range of transitional measures to assist them during and after accession. For example, developing countries may request a price-preference program for goods or services related to internal sources or other developing nations. They may also incorporate offsets, phased-in additions of specific entities or sectors, or increase thresholds temporarily.
Surprisingly, the GPA does not provide a standard for determining what constitutes a developing country. The acceptance or rejection of development status is centered on whether other GPA members feel the proposed transition measures are reasonable, rather than whether a country can prove their developmental status. To be enforceable, these special terms and conditions are required to be annotated under Annex 7 of each country’s accession coverage schedule, along with an agreed-upon implementation schedule that details when the terms will expire. The default time frame for these measures is three to five years; however, countries can negotiate shorter or longer terms.
While the GPA repeatedly calls for special treatment, transitional measures have been greatly underutilized to date. Only six GPA members have entered under developing status, and only three of those members applied for transitional measures. First, in 2009, Taiwan (Chinese Taipei) “was permitted to apply offsets of up to [fifty percent] of the procurement [value] for a period of [ten] years.” Second, Moldova “was allowed to apply higher thresholds for two years after it became a party in July 2016.” Third, Israel applied an extensive set of offsets under its accession to the GPA, with a fixed schedule to reduce them over several decades.
Aside from these three examples, acceding countries have largely failed to frame transitional measures expansively, or alternatively failed to request measures altogether. Rather than focusing on transitional measures, negotiations have centered almost exclusively on tit-for-tat coverage for wars and market access.
Despite the flexible measures and special tools available for developing countries, the current scope of GPA membership is limited almost exclusively to developed countries. The following table of the current GPA membership, along with the accompanying date of accessions, demonstrates the extent to which the developed world has embraced the GPA.
There are several reasons the developed world has embraced the GPA. First, developed countries were the primary authors of the GPA and were driven to expand GATT and free trade to the realm of government contracts. As discussed, the economic prospects of increasing coverage and market access were a key incentive for incorporating government contracts.
Second, industrialized nations could quickly accede to the GPA without having to reform their procurement systems or make dramatic changes to comply with checklist requirements. This is because most developed countries had already undergone decades of procurement revisions by the time accession requirements were formalized. This sequence streamlined the checklists phase for developed countries and provided the unique opportunity to promote the uniform norms that would apply to all subsequent negotiations.
Third, accession by one country often prompts additional accessions by countries of similar economic standing. A domino effect has occurred repeatedly in GPA membership history wherein accession from one developed country prompts rapid and simultaneous accession by developing country neighbors and trading partners. Assurances in economic gains, along with reputational bolstering to the GPA, accompanied accession to the GPA by global superpowers.
Acceding countries and GPA members often rely on the successes and failures of previous accessions when undertaking new negotiations. With each GPA accession, an underlying set of negotiation norms is established.
For example, one of the earliest reservations negotiated from the European Union was to exclude human feeding programs and broadcasting contracts from market coverage. Once these exclusions were approved and accepted by the GPA members, they were immediately implemented in subsequent accessions across Europe, Moldova, Montenegro, and Armenia. Similarly, when the United States excluded small businesses from GPA coverage, Canada and Australia followed suit and incorporated their own set-aside programs.
While drawing upon past experience is valuable, the GPA accession terms that were normalized for developed countries may not be as relevant for developing country accessions. Developing countries have an entirely different subset of economic and geopolitical challenges, which alter the incentives to accede and the benefits of participation. The GPA terms that were not useful or utilized during accessions for developed countries may be the very terms that developing countries need to achieve meaningful accession.
The normalization of overlooking special provisions could make it increasingly difficult for acceding countries to gain transitional measures. GPA members risk impeding future accessions of developing countries by clinging to a narrow fixation on coverage. Developing nations also risk failing to secure the full range of available benefits offered by the GPA if they simply replicate the negotiation strategies of the past. The ability to expand negotiations and make full use of transitional measures will be vital for developing countries around the globe, especially the least developed countries in Africa and Asia.
Despite the GPA’s success at attracting the developed world through economic incentives and public procurement best practices, gaps have emerged between the developing world and GPA accessions. Understanding how those gaps emerged, and why they have prevented the developing world from seeking accessions, is critical to facilitate future GPA growth. Accessions of developing countries could accelerate through adjustments to current practices and perceptions.
This section examines the major gaps that have emerged and prevented GPA accessions by developing nations. These gaps include the lack of capacity to comply with GPA requirements, commodity dependence, a perceived lack of economic incentives, and market exposure risks. This section also examines why inclusion matters to the developed world and discusses the economic, national security, and legal benefits of supporting developing country accessions.
While GPA membership has doubled since the 1990s, the forty-eight member states are almost exclusively developed countries and top-tier economies. There is not a single member from South America, Central America, or Africa, and very limited representation from Asia and the Middle East. The list of excluded countries include Brazil, Russia, China, India, and South Africa (also known as the BRICS nations), which currently represent twenty-five percent of the world’s land mass and forty percent of its population.
The following table provides an overview of the thirty-five current GPA observers, which includes thirty-two developing countries and one least developed country, Afghanistan. Russia and China are the only observers that would not likely be considered developing countries for purposes of accession.
This table establishes two important data points. First, the only way for the GPA to continue to expand is through the developing world. Only twenty-four percent of the world’s nations are members of the GPA, with 145 nations currently outside the fold. With the exception of the United Kingdom and arguably China, all the observing countries—those countries that are most likely the next to seek accession—are developing nations. Accordingly, all future accessions will involve developing nations, whose negotiation strategies could differ dramatically from previous accessions.
Second, in the history of the GPA, only one of forty-six least developed countries (LDC) has ever sought even observer status. This absence demonstrates that the GPA has not leveraged the requisite incentives to promote accession by the world’s poorest nations. However, it should not be assumed this lack of membership is simply due to economic disparity between developed and developing nations. Many LDCs have entered bilateral trade agreements with developed nations, incorporating transitional terms and development measures. These agreements indicate that incentives and conditions exist under which least developing countries could be motivated to join the GPA.
There is reason to believe that increased accessions may begin to occur in the near future; the major developing economies of the world (China, India, Russia, and Brazil) are already GPA observers and, in many cases, have already initiated accession. Some experts believe accession of these countries could create a domino effect, wherein developing neighbors recognize the need to maintain close ties and accede to the GPA collectively or in rapid succession.
For example, Brazil initiated accessions in May 2020. Brazil has been a core member to the Southern Common Market (MERCOSUR) since signing the Treaty of Asunción with Argentina, Paraguay, and Uruguay in 1997. Peru and Chili subsequently incorporated individual free trade agreements (FTA) with Brazil. If Brazil accedes to the GPA, the MERCOSUR members would likely pursue accessions, followed closely by regional trade partners that do not want to be left behind. The anticipated domino effect could continue with the rest of South and Central America seeking accession.
Other developing regions such as Africa and Southeast Asia could follow suit, especially if effective transitional measures are secured by developing countries in South America. South Africa, second only to Nigeria in terms of continental GDP and prosperity, has already stated that it would accede to the GPA if Brazil’s negotiations are successful.
Regardless of whether this domino effect will occur, questions remain as to why it has taken nearly twenty-five years for developing countries to begin to show interest in the GPA and why so many have not pursued observer status. Identifying and analyzing the major gaps between GPA accessions and the developing world can answer these questions and identify what concerns need to be addressed to attract future accessions.
One of the most significant gaps preventing accessions by developing countries is the inability to comply with the checklist requirements. In other words, the domestic procurement framework is not consistent with GPA standards (e.g., transparency, non-discrimination, full and open competition, appeals, and public access). Developing countries may lack a strong or efficient government contracts framework or, alternatively, have an incompatible system in place that is so deeply rooted in laws and cultural norms that any level of change meets stark resistance by policymakers and society.
To combat this challenge, the GPA grants developing countries a three-year grace period to update and implement domestic legislation in a way that is consistent with GPA standards. This incremental approach allows government leaders to make contemporary binding commitments to the GPA without the political backlash that would come from abruptly uprooting government policies and cultural norms. Acceding nations can draw upon GPA best practices to gradually improve systematic weaknesses, including electronic record keeping standards, single points of entry, or use of competitive negotiations.
Regardless of these considerations, the challenge of the reform process should not be underestimated, and implementing changes incur many political, institutional, and economic costs. Transitions can create tension and disagreement over fiscal policies and practices between various levels of government officials and ministries. Reform can take years, if not decades, to enact domestically and requires training, careful review, acceptance, and implementation by governments.
Two of the greatest challenges in systematic transformation are incorporating sub-central government authorities (e.g., state, county, municipal, and city governments) and state-owned entities (SOE). The larger a country’s territory, population, and government, the more coordination and support for accession must be garnished from sub-central entities and domestic suppliers. Large federal systems such as the United States, Australia, Brazil, Russia, India, and China face coverage complications under the GPA when individual states or municipalities refuse to accede to the agreement. GPA members want to include as many state and municipal procurements as possible to ensure equal market access and may deny accessions where coverage offers are too narrow.
For example, Brazil’s transformation from an empire into a republic was marked in its first republican constitution in 1891. The federation model in America “strongly influenced Brazil’s evolution” and led to the creation of twenty-six states, plus one Federal District (Brasília) under a centralized government. However, Brazil’s Constitution is unique in that it adds municipalities as a third distinct political tier. Today, 5,570 municipalities operate independently in Brazil with constitutionally mandated independent authority.
In 2016, nearly a half-million government contracts were procured in Brazil, fifty-five of which were with sub-central entities. State ownership of large-scale enterprises also emerged in Brazil during the twentieth century in an effort to increase economic development with railroads, electricity, mining, and public service sectors. Today, Brazil has more SOEs than any other country in North America and the Organization for Economic Cooperation and Development (OECD). The direct impact on government contracts is irrefutable; nearly forty-eight of Brazil’s government contracts are with SOEs and constitute $125 billion of Brazil’s procurement market and eight percent of its GDP.
Given the sheer size and volume of many SOEs, GPA members will demand that they be included in market coverage. This inclusion results in outcry from domestic firms and their lobbyists—which were previously shielded by protectionists measures—and creates pressing challenges to reconcile GPA coverage with protected sectors. For example, China has been involved in formal accession negotiations for fourteen years, with much of the delay attributed to the challenge of reshaping its government procurement legal framework. Decades-old legislation and incompatible norms related to state-owned markets and sub-central government entities have led to six procurement law revisions, with more to follow, to comply with the GPA’s checklists and reach an acceptable level of market access.
The challenges of overhauling a domestic government contract framework may simply be too much for developing countries, especially those facing urgent national security concerns, widespread poverty, limited economies, or complex political and economic challenges. Special treatment for developing countries exists in part to ease these domestic challenges and provide the necessary incentives to pursue accession, despite the negative impact that it will have on some domestic sectors. Unfortunately, there are almost no examples to date of a developing country being allowed to apply transitional measures in ways that make procurement system reform easier.
Another major gap standing between developing countries and GPA accessions is overreliance on commodities and a perception that the GPA lacks any economic advantages for developing countries. A country that relies on few exports or that has little trade influence will likely believe that it has little to gain through access to foreign markets offered by the GPA.
Twenty-eight countries have a Gross National Income (GNI) of $1,085 or less. An additional fifty countries have a GNI of $1,086 to $4,255. The majority of these countries are commodity-dependent, meaning that they rely on only a few raw materials for over fifty percent of their export earnings. As of 2019, two-thirds of developing countries were dependent on commodities, with an alarming eighty-nine percent of countries in Sub-Saharan Africa depending on commodities. For example, Angola is 100% dependent on commodity exports, with ninety-six percent coming from crude petroleum. Somalia’s economy is built on ninety-three percent exports, seventy percent of which come from live-animal exports. The developing world is filled with similar examples of commodity-reliance on minerals, energy, and agricultural exports.
The following graph organizes the global distribution of commodity-dependent countries by geographic regions.
Commodity dependence heightens a country’s vulnerability to increased poverty and economic crisis through a lack of diversification. Price volatility in the market causes immediate booms or busts in the national economy because there are no other economic resources to mitigate the impact. Dramatic year-to-year fluctuations are the result, and, in worst-case-scenarios, producers can lose everything in a single season.
The following image depicts the global “distribution of commodity-dependent and non-commodity-dependent countries”; it demonstrates the strong correlation between GPA membership and non-commodity export capabilities.
The current GPA membership, and the bulk of the developed world, are far less reliant on commodity exports for their domestic economies. These nations specialize in finished goods and services, rather than just raw materials, and have broad industries and stakeholders that benefit from increased access to foreign procurement markets. Conversely, commodity-dependent and developing nations typically have narrower trade capabilities and relatively little experience with government contracts abroad. There is little incentive to pursue GPA accessions if the gains are advertised and perceived in terms of trade coverage or market access alone. Developing countries would likely be more motivated to join the GPA if accession could lead to greater market diversification and local training or development.
Another gap for developing nations is the belief that opening up domestic markets to foreign competition will dilute the already limited domestic economic opportunities.
Despite the collective and long-term advantages that increased competition offers to the end consumer (i.e., higher quality goods and lower costs), the immediate and short-term impact on domestic suppliers is a serious threat to developing countries with only a few sectors. Political opponents to free trade often promote protectionism and nationalism by arguing that “local money should be spent locally” and that policies should always prioritize domestic output and employment opportunities for local citizens.
This rationale was one of the reasons India’s recent GPA negotiations failed and why concerns were raised in public discussions during South Korea’s and Taiwan’s (Chinese Taipei) accessions. Taiwan (Chinese Taipei) and South Korea were only able to assuage domestic impact concerns through their geo-political relationships and strategic importance. These two countries have advantages that most developing countries cannot utilize. For example, exports and trade from both countries make up more than fifty percent of their GDP. However, unlike most developing economies, their domestic producers have developed unique skillsets that can compete with foreign competition and do not rely exclusively on collecting raw materials. In 2019, the United States exported over $30 billion worth of goods to Taiwan, and Taiwan exported $54.3 billion in goods to the United States. South Korea’s and Taiwan’s exports are based on complex and technical products, including electrical machinery and equipment, nuclear reactors, boilers, organic chemicals, optical and medical apparatus, road vehicles, and plastics.
South Korea is a global technological and innovation leader, with strong international financial backers, competition, and education. In 2018, Korea had the twelfth largest GDP in the world, with $617 billion product exports and $96.3 billion service exports, the fifth and eighth highest in the world, respectively. Taiwan (Chinese Taipei) and South Korea can clearly compete with external contractors, which makes them capable of mitigating domestic impacts caused by increased foreign competition.
The transition is riskier for developing economies that have less to offer internationally and have not tested domestic markets with foreign competition. For example, in 2020, Ghana ranked seventy-third in the world in terms of GDP. With $20.5 billion in product exports, Ghana may appear as though its economy and domestic contractors could survive an influx of foreign competition; however, a closer look at the data reveals that Ghana’s exports are primarily commodities (gold, crude oil, cocoa beans, and nuts), ranking 120 of 157 in terms of economic complexity. Ghanaian suppliers, which deal primarily with agricultural supplies and services, are unlikely capable of competing with the service, product, construction, and development capabilities of foreign contractors. An influx of foreign competition could quickly dilute local economic opportunities. Without additional incentives or novel transitional measures, Ghana is unlikely to bear the domestic risks that accompany GPA accession. These risks are even more dramatic for least developed and landlocked developing countries with far less capacity.
Including developing countries in the GPA can result in gains for existing GPA members and the developed world. These benefits could come primarily in three areas: economic, national security, and legal.
Since the 1990s onward, emerging markets have accounted for an increasing share of global GDP, growing at unprecedented rates. The GDP of emerging markets in developing countries will constitute eighty-four percent of the global economic growth by 2023. These markets already exceed the combined GDP of the developed world.
Despite the GPA’s impressive strides, the majority of the global economy is still uncovered by the GPA. Non-members include China and India, which make up the first and third largest purchasing powers in the world, with GDPs that were $14 trillion and nearly $3 trillion respectively in 2019. An additional eighteen of the world’s fifty highest GDPs are not members of the GPA. By 2030, it is estimated that either six or seven of the top ten purchasing powers will emerge from developing nations, none of which are GPA members.
Greater market access in developing countries is a staggering monetary incentive for the developed world. Government contracts open access to a wide array of otherwise closed sectors, including goods and services in construction, infrastructure, pharmaceuticals, health services and products, computers, information technology, public services, agriculture, chemical products, fuels, machinery, textiles, plastics, woods, and rubbers, to name a few. Developing countries simultaneously benefit from the goods and services that foreign contractors offer that are otherwise unavailable to them.
Increased integration will likely be key to the economic future of developed countries. For example, the United States Agency for International Development (USAID) published a report in 2016 that demonstrated the vital link between developing countries and economic growth of the United States. U.S. exports are characterized as income elastic, meaning that, as other countries get richer, they buy more of the goods that the United States sells. “Over the past [ten] years, almost two-thirds of the growth in U.S. goods exports was to major USAID partners” in developing countries. This development investment was identified as a critical component to the U.S. economy and key source to recovery from the most recent recession. Greater integration of development and investment through public procurement markets would dramatically increase economic benefits for the developed world and developing world alike.
One of the key lessons learned from twentieth-century conflicts was the correlation between free trade and national security. Growing levels of protectionism and nationalism during World War II were key components to Hitler’s Germany and the inner-continental conflict that spilled over to the rest of the world. During post-war rebuilding efforts, free trade and liberalization were promoted on the premise that co-dependence and cooperation reduce the likelihood of conflict. To that end, the global powers convened in July 1944 to complete the Bretton Woods Agreement and establish an interdependent global economy and trade system.
The battle space has changed since World War II, with nearly all international conflict from the past seventy years shifting to battlefields in the developing world. Modern armed conflict is driven—if not exacerbated—by external global powers, which have competing and vested interests that play out in the domestic affairs in developing countries. Sustaining leaders or policies in a developing country through financial, military, and economic support can lead to proxy wars or prolonged fighting. Consider the drawn-out engagements of the twentieth-century on the Korean peninsula, Vietnam, Afghanistan, Iraq, Syria, and Ukraine. The duration and intensity of these conflicts were largely due to polarizing foreign support that competing domestic factions received from global powers.
Government procurement systems that incorporate wider competition for goods and services in infrastructure, public service, and defense are less susceptible to influence by trade partners. A country such as the United States—with an abundance of access to internal and external talent, resources, and experience—does not need to rely entirely on individual foreign investors to complete national programs or defend itself. Developing countries, on the other hand, may have to rely on unilateral foreign support, with no alternative trade, outreach, or partnering. This makes them more susceptible to manipulation and control by external influences and increases the likelihood that decisions will be based on narrow interests and survival at the expense of collective peace and security.
For example, China’s belt and road initiative offers infrastructure improvements to developing countries across Southeast Asia, Africa, and East Europe that are otherwise incapable of sustaining large domestic projects. The assistance includes building dams and high-speed trains in Laos, light-rails in Vietnam, oil pipelines between Chad and Cameroon, highways and ports in Sudan, airstrips in the Philippines and Indonesia, and water diversion projects in the Central African Republic. The national security risks that could quickly stem from these relationships are concerning. Civilian airports could become Chinese military strips and air space, weaponized at a moment’s notice. Shipping ports, roads, and train lines could be controlled or leveraged for economic, political, or military support. Gas lines, dams, and access to water could be regulated or shut down by individual foreign nations.
While not all conflicts can be predicted, experts concur that future wars will continue to emerge in the developing world, where competing world powers have a sense of investment and integration. Inclusion of developing countries in the GPA could diminish national security risks by opening up competition to outside contractors and spurring development from more than only one source. Greater integration from multiple nations would prevent a monopoly of development and reduce the likelihood that the support-receiving nations’ resources could be utilized by any single country as political leverage or military control in future conflicts. Increasing integration will improve the likelihood that the collective good prevails and threats of conflict are pacified.
In addition to economic and national security incentives, inclusion of developing nations is a legal obligation and mandatory term in the GPA. Developed countries drafted these terms; compliance will bolster institutional credibility and add reputational value to the WTO, GPA, member countries, and individual government contractors participating in capacity development within developing countries.
Development, capacity building, and preferential treatment were central to both the 1994 and 2014 GPA texts. The frequency of development references, specificity and length of transitional measures, and use of mandatory language (“shall”) rather than discretionary or recommendary language (“may”) throughout, demonstrates the intent of the drafters and signatories of the text. The GPA references developing countries twenty-two times throughout the revised text, more than almost any other theme or word. Inclusion of developing countries is not just an altruistic idea but a core element and legal requirement in the GPA and the WTO at large. For example, Article V, paragraph 1 of the GPA mandates that parties “give special consideration to the development, financial and trade needs and circumstances of developing countries and least developed countries” during negotiations. Article V, paragraph 8 states that parties “shall accord special and differential treatment to . . . least developed countries; and . . . any other developing country . . . to . . . [meet] its development needs.”
Developed countries are instructed that special terms should be negotiated with developing countries in order to “maintain an appropriate balance of opportunities under this Agreement.” The revised GPA also requires GPA members to consider any requests for capacity building or technical cooperation from a developing country. The terms “capacity building” and “aid effectiveness” became prevalent in the twenty-first century, following the implementation of the 1994 text and the Paris Agreement and Accra Agreement.
As noted, the GPA grants developing countries a three-year grace period to update and implement their legislation in a way that is consistent with GPA standards. This flexible timeline is an invaluable reform tool for political leadership in developing countries. It provides a buffer between accession and the time that domestic changes will actually go into effect. Policy makers can finalize GPA entry without suffering immediate consequences domestically or stalling accessions indefinitely due to minor domestic wrinkles that can be ironed out during the interim. It also allows local leadership to bind future policymakers to procurement reform due to the negotiated and legally binding GPA checklist and implementation timelines.
The GPA emphasis on contemplating and incentivizing inclusion of developing countries is consistent with the themes and measures found throughout the overarching trade agreements of the WTO, under which all GPA members belong. The WTO agreement specifies that international trade in all forms should benefit the economic development of developing and least-developed countries. The WTO also has an entire database dedicated to preferential agreements and established practices to strengthen participation, inclusion, and transitional measures for developing countries.
A key benefit from legal compliance for developed countries and the WTO is international credibility and reputation building. One of the primary criticisms of the GPA and WTO is that they are skewed to favor the rich at the expense of the poor, despite their altruistic language. These arguments become more persuasive the longer that GPA membership remains exclusive to developed countries, with little demonstrative success of implementing adequate transitional measures. Compliance with the GPA’s development legal requirements, and offering meaningful special differential treatment, could rebut critics and attract developing countries to the GPA.
Commercial marketability benefits could come from compliance with the GPA’s development values and goals. The normative framework and concern for cooperation, fairness, and the collective international good are what set the WTO and GPA apart from other bilateral trade agreements and partnerships. The profitability and attractiveness of this message is clear from the active participation, support, and generated interest that it receives from the international community. Further incorporating developing nations into this framework validates the proposition that these norms are universally beneficial.
Recognizing the need to take into account the development, financial and trade needs of developing countries, in particular the least developed countries.
Successful GPA negotiations in the future will likely be those that address the gaps facing acceding developing countries—including systematic incapacity, lack of economic incentives, and market exposure risks—while simultaneously securing the full range of benefits for the developed world, including economic, national security, and legal compliance gains. A strategy that utilizes interest-based negotiations and existing GPA provisions (i.e., special differential treatment) could bridge these challenges and result in mutually beneficial gains. To that end, this section proposes a three-step negotiation strategy and demonstrates how this process could be utilized to address some of today’s most prevalent development challenges. These include infrastructure and public service challenges in Asia, unemployment and human capital challenges in Africa, and environmental and sustainability challenges in South America.
Two primary types of negotiation theories exist: position-based and interest-based negotiations. In position-based negotiations, parties come to the table with self-serving end goals and a focus on their own interests. They measure success by their immediate gains and their ability to secure an advantage against competitors in a zero-sum game. In other words, parties view one another as adversaries competing for slices of the same pie; the larger their slice, the less there is for everyone else.
Conversely, interest-based negotiations consider the substance at stake through the collective lens with an emphasis on the long-term gains that can be secured through cooperation, relationship-building, and interdependence. The key principle is to understand all parties’ interests and develop creative options to satisfy those interests through mutually beneficial terms. Parties consider not only how to divide the pie at the table, but also how they can work together to bake more pie in the future.
GPA negotiation strategies to date have largely been zero-sum, position-based negotiations between developed countries, with a hyper-focus on increasing immediate market access. This strategy worked during the GPA’s first twenty-five years because the incentives among developed countries were largely the same: they each wanted larger slices of the coverage pie. Some scholars have argued that perpetuating competition-driven or position-based GPA negotiations will not be effective with developing-world negotiations and that a cooperative approach focused on supporting economic development will be necessary.
A shift to interest-based negotiations could be a more successful tactic for rapid inclusion of developing countries in the GPA because of the different end objectives of the parties at the negotiating table. A shift to interest-based negotiations could incorporate more effective use of transitionary provisions that address capacity for the acceding developing country, while simultaneously offering developed countries the full spectrum of economic, security, and legal compliance benefits.
A three-step negotiation strategy could be used to ensure interest-based negotiations are successful. In step one, the parties recognize the interests and challenges of one another. This process could include identifying domestic or international challenges the acceding nation faces and any mutual interests in solving those challenges.
In step two, the parties identify the relevant GPA clauses, transitional measures, special differential treatment, or international best practices that relate to those shared interests. In step three, the parties merge the information learned from step one (mutual interests and challenges) and step two (relevant GPA provisions) to propose uniquely tailored negotiation terms that are mutually beneficial. This process could assist parties in recognizing the myriad economic, development, national security, and legal benefits that can accompany developing-world inclusion.
This three-step process presupposes that interest-based negotiations could be successfully utilized in a plurilateral agreement such as the WTO. It must be conceded that arguably not all GPA parties would agree to all proposed measures in negotiations. However, bilateral trade agreements regularly implement unique measures to induce developing countries and provide strong evidence that interest-based negotiations are effective. This could explain why most developing countries choose to join individual bilateral trade agreements while opting out of the GPA.
This article is not the first to propose broader use of transitional measures or interest-based negotiations among GPA members. It also does not purport to provide an end-all solution to problems that have existed for millennia. Its purpose is to demonstrate one way, out of likely hundreds of possibilities, that existing tools could more effectively increase GPA inclusion for the benefit of all parties, at the expense of none.
One common challenge for developing nations that could be addressed through GPA transitional measures is a lack of adequate and reliable infrastructure and public services. Advancement in these areas is widely recognized as a crucial driver of economic improvement, with increased infrastructure investment commonly regarded as a key pillar in national development strategies in low-income countries.
The following graph captures the relationship between infrastructure and economic development status.
Most developing nations struggle to provide reliable public services and infrastructure, including access to clean water, reliable power and electricity, stable public buildings, and roadways. Underdeveloped ports, airports, roadways and railways stifle trade and growth and negatively impact local populations in a way that is felt daily.
Public procurement is essential to improvements in infrastructure and public services due to worldwide expectations that these areas fall under government purview to provide and maintain. Increasing competition in a developing country’s government contracts is one way to improve these services; the ability to do so while simultaneously increasing local capacity has been a persistent challenge. To examine these issues more fully, this section applies the previously discussed three-step process to infrastructure challenges and opportunities in Southeast Asia, specifically the Lao People’s Democratic Republic (hereinafter Laos) and Vietnam. These countries provide valuable examples due to their readily apparent infrastructure challenges and the impact of outside investment (namely, China) on development.
Infrastructure challenges in Asia have been a particular focus in recent years for international organizations, including the World Bank, based on the restraints that these gaps place on developing countries and slow the global economy. South Asia accounts for nearly thirty-six percent of the world’s most extreme poor, but is also the world’s fastest growing region. Investments in roads, transportation, electricity, water access, and sanitation services are predicted to be a key factor for the region in sustaining economic and geopolitical stability in the coming decade.
Infrastructure in Asia has also become a central point for competition between global superpowers due to the strategic and geopolitical advantages that can be leveraged through servicing roads, electricity, water, and other essential public services. These services are often provided in exchange for exclusive access by the supporting country in areas of economic, military, and even contracting opportunities. Rather than ignoring these challenges, GPA members can view them as an opportunity to incentivize GPA accessions and identify improved, mutually beneficial solutions through the GPA.
Developing nations with weak exports or trade capacity may not immediately benefit from free-trade access to the developed world’s procurement markets; however, they are likely incentivized by opportunities to improve public services and develop local talent and capacity. Infrastructure improvement increases both citizen confidence in government and in private sector competitiveness through “leveling the playing field for small- and medium-sized businesses.” It generates more efficient use of public resources and effective public transportation, communications, sanitation, pharmaceuticals, health services, and construction.
Developing countries are also motivated to acquire new technology, trade tools, training, employment, skills, investment, and integration with the developed world, provided it is not at their own expense and detriment. The immediate installation of a new train, water services, or electric grid is only effective in the long term if local talent is equipped and capable of maintaining it after it is built. Effective measures need to incorporate capacity building mechanisms to realistically incentivize developing governments to solicit international competition.
Developed countries have a mutual interest in improved infrastructure for several reasons. First, the economic gains of emerging markets will constitute eighty-four percent of global economic growth by 2023. Building relations early on could be vital to integrating untapped government contracting markets. Second, infrastructure and public service capacity development will directly benefit private investment, international trade, and future contractors working abroad through increased ease of doing business and market stability. Third, foreign competition would also diversify the procurement markets and remove the risks of a single global power, in this case China, from having disparate advantages or power to leverage future political activity that may not serve the collective interest of the local or international community.
Fourth, there is significant modern commercial appeal to philanthropic and development initiatives. Companies such as Toms, Allbirds, IBM, Cummins, Coca-Cola, Google, and Amazon have initiated poverty-reduction and corporate responsibility initiatives and campaigns throughout Africa and Asia. These projects garnish international praise and support and improve brand reputation. Bolstering democratic free markets and altruistic development—which the GPA and its members all purport to adhere to—promotes the functionality and reliability of the GPA. The fulfillment of capacity building requirements contained within the GPA will likely secure reputational and systematic gains for the WTO and encourage other developing countries to accede.
After recognizing interests and challenges, the second step is to determine what GPA provisions—including transitional or special differential treatment measures—exist in relation to the challenge. Several GPA provisions are applicable to infrastructure challenges in Asia. Article V, paragraph 8, of the GPA requires member states to consider potential capacity building solutions during negotiations. Article V, paragraph 3, of the GPA outlines special transitional measures, including the use of offsets. Article I, paragraph 1, of the GPA defines “offsets” as “any condition or undertaking that encourages local development or improves a Party’s balance-of-payments accounts, such as the use of domestic content, the licensing of technology, investment, counter-trade and similar action or requirement.”
Offsets are commonly associated with foreign military sales; however, they can be applied much more broadly. A similar concept is referred to as “countertrade” in civilian and trade sectors and even the GPA itself in Article I(1). These terms—offsets and countertrade— both refer to imposing some sort of reciprocity measure to stimulate national economies and local development through additional conditions and requirements that are not directly related to the procurement at hand but aimed at achieving wider policy goals. For example, a developing country could require offsets or countertrade in the form of transfers of technology, training, and equipment during performance of the contract. In such cases, the technological and training gains “offset” the cost the buying nation incurs from not using local manufacturers or domestic talent to acquire the good or service.
Offsets could alternatively require direct payments or contributions to local development projects, or in the form of hiring thresholds of local contractors. There is no shortage of creative uses that could be applied to offsets. The link between capacity development and offsets has been underutilized by practitioners today but has incredible potential, particularly in the area of infrastructure and public service development.
In step three, the parties merge the information learned from step one (identifying interests and challenges) and step two (identifying relevant GPA provisions) to propose accession terms that are mutually beneficial and specifically tailored to address the unique circumstances of the acceding country.
In this case, Laos, Vietnam, and developing countries in Southeast Asia could focus accession terms towards infrastructure improvements by invoking offsets and capacity development. Specifically, Laos could raise concerns that it has no alternatives to Chinese development programs with its railways and roads and that no local resources or labor are being used in these programs. Offset provisions could be implemented into Laos’s accession appendix and require training and use of local labor for a percentage (e.g., forty percent) of subcontract work on infrastructure projects. Similarly, Laos could require that contractors use local resources and materials or even require that certain construction equipment and technology be transferred to local competitors upon completion of the project.
Another simple form of offset measures would be to require cash or in-kind donations to preapproved infrastructure projects or funds. For example, Laos could require that the selected contractor match a percentage (e.g., fifteen percent) of the contract in contributions to a national highway fund, subway development plans, or a basic public service development fund for electricity, water, or sanitation. The more directly that Laos can tie requested offsets to specific infrastructure concerns, the more likely that special treatment would be granted by GPA members. Allowing contractors to gain the necessary skills, equipment, and labor opportunities needed to compete in future contracts could mitigate market exposure concerns.
GPA members could require contributions to projects that involve World Bank, United Nations, or USAID oversight to mitigate the risks of misuse of funds, or even the appearance of impropriety. A fixed expiration date for the offsets at the end of a pre-determined transition period would further mitigate any serious long-term risks or concerns associated with these measures from developed countries. If GPA members were willing to discuss these interests and benefits more widely with developing countries during negotiations, and if the parties were more proactive about using transitional measures and offsets in creative ways, infrastructure challenges and gaps could be bridged more rapidly and effectively.
Unemployment and lack of human capital represent another significant challenge facing developing countries that could become an area of mutual interests for accession negotiations. An estimated one-third of working-age populations in low- and middle-income countries lack necessary skills to secure any kind of employment. The World Bank estimates that more than two billion working-age adults worldwide, including 420 million young adults under the age twenty-five, fail to possess the minimum literacy skills needed in today’s market. Low skills reduce labor-force productivity, increase unemployment in young people, and inhibit investments and transfer of technology from developed countries. This is an ever-growing area of concern due to changes in the global economy and an emerging dependence on skillsets in areas of technology and innovation.
Despite having one of the largest portions of global youth “and eleven million new graduates entering the job market each year,” Africa only generates approximately one percent of global research output annually. According to the World Bank, addressing this challenge is a key feature to successfully developing Africa in the next decade; a failure to do so could see even more dramatic marginalization from the rest of the world. The abundance of natural resources and potential human capital in Africa makes this challenge ripe for creative solutions.
Human capital challenges in a country like Nigeria could provide a prime opportunity for GPA accession negotiations. With 209 million people, forty-three percent of which are under the age of fourteen, Nigeria has one of the largest youth populations in the world. Simultaneously, unemployment—especially for educated young adults—has been on the rise for over a decade and reached forty percent in 2018, with Nigeria ranking 150 out of 157 countries in the World Bank’s Human Capital Index.
The need for deliberate investment in technology, research and development (R&D), diversified production, and improved use of human capital in Nigeria could be a valuable GPA accession incentive for Nigeria and similarly situated developing countries. Developed countries could also benefit economically from an emerging market of such magnitude and underutilized human capital. An African tech hub, facilitated in large part by government contracts, could generate jobs, education and training, employability, and vast economic opportunities throughout the region. Nigeria is also at the crossroads of many political and national security interests. Timely development and increased economic ties through the GPA could help establish Nigeria as a stabilizing power node in Africa.
Article V, paragraph 3(a), of the GPA states that a developing country, based on its development needs and with the agreement of the parties, may adopt a price preference program if it is transparent and clearly describes the notice of intended procurements in Appendix 1 of the Accession Annex. Preference programs give a competitive advantage to predesignated interest groups or demographics in an effort to stimulate underdeveloped areas.
For example, the United States has a government contracts preference program for historically underutilized business zones (HUBZones) in areas that have high unemployment rates or that could otherwise benefit from increased investment. Qualifying contractors receive a ten percent price preference, which makes them eligible for selection, even when their offer is up to ten percent higher than other bids.
Article V, paragraph 3, of the GPA also authorizes the use of phased-in additions for specific sectors and temporary threshold adjustments. Phased-in additions allow certain sectors of a country’s economy to temporarily delay entry to the GPA for a negotiated period of years. Thresholds allow developing countries to increase the minimum dollar value of contracts that will be subject to the GPA for a negotiated period of time.
For example, if a country’s threshold was set at $100,000, it would not be required to open competition to, or accept offers from, foreign contractors on government contracts valued below $100,000. In other words, the higher the threshold, the fewer contracts the country will be required to consider bids from foreign contractors. This threshold amount is an effective tool for countries seeking to carve out temporary protections for certain industries or to protect local contractors from being overrun by more effective and less expensive foreign competition. The following table captures the thresholds currently incorporated by most GPA members and from which developing countries could temporarily deviate under special transitional measures.
Some GPA members negotiated transitional phases for only certain industries. For example, Taiwan (Chinese Taipei) negotiated a five-year transitional threshold for certain constructions services to mitigate immediate impact on local construction companies. Taiwan (Chinese Taipei) also negotiated a five-year grace period for the National Space Organization of the National Science Council to prepare for GPA integration.
In addition to price preferences, thresholds, and the previously discussed offset transitional measures, the GPA allows acceding countries to incorporate any other special terms and reservations under Annex 7 of the general notes. Some countries, including the United States, have incorporated set asides through their Annex 7 general notes. A set aside is a form of a preference program that allows a government to narrow the scope of competition to a smaller pool of contractors who qualify for award based on given public policy interests. The purpose of these set aside programs is to develop disadvantaged sectors of society (e.g., women owned small businesses, veteran owned businesses, etc.). For example, The United States’ general note reservation states the GPA “does not apply to any set aside on behalf of a small- or minority-owned business” and “may include any form of preference, such as the exclusive right to provide a good or service, or any price preference.”
Some GPA members have expressed concerns with overly broad set aside programs; however, developing countries and GPA members could utilize this practice in several ways that distinguish them from the United States program and assuage concerns from developed countries. First, under the GPA, price preferences or set aside programs for developing countries would be temporary, in order to develop domestic competitors prior to exposing them to full and open competition against foreign contractors. The time frame for this transition is typically only three to five years.
Second, the measures can be narrowly tailored towards specific industries or development goals (e.g., public infrastructure and public service contracts). Third, these terms would be documented in the accessions annex after open discussions and would not be subject to change at a later date or subject to surprise additions of new preference categories.
Creative use of set asides, price preferences, thresholds, and offsets could generate mutually beneficial negotiation terms for developing countries with unemployment concerns like Nigeria. A narrowed set aside program could be negotiated that would grant a percentage (e.g., twenty-five percent) of all contracts to be awarded to local small business or startup firms.
Similarly, a price preference program could be awarded to Nigerian startups, tech, or energy firms to prompt new businesses and employment opportunities in industries with the most promising development and employment opportunities. Coupling these efforts with offsets could be especially effective. Offsets in the form of technology transfer and training could be required in all government contracts to equip Nigerians with advanced tools and skills needed to modernize its labor force. Nigeria could incorporate technology transfers with universities and research institutions or require contractors to train and utilize local labor in a percentage of all its contracts. Alternatively, offsets could be applied in the form of direct contributions to global initiatives focused on addressing youth unemployment, such as the United Nations’ Nigerian Youth Employment Action Plan (NIYEAP).
Investments and cash contributions to third parties, universities, scholarships, grants, and tech industry initiatives could be specific enough that they would address particular challenges and assure the developed world that they were being used for their intended purpose. Oversight by reputable international organizations that are invested in improving these global challenges would reduce the risk of corrupt use of funds or prevention of their use for the intended purpose.
Offsets and capacity building related to human capital, employment, poverty reduction, and corporate responsibility are often a welcomed venture by global enterprises due to the marketing value and brand bolstering associated with philanthropical campaigns. For example, IBM recently launched its first global research lab in Africa (Kenya) as part of a philanthropical initiative that focuses on innovation, human capital development, education, and sanitation. It also undertook a high-tech initiative in South Africa in partnership with local universities. IBM promotes these programs online as corporate social-responsibility initiatives driven to transform lives and spark new business opportunities in key areas such as water, agriculture, transportation, healthcare, financial inclusion, education, energy, security, and e-government. Similarly, Cummins Inc., a United States-based power-generation corporation, has development campaigns throughout Africa to promote water and sanitation in schools, food donations, and community-needs humanitarian projects. Cummins describes these programs as “[t]aking [c]are of [o]thers,” “build[ing] stronger communities,” and “mak[ing] a difference.” These and similar programs are widely publicized by corporations and effectively improve credibility and public trust.
Creative use of offsets and price preference programs would help Nigeria develop less reliance on commodities while simultaneously addressing issues of unemployment and human capital. While these proposed efforts would not likely be the sole solution to remedying challenges that have existed for centuries, they are a few examples of how transitional measures can be used creatively to address human capital challenges and entice GPA members and developing countries to the negotiating table.
Environmental issues will play an increasingly important part of discussions in trade agreements and GPA accessions as international pressure mounts and demands efforts in key countries and regions. Infectious diseases, heatwaves, flooding, storms, and agricultural losses from environmental concerns and climate change are just some of the areas of growing concern.
In 2016, the World Health Organization calculated that approximately one in four deaths worldwide (12.6 million) resulted from exposure to unhealthy environmental risk factors such as air pollution, water pollution, soil pollution, chemical exposure, and climate change. Many key environmental resources—including forests, water channels, and agricultural bread baskets—reside within lower-income nations and could become a focus of negotiations. For example, environmental policies in Brazil are constantly under a microscope due to its stewardship of sixty-five percent of the Amazon rainforest. The issue has led to tension in previous trade agreements, and EU members even threatened to terminate the recent Mercosur trade deal due to preservation concerns of the Amazon.
Brazil’s past practice has been to avoid discussion of Amazon-related issues with international actors due to a strong sense of protectionism and skepticism towards outside involvement. Brazil may have more success treating international environment concerns as mutual interests in an effort to obtain greater offsets and transitional measures in exchange for commitments to address environmental considerations. For example, Brazil could leverage the temporary measures under Article V of the GPA to apply previously discussed offsets, thresholds, phased-in additions, or even price preferences in exchange for more inclusive environmental policies. Brazil could require contributions to environmental funds for procurements with an agricultural or environmental impact, price preferences could be given for Amazon-bordering communities, or subcontractor thresholds and local employment requirements could be used as alternative options to steer deforesting-prone actors towards more sustainable work.
Many experts believe that a global contribution fund to Brazil would be the quickest and most effective solution to stopping deforestation. This option has drawn support from politicians, including Brazil’s Minster of the Environment and U.S. President Joe Biden, who proposed contributing $20 billion to Brazil for use towards conservation efforts.
Brazil’s central authorities could consider consulting with its agricultural and environmental subject matter experts, as well as sub-central government entities that border the forest (e.g., Rondônia, Pará, Mata Grosso, and Amapa), to identify the optimal transitional measures that could simultaneously benefit local communities and improve conservation efforts. The amount of international interest, support, and sense of urgency surrounding this issue is at an all-time high and provides ample opportunity for mutually beneficial negotiations.
Alternatively, Article III of the GPA, which is not limited to a transition period, authorizes any GPA member (developed or developing) to implement any measures “necessary to protect human, animal or plant life.” Article X, paragraph 6, of the GPA promotes conservation of natural resources and environmental protection efforts in procurement specifications. Brazil could rely on these provisions during negotiations to secure benefits in exchange for environmental policies beyond the initial transition period.
The three-step process, or any similar interest-based negotiation strategy that makes creative use of GPA provisions, is not limited in application to infrastructure, human capital, and environmental challenges. Virtually any contemporary challenge or gap facing developing countries could likely be ameliorated through this process. This could include challenges related to the protection of intellectual property, inclusion of state-owned entities and sub-central government entities, food and water policies, agricultural and human feeding programs, philanthropic efforts, provisions for indigenous populations, and treatment of disabled or marginalized communities, to name a few.
Regardless of the method used, incorporating more effective use of transitionary provisions that address capacity for the acceding developing country, while simultaneously offering developed countries the full spectrum of economic, security, and legal compliance benefits, could be a key component to assisting legal and trade practitioners, GPA members, and developing countries transition towards more rapid inclusion of developing countries in the GPA.
The builder lifted his old gray head: “Good friend, in the path I have come,” he said, “There followeth after me today A youth whose feet must pass this way. This chasm that has been naught to me To that fair-haired youth may a pitfall be. He, too, must cross in the twilight dim; Good friend, I am building the bridge for him.”
The GPA has taken tremendous strides over the past fifty years to become the premier international agreement on government contracts. It has bolstered free trade relations, increased procurement market access to unprecedented levels, and succeeded in perpetuating global norms and uniform best practices that promote anti-corruption, full and open competition, and systems of redress in government contracts.
Despite these historic gains, the achievements have largely been enjoyed by the developed world, whose accessions have focused primarily on trade coverage and compliance, with little to no implementation of transitional measures for developing countries. Gaps have emerged between developing countries and accessions due to the challenges of conforming procurement systems to GPA standards, a perceived lack of economic benefits, and the negative risks of market exposure on local procurement markets.
If no further adjustments to accession practice are made, the GPA runs the risk of reaching stagnation and becoming a tool that expands, rather than bridges, gaps between developing and developed nations. The longer that these divisions remain in place, the more credibility will be lent to critics who claim the WTO and GPA are all talk, with no action, in terms of inclusion and development. Stagnation and lack of inclusion would be a mistake due to the tremendous economic, national security, and legal compliance benefits available to the developed world, as well as the capacity development, corruption mitigation, increased procurement efficiency, improved quality of goods and services, and global integration available to the developing world.
Fortunately, powerful tools already exist to address gaps and, if used more expansively, bridge the divide and accelerate accessions to the GPA by developing countries. These tools are the GPA’s transitional measures and special differential treatment provisions. Novel negotiation strategies that are interest-based—rather than position-based—could lead to mutually beneficial terms that address challenges with relevant incentives. A three-step negotiation process that recognizes mutual challenges and interests, identifies relevant GPA transitional measures, and proposes creative solutions could be adopted to bridge some of today’s widest gaps, including infrastructure, human capital, and sustainability challenges.
Despite long-standing challenges to the GPA’s growth, the widest gaps between the developing world and accession can be bridged. The requisite tools are at the feet of both parties; however, the building cannot begin until they pick them up.
