China lures WTO to brink of procurement deal: sources

By Tom Miles

GENEVA (Reuters) - Forty-two countries are close to agreeing an upgrade of their Global Procurement Agreement (GPA), a reform that could unlock tens of billions of dollars of commercial opportunities, and many times more if China gets on board, trade sources said on Monday.

The GPA, a voluntary agreement within the World Trade Organization, opens a wide spectrum of public contracts in member countries to bidders from other members, improving competition and efficiency as well as providing massive new markets in areas such as infrastructure and transport.

By upgrading the existing 1996 agreement, its members hope to bring their rules into the internet age, deepen market access and offer special treatment for developing countries, which could persuade China to join -- as it has committed to do at some stage -- and bring in a vast new pool of contracts.

"We think the prospects of concluding the negotiation by the time of the ministerial meeting in December are pretty good," said a trade official involved in the GPA negotiations who declined to be named because the talks are confidential.

The European Union still had some disagreements with Japan and the United States and it was likely those issues needed a push from politicians rather than technical tweaks at the WTO in Geneva, another trade official said.

But he added that all three parties were looking at "creative" solutions and understood the importance of striking a deal by the end of this year.

"Things are positive," he said.


However, member governments have been warned that the window for a deal is rapidly closing. Last week, Nicholas Niggli, the chairman of the WTO committee on government procurement warned that agreement was needed urgently, since the stakes were huge and the time for a deal was now or never.

"The gains in market access will result in significant commercial opportunities for parties' companies, representing many tens of billions of dollars/euros annually," he told the committee, according to a text of his remarks which was circulated to member governments and later obtained by Reuters.

"It would be extremely short-sighted to jeopardize these benefits for the sake of a continued struggle amongst ourselves to eke out a few additional incremental gains at the margin," he told the committee, since other were lining up to join.

Gains from accessing those new markets would be many times greater than gains from upgrading the existing deal, he said.

China is expected to make a revised offer to join the club just before the ministerial meeting in December, which could extend its offer of market access to provinces and may even include some state-owned enterprises, trade officials said.

Other potential members include Ukraine, Vietnam and Russia, which has been asked to commit to joining the GPA as part of its negotiations to join the WTO, according to a trade official who had seen the draft agreement with Russia.

India is also exploring possible membership, a trade official said. And several Gulf Arab countries already have GPA-compatible rules, which means they could swiftly join.

If the GPA members reach agreement, it would rescue trade ministers from a potentially embarrassing WTO meeting in December, since the 153 members have failed to clinch a deal on the Doha round of talks aimed at further liberalizing trade.

One official said the GPA talks, which had also taken 10 years so far, stood a better chance of success than Doha because they involved "a coalition of the willing" rather than the full WTO membership.

(Reporting by Tom Miles)