GPA’s Challenges And Impacts On China Government Procurement

Government procurement is generally adopted by marketing economy countriesin the background of economic globalization. The government procurement is one ofthe important means for current countries’ governments in the world to administratethe social economy; it is one kind of effective ways which marketing countriesusually adopt for increasing the management of government spending. And also, it isvery important for improving the efficiency of the use of government financialcapital, regulating government’s consuming behavior, and reducing the corruptionphenomena.The Agreement on Government Procurement (GPA) is a plurilateral agreementunder WTO and only binding on the parties who have signed it. The basic principlesestablished by GPA are increasingly accepted by government, international economicorganizations and multinational corporations as well as manufacturers. China’s tradepartners have made considerable efforts, before and after China’s WTO accession, topersuade China to become party of GPA. After5years of intensive discussion, on28December2007, China finally submitted a formal application to become party to theGPA. This included an offer of GPA coverage (the so-called ‘Appendix I offer’) andsignaled the initiation of China’s GPA accession process.It is safe to argue that China’s GPA accession poses significant challenges fornegotiators due to a number of factors. Firstly, the GPA itself is not fully equipped todeal with acceding countries with a large state sector and existing GPA Parties havemade little progress in extending the coverage commitments following the revision.Secondly, so far as the position of China is concerned, Chinese government structureis complicated and the problem has been aggravated by a new round of centralgovernment reorganization completed after the application and the division betweenthe Chinese government and state enterprises is difficult to ascertain, especially withregard to investment, which make coverage negotiations problematic. Furthermore, the legal and institutional frameworks underlying current Chinese public procurementregime remain fragmented and incoherent whilst it is also evident that China has inrecent years intensified the use of government procurement as a policy instrument topromote national industrial and environmental policies. These add to the lack ofpolitical supports for speeding up the GPA accession and complicate the negotiationand adaptation of domestic legislation. Finally, the structural link betweenadministrative tribunals/judiciary and the local government gives rise to the concernof local protectionism and put the effectiveness of a GPA-compliant supplier reviewsystem in question. These challenges can be broadly divided into three categories:politically-rooted, coverage-related and implementation-concerned. In order to ensurea successful accession, the roots and implications of such challenges need to beclosely scrutinized.This paper consists of four parts with GPA and China’s governmentprocurement as the researching objects. The first part introduces the concept, featuresand development of government procurement. The second part introduces theemergence, main points and development of GPA, which introduces the value goal,the basic principle and application scope of GPA. The third part outlines a number ofchallenges associated with the negotiation of GPA. Firstly it deals with challenges ofa political and institutional nature, namely the lack of political momentum and anadequate institutional framework for negotiation on the Chinese side, as well as thelack of consensus in expanding the GPA coverage among existing GPA Parties. Thenit deals with challenges including the difficulty in ascertaining the real value ofChina’s offer with regard to central, sub-central government entities; the difficulty inenlisting state enterprises; the tension regarding the extent to which China can benefitfrom the special treatment provided for developing countries; and the tensionregarding the extent to which China can continue to pursue industrial, social andenvironmental policies through government procurement under the GPA. Thirdly ithighlights the challenges concerning the implementation of the GPA in China withspecial focus on the harmonization of the domestic legal framework and theestablishment of a domestic review procedure. The fourth part will suggest broadprinciples for moving forward and propose a number of practical measures to facilitate the accession process. The conclusion argues that the success of China’sGPA accession depends on the clear awareness of significant challenges from bothinternational and domestic perspective, and the mutual understanding between Chinaand GPA Parties of each others’ expectations and constraints, as well as developing aculture of cooperation instead of confrontation in the negotiation. It will promote ahealthy and steady development of China’s economy.