Why is entering into multiple procurement-related free trade agreements problematic?

by Albert Sanchez-Graells, Professor of Economic Law and Co-Director of the Centre for Global Law and Innovation

Banana stem cross section. Photo Credit: Ian Jacobs

Post-Brexit, the UK has been repositioning itself in the global trade scene. Focusing on trade-related public procurement liberalisation, the first two moves for the UK were: one, to join the World Trade Agreement Government Procurement Agreement (GPA), of which it had been a member via the EU, and two, to enter into a comprehensive procurement chapter with the EU in the EU-UK Trade and Cooperation Agreement (TCA). As a result of these two moves, the UK largely consolidated the pre-Brexit status quo and ensured continuity in market access for UK suppliers abroad, as well as foreign suppliers in the UK.

The next move is now for the UK to expand procurement-related trade liberalisation via free trade agreements (FTAs), of which it has signed one with Australia and another with New Zealand. The UK is also seeking accession to other multilateral FTAs covering procurement, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Interestingly, both Australia and New Zealand are parties to the GPA and to the CPTPP, so the UK is about to create a triple layer of regulation of procurement liberalisation with these two countries, as all relevant procurement exercises will be subjected to the GPA, the CPTPP and the FTAs. Is this a problematic strategy?

In a new research paper that will soon be published in Legal Issues of Economic Integration,* I argue that the UK’s approach to entering into new FTAs covering procurement is problematic. The strategy underpinning the TCA was to incorporate by reference the UK’s and EU’s obligations under the GPA, and then build on them. This is a clear and neat way of avoiding potential inconsistencies and contradictions between the GPA—which is the foundational agreement for procurement-related trade liberalisation—and bilateral or plurilateral agreements that seek to go beyond it (GPA+ FTAs). By contrast, in its FTAs with Australia and New Zealand, as well as in relation to its aspiration to accede CPTPP, the UK is following a much messier approach by largely replicating but also altering the text of the GPA. Such modifications are both in ways that exceed the GPA’s regulatory requirements (GPA+) and in ways that fall short of those (GPA-).

This generates significant legal uncertainty in all cases of procurement subjected to multiple agreements, in particular in relation to the conflict that arises between the GPA and the GPA- aspects of the FTAs. And these are not minor conflicts, as they concern the primary obligation of national treatment, as well as the rules on enforcement, under the different treaties. To further complicate matters, there is also legal uncertainty on the impact of this over-layering of procurement liberalisation on the rights and obligations of GPA party suppliers, goods and services.

The way to resolve this legal uncertainty is to resort to the 1969 Vienna Convention on the Law of the Treaties and, in particular, its rules on conflicts of treaty norms. In my analysis, the result of applying those rules and the practical functioning of procurement covered by multiple agreements is that:

  • GPA- deviations will either be ineffective because States will choose to comply with the more demanding GPA standard so that there is no breach of any of the international agreements where multiple of them are applicable (i.e. in triangular situations), or the GPA- deviations will only apply to economic operators from the jurisdiction/s with which the relevant FTA is concluded (i.e. in strictly bilateral situations, which are the minority). And, even then, some of the GPA- deviations can be precluded by domestic rules (e.g. common law doctrines of access to justice).
  • In turn, most GPA+ deviations in FTAs are likely to be propagated to all GPA parties and, consequently, there will be no specific advantage to the economic operators from the jurisdiction/s with which the relevant FTA is concluded, other than in terms of market access commitments.

Therefore, there is a very limited practical impact from the UK Government’s strategy. Conversely, the strategy generates significant legal uncertainty that can have perverse chilling effects on the economic operators expected to benefit from procurement-related trade liberalisation. This will in turn deprive public buyers from the benefits that could result from increased international competition for public contracts.

To my mind, the solution is clear. In furthering procurement liberalisation with other GPA parties, the UK should follow the same regulatory strategy underpinning the TCA. That is, design its FTAs covering procurement in a way that incorporates GPA obligations by reference, and then builds on them. More generally, this is the strategy that should be followed by all GPA parties if they want to avoid the issues that I have identified using post-Brexit UK as a case study.

Finally, it is worth mentioning that the issues discussed in the paper fall within the scope of several enquiries carried out by the House of Lords International Agreements Committee and the House of Commons International Trade Committee, to which I have submitted different pieces of written and oral evidence (see here, here, here, here, here and here). I am optimistic that their future reports will contribute to a rationalisation of the UK’s post-Brexit approach to procurement-related trade liberalisation.

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* A Sanchez-Graells, ‘The Growing Thicket of Multi-Layered Procurement Liberalisation between WTO GPA Parties, as Evidenced in Post-Brexit UK’ (2022) 49(3) LEIE, forthcoming.

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