This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
With the United States threatening to build a wall, tear down the North America Free Trade Agreement (NAFTA), and start trade wars with China, the United Kingdom heading into a post-Brexit treaty tailspin, and the rest of Europe seeing a rise in anti-global protectionist politics, it would be easy to assume that our open public procurement system is heading into some serious turbulence in the next few years. However, as evidenced by the following global developments, the prevailing trade winds continue to stay a course towards an expanding international procurement system based on common global standards.
1. NAFTA 2.0: The USMCA
Notwithstanding the high-drama and last-minute deal-making between the US, Canada, and Mexico, the NAFTA was not cancelled, but instead was revised into the new United States-Mexico-Canada Agreement, or USMCA. While lingering doubts remain regarding the short-term stability of trading relations under the current administration, the long-term view remains stable given the inter-dependence of these economies and the entrenched open procurement practices that underpin the global economic system.
2. WTO Still Going Strong
The World Trade Organization’s Government Procurement Agreement serves as the global standard for government procurement treaties. Originally established in 1994, this treaty currently has 48 members from predominantly developed economies, including the European Union, Canada, the United States, and Japan, with another eleven nations, including Australia, which joined the trading block in 2018. The treaty, which was recently updated in 2014, provides a series of global benchmarks for the further implementation of numerous other regional and bilateral trade treaties.
3. The UN Sets the Standard
In 2011, the United Nations updated its United Nations Commission on International Trade Model Procurement Law from the previous 1994 version. With open procurement rules consistent with World Trade Organization standards, this model law has influenced the development of national procurement systems across dozens of predominantly non-WTO countries in multiple regions over the years. These UN standards continue to influence the development of domestic public procurement regimes and were most recently implemented in 2017 by Bermuda in a new project management code, and by the Cayman Islands in 2017 in a new procurement statute and in 2018 in new procurement regulations.
4. The EU and Atlantic Trade
The European Union has achieved an unprecedented level of procurement integration, with a system of open public procurement reaching all levels of government across the continent. Canada recently joined this trading block in 2017, with the ratification of the Canada-Europe Comprehensive Economic and Trade Agreement (CETA). To complete the trans-Atlantic triangle, the Caribbean Community (CARICOM) members have also moved towards greater procurement integration with the EU since signing the 2008 Economic Partnership Agreement with Europe.
5. Caribbean Currents
The Caribbean Community (CARICOM) members are also expanding the open public procurement system within the region, with the 2017 CARICOM Model Procurement Bill establishing rules consistent with WTO standards for the expanding Caribbean trading block. This new model law complements a series of concurrent national reforms, which have seen the adoption of new open procurement statutes in Guyana, Jamaica, Trinidad and Tobago, and the Cayman Islands in recent years. As other jurisdictions, including Barbados, which introduced a new government bill in late 2017, move towards greater open procurement, the CARICOM bill provides common benchmarks for future reforms.
6. OECD Collaborations
The Organization for Economic Co-operation and Development (OECD), with 35 members drawn largely from advanced economies, also helps promote global trade and investment through the development of common global standards. In its 2016 Preventing Corruption in Public Procurement report, the OECD noted that 57% of all foreign bribery cases involve public procurement. To address this ongoing problem, it previously established the 2011 Convention on Combatting Bribery of Foreign Public Officials, which complements its 2009 Principles for Integrity in Public Procurement, both of which contain global standards for promoting transparent procurement at the national level. As discussed below, these OECD standards help inform the practices of international development banks.
7. World Bank Benchmarking
The World Bank provides funding and procurement expertise for large public procurement projects in developing countries. Project funding requires borrower nations to comply with the open procurement standards established by the World Bank, which updated its procurement manual in 2016. In recent years, the World Bank has also conducted a series of global benchmarking studies. Its 2017 annual report assessed the public procurement practices of 180 nations, scoring how those countries measured up to global standards. Similarly, in 2013, the Inter-American Development Bank established a series of guidelines, based on OECD standards, for measuring government procurement practices across the Americas. This program encourages the use of national systems for bank-financed procurement projects if those domestic systems measure up to global standards. Similar initiatives are also conducted in other regions by development banks, including the African Development Bank and Asian Development Bank.
8. Asia and Beyond
While the reversal by the US government served as a temporary setback to ratifying the Trans-Pacific Partnership (TPP), in March 2018, the remaining members of the Asia-Pacific trading block (Canada, Mexico, Peru, Chile, Japan, Singapore, Brunei, Vietnam, Malaysia, Australia, and New Zealand) signed a revised trade agreement with public procurement rules consistent with WTO standards.
As these recent developments illustrate, notwithstanding some patches of temporary turbulence, the prevailing trade winds continue to steer a course towards expanding global standards in open public procurement. Purchasing institutions should therefore redouble their efforts in ensuring their compliance with these increasingly integrated common global standards.