The Limited Case for Permitting SME Procurement Preferences in the WTO Agreement on Government Procurement
The Limited Case for Permitting SME Procurement Preferences in the WTO Agreement on Government Procurement, in THE WTO REGIME ON GOVERNMENT PROCUREMENT: CHALLENGE AND REFORM444(Sue Arrowsmith & Robert Anderson eds., Cambridge University Press)
This is a chapter in the forthcoming book, Sue Arrowsmith & Robert D. Anderson, The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press, 2011). The chapter puts under scrutiny public procurement policies designed to benefit SMEs per se, as small or medium sized enterprises, and to evaluate whether the GPA (and hence possibly other trade agreements liberalizing procurement markets) should be more accommodating to these policies, even though these policies might restrict international trade. The chapter also evaluates whether the GPA should be more accommodating to policies designed to benefit firms controlled by individuals who belong to historically disadvantaged groups. Contrary to the standard argument that SME procurement policies are trade protectionist, there are cases in which they enhance competition and reduce procurement costs, though the conditions for these benefits are narrow and depend on proper institutional design. The economic merits of SME preference policies complement the noneconomic policy justifications for procurement preference policies to support firms owned and controlled by historically disadvantaged individuals, or HDIs. Any agreement to liberalize procurement markets should deal with the reality that some states have longstanding policies supporting firms owned and controlled by historically disadvantaged individuals, rooted in the constitutional orders of those states. Substantial noneconomic rationales, grounded in notions of social justice and human rights, support these programmes, but the domain of these rationales as they are currently understood is limited to domestic societies. This limitation affects all negotiations to liberalize trade across national borders, in that states (or their leaders) do not hold the view that they have obligations to support the programmes of other states in the area of social justice. I argue that all WTO members should have an equal opportunity to implement noneconomic policies having to do with promoting justice within their borders for their citizens. The GPA, at least by default or implicitly, currently gives only powerful WTO members the ability to employ SME and HDI policies. The GPA should accommodate SME and HDI policies for purposes of creating a level playing field between large market and small market WTO members. Particularly as to procurement preference policies to benefit HDIs, the GPA should accommodate HDI friendly policies to respect values of social justice and human rights that well-ordered domestic societies are required to respect. The weakness of the GPA to accommodate SME and HDI policies likely offers insights on why the GPA has had difficulties becoming a multilateral WTO agreement.