Public Procurement in 21st Century: Balancing Liberalisation, Social Values and Protectionis

Governments have long used public procurement markets to advance broader (horizontal) policy-goals at the expense of achieving the best value for money in the public sector. Such policies---which include social, environmental, human-rights-related or simply openly protectionism---have often been the result of powerful domestic interest groups successfully lobbying their governments for protection from global competition. Such behaviour has traditionally not been condemned by the international system. For example, the international community failed to multilaterally address the resulting discrimination against foreign suppliers/contractors of goods/services in the formation of the General Agreement on Tariffs and Trade (GATT) in 1947. Only much later, and as a result of the plurilateral Tokyo Round Code on Government Procurement ('GPA') in 1979, did a group of mostly developed countries partially commit to opening their public procurement markets with the goal of advocating best value for money and containing other horizontal policy goals. After thirty years of little further progress, the GPA parties discreetly changed this paradigm by showing a lax stance on the increasing phenomenon of 'cross-border horizontal policies.';Such 'cross-border horizontal policies.' deprive foreign (exterritorial) business of their comparative/cost advantages by deliberately interfering with foreign regulatory environments in a number of ways, including written laws, their enforcement or foreign law-making/political process. Such policies employ public procurers' purchasing power to arbitrarily and selectively target specific jurisdictions, sectors, geographical regions or specific business operators. Such policies also work in tandem with consumer-driven fair-trade initiatives in private markets and with attempts to internationalise green and social standards through international agreements. At the same time, large emerging economies employ strategies of 'innovation mercantilism' which seek to use public procurement as a means to force technology transfers. Innovation mercantilism shares many characteristics of environmental and social policies by arbitrarily and selectively targeting the innovation advantage of specific foreign sectors or enterprises, and by adversely affecting regulatory environments in the originating country.;This study presents cross-border horizontal policies as a major obstacle to further liberalisation of public procurement markets. This study finds that governments negotiating liberalisation of public procurement markets have little control over the pursuit of such policies by sub-central governments and by executive agencies, resulting in that governments can neither make reliable commitments toward their trading partners on curbing such policies nor can they effectively use such policies to force third countries to reciprocally open markets.;This study also finds that governments are detracted from properly addressing the problem of such policies by having instead to negotiate procedural framework of the GPA in the lack of spontaneously emerged order of public contracting. As a result, diverging attitudes to such policies are not reflected in the GPA, which largely explains many countries' (especially emerging economies') aversion to join this agreement and a current trend toward a bilateralisation of public procurement-specific negotiations whereby such policies might be more easily addressed between pairs of most interested countries, to the detriment of unfinished multilateralisation of the GPA.