The negotiation of China’s accession to the WTO Agreement on Government Procurement (GPA) has entered a critical stage since it was initiated at the end of 2007. Judging from the latest bids and asking prices, the biggest difference between China, the United States, the European Union and other major GPA participants lies in whether and to what extent state-owned enterprises are included in the bidding list. At the same time, China’s domestic government procurement system is not unified, and there is a big gap with the requirements of the new GPA text. Therefore, there are two main challenges for China to join the GPA negotiations at present: first, how to treat the GPA bid of state-owned enterprises; The second is to improve the domestic government procurement system and connect with GPA.
First, the GPA bid of state-owned enterprises
China thinks that its state-owned enterprises are large in quantity and wide in scope, which are essentially different from those in the west. They belong to an independent market entity and should not bid. So far, four bids have not included state-owned enterprises. However, the United States, the European Union, Japan, South Korea and other major GPA participants believe that China’s state-owned enterprises are heavily controlled or influenced by the government and do not have the status of independent market players. Some of them have public purposes and should be included in the scope of government procurement norms. The latest asking price includes not only the vast majority of central state-owned enterprises, but also some local state-owned enterprises.
The above differences between China, the United States, the European Union and other major GPA participants should be treated rationally. First of all, the state-owned enterprises in China are quite different from those in most western countries in nature, scale and field, which is rooted in the difference between public ownership and private ownership in the basic economic system. With the process of privatization, western countries gradually open their government procurement markets to regional or international markets, while China seeks to moderately open its government procurement markets on the premise of adhering to the basic position of public ownership. Moreover, although some state-owned enterprises in western countries are called state-owned enterprises, they are more similar to institutions in China in essence. Therefore, it is unreasonable and unrealistic to ask China to treat state-owned enterprises in full accordance with western standards in opening up the government procurement market. Secondly, in some western countries’ domestic laws and EU procurement directives, government purpose, government control or influence standards did play an important role in deciding to include them in the adjustment scope of government procurement system. However, GPA was mainly negotiated by the participants, and the system standards were vague. Moreover, judging from the bids of the existing GPA participants, apart from reciprocity, a dominant theoretical standard could not be extracted. Therefore, it is obviously unfounded to ask China to bid for state-owned enterprises according to public welfare standards, government-controlled competition reduction standards or other standards. That is to say, GPA participants cannot ask China to abide by standards that do not exist at the GPA level, but only exist in its domestic laws or regional laws. Thirdly, whether and to what extent China’s state-owned enterprises bid,The bidding of state-owned enterprises should be determined on the principle of reciprocity, that is, the principle of field and scale equivalence, supplemented by business opportunity equivalence. Considering that Annex III of GPA is mainly composed of institutions and state-owned enterprises, the reform of institutions and state-owned enterprises in China is still in progress. Moreover, compared with state-owned enterprises, the scale of institutions is not small, and the government has a stronger purpose, which is more in line with GPA bidding requirements. Therefore, China’s Annex III bid should consider institutions and state-owned enterprises as a whole, and choose public welfare institutions as the main bid. Fourth, China is a developing country, and it is the largest developing country in the world. If the GPA as a "rich country club" overcharges China, it will not only hurt the interests of China and be unfair to China, but also have a negative impact on the future "expansion" of GPA, which is not conducive to the long-term development of GPA.
Second, the integration of domestic government procurement system with GPA
The legal system construction of government procurement in China has made some progress since the end of last century, but there are also many problems, which are mainly manifested in: the basic law of government procurement, the Government Procurement Law, and the Bidding Law are in serious conflict; The adjustment scope of the Government Procurement Law is too narrow, the supporting system is not in place, the procurement procedure is not standardized, and the relief system is weak; The bidding form stipulated in the Bidding Law is too rigid to meet the diversified procurement needs of enterprises, and the relief mechanism is also imperfect; There is a big gap between the current legal system of government procurement and the requirements of the new GPA text. These problems not only seriously affect the function of government procurement, but also restrict the process of China’s entry into GPA.
In the GPA negotiations in recent years, the European Union and other participants have repeatedly asked the China government to improve the legal system of government procurement and realize the integration of the government procurement system with GPA. Scholars at home and abroad have also clearly pointed out that the biggest challenge for China to join GPA lies in the adjustment and improvement of the domestic government procurement system, but these issues have never attracted enough attention from relevant domestic departments. The conflict between "Government Procurement Law" and "Tendering and Bidding Law" remains, and the supporting regulations of "Government Procurement Law" have not been promulgated since soliciting opinions in 2010. It can be said that in the nearly six years since China started the GPA negotiations, it has been more active in GPA negotiations, but it has done little in terms of system integration.
According to the current negotiation progress, it should not be too long before China joins the GPA. It takes time to adjust and improve the domestic government procurement system, and it takes more time for domestic procurement institutions and suppliers to adapt to and be familiar with the adjusted state-owned procurement system and GPA rules. Judging from the practice of other participants in GPA to open their domestic government procurement market, most of them have experienced the gradual development process of perfecting the government procurement system, standardizing the government procurement market, concluding bilateral or regional treaties or agreements to open the government procurement market and participating in GPA. Judging from the development and evolution of GPA, GPA rules are formulated by major GPA participants such as the United States and the European Union on the basis of their domestic or regional procurement laws, so for these countries, the cost of system integration is very low. Countries and regions that later joined or are now preparing to join GPA also adhere to the principle of improving their own procurement system before joining GPA. China started to join GPA negotiations under the background of imperfect government procurement system, nonstandard government procurement practice and insufficient openness of government procurement market. The cost of system integration is very high and it needs a longer transition and adaptation period. Therefore, while actively responding to the negotiations, China should learn from the experience of other countries and regions in government procurement system construction and China’s WTO accession system construction, and improve the domestic procurement system as soon as possible to at least meet the bottom line requirements of GPA. Otherwise, the possible consequence is that after the GPA comes into effect in China, enterprises in China, procurement entities included in the GPA bidding scope and relevant dispute settlement institutions are still not familiar with the GPA rules.Not only will it directly affect the pace of China enterprises entering other countries’ government procurement markets, but foreign enterprises entering China’s government procurement market will inevitably lead to many disputes and conflicts, which will undoubtedly hurt China’s national interests and image. Moreover, GPA’s procurement program design is a summary of the experience of regulating government procurement behavior in various countries around the world, and it is a guarantee for establishing a transparent, competitive and fair government procurement market and improving the efficiency of public funds. To some extent, even if China doesn’t join GPA, it should learn from GPA and accelerate the process of legalization of government procurement. (Professor Liu Rui, Faculty of Law, National School of Administration)