I. Purpose of the Report
This report summarizes and compares government procurement rules of selected jurisdictions, including the implementation of the WTO-GPA by the State members to the agreement as well as the domestic laws of the countries that are not members to the agreement.
II. WTO – Plurilateral Agreement on Government Procurement
Brazil, India and Russia are not parties to the WTO-GPA. Canada, the European Union, and Japan joined GPA in January 1996, and China was accepted as an observer in February 2002. In December 2007, China started its accession process by signing a written application to join the WTO-GPA.
III. Implementation of Government Procurement Rules
The provisions of the WTO-GPA were implemented in the domestic legislation of Canada, European Union and Japan. Japan issued general rules. Directives were prepared by the European Union, and Canada incorporated the provisions of the WTO-GPA at the federal level only, limiting the participation of suppliers on state and local tenders.
In the absence of an international agreement, government procurement in the BRIC countries (Brazil, Russia, India, and China) is governed by federal laws. Brazil and India issued federal laws based on constitutional principles, which was not the case for Russia and China. However, all countries make it mandatory that government procurement follow the rules enacted in this regard.
IV. Domestic Sourcing
Canada and the European Union have their domestic sourcing boundaries defined in the form of limitations and exclusions listed in legal instruments, while Japan does not make use of any restrictive protocols.
Canada used the General Notes submitted to the WTO-GPA to summarize limitations and exclusions, and to state that the services Canada has included extend only to parties that grant reciprocal access and that, for the European Union, the WTO-GPA does not apply to certain activities, which consequently defined the requirements for domestic sourcing.
The Directives issued by the European Union to regulate government procurement also list public contracts, works, and services that are excluded. In addition, within the European Union market, there is no requirement for preference of domestic sourcing. However, with regard to the WTO-GPA, EU Members are required to apply the “no less favorable” treatment to products, services, and suppliers of any other party to the Agreement than they give to their domestic products, services, and suppliers.
On the other hand, Japan does not have any requirement regarding domestic sourcing or industry exemption.
Brazil and China require that government procurement come from domestic sources, while Russia limits its domestic sourcing requirement to military and national security issues, and India prefers to focus on price competitiveness and transparency.
In Brazil, domestic sourcing is justified under constitutional principles that determine that government procurement must be done through public tenders that are regulated by federal law, and that no government entity is exempt from a public tender process. Small companies enjoy preferential treatment and the proposal that is more beneficial to the government is awarded the contract. However, if a tie occurs, Brazilian goods and services are given preference.
Russia does not restrict procurement based on the contractor’s citizenship. The criteria used to establish prohibitions and restrictions for acquisitions of goods, works, and services produced outside Russia is limited to military contracts and national security issues.
India’s requirement for government procurement is to procure materials and/or services of the specified quality, at the most competitive prices in a fair and transparent manner.
In China, government procurement must come from domestic sources, except when: (1) the required goods, projects, or services are not available in China, or are not available upon reasonable commercial conditions; (2) the objects of procurement are for use outside China; or (3) it is specified otherwise in other laws or administrative regulations.
V. Exempted Industries
In Canada, federal government entities that are bound by the WTO-GPA are listed on the Annexes submitted to the WTO-GPA, making most governmental departments, agencies, and enterprises generally bound by the WTO-GPA. Nevertheless, the Department of Defence and the Royal Canadian Mounted Police are extensively exempt from procurement rules. In addition, the General Notes submitted by Canada list several types of activities, including public works, services, equipment, programs, and government assistance that are not covered by the WTO-GPA.
Like Canada, the European Union also lists on its Directives the public contracts, works, and service concessions that are excluded from the scope of the WTO-GPA and Japan does not have any exempted industry.
In Brazil, no industry is exempt from a public tender process, but the law lists the situations that are exempt from public tender and identifies the situations in which a public tender is not required because competitive bidding is not viable.
As in Brazil, in India no industry is exempt from the procedures of government procurement, outlined in India’s General Financial Rules, as a means to provide equal opportunity, fairness, and transparency to all domestic and foreign companies who compete for procurement contracts.
In contrast, Russian law does not provide exemptions other than for state secrecy reasons, which appears also to be the case in China, as the requirements of the Chinese Procurement Law do not apply to military procurement, emergency procurement due to serious natural disaster or other matters of force majeure, or procurement involving national security or state secrets. Legislation currently being drafted in China will also exclude procurement with international loan funds, and procurement of mechanical and electrical products.
VI. Compliance with WTO Guidelines
The WTO-GPA is based on the principles of openness, transparency, and nondiscrimination, which apply to the parties’ procurements that are covered by the Agreement, to the benefit of parties and their suppliers, goods, and services. In this regard, Canada, the European Union, and Japan have consistently issued regulations designed to implement the Agreement into their domestic markets.
VII. Market Access for Other Nation’s Goods
The three members to the WTO-GPA covered in this report, Canada, the European Union, and Japan, issued regulations granting access to other nations’ goods to their domestic markets.
Canada established rules for the procurement of certain supplies and services by national governments, which were prepared to give foreign parties market access on a reciprocal basis.
Access to the EU market for the goods of other nations who participate in the WTO-GPA is foreseen in the Directives issued by the European Union, which dictate that EU Members are required to apply the “no less favorable” treatment to products, services, and suppliers of any party to the Agreement than they give to their domestic products, services, and suppliers. In addition, the European Union legal regime on public procurement also applies to signatories to the WTO-GPA.
Japan has voluntarily improved foreign suppliers’ access to government procurement by exceeding the requirements of the WTO-GPA. The government also expanded the scope of applicability of the GATT Agreement on government procurement by lowering the threshold estimated value assigned in the GATT Agreement.
Although the BRIC countries are not participating members to the WTO-GPA, other nations’ goods can still reach their markets. Brazil and China require that government procurement come from domestic sources, but there are exceptions. In Brazil, a foreign company may participate in public tender processes for government contracts as long as they are established or represented in the country. In China, if certain circumstances occur, goods, projects, or services may be procured abroad.
Russia only establishes restrictions or prohibitions for the acquisition of goods, works, and services originating outside of Russia in the case of military contracts or when issues of national security are at stake.
In India, the only requirement is that foreign companies must be centrally registered with the Director General of Supplies and Disposal (DGS&D) in order to submit tenders agreeing to supply goods of the requested specifications.
Prepared by Eduardo Soares
Senior Foreign Law Specialist
 World Trade Organization, The Plurilateral Agreement on Government Procurement, available at http://www.wto.org/english/tratop_E/gproc_e/gp_gpa_e.htm (last visited Feb. 4, 2010).
Last Updated: 03/31/2014