 
 WORLD TRADE  
ORGANIZATION  RESTRICTED 
S/WPGR/W/48 
11 May 2004 
 
 (04-2092) 
Working Party on GATS Rules Original:   English 
  
 
COMMUNICATION FROM THE EUROPEAN COMMUNITIES  
 
Government Procurement in Services 
 
 
 The following communication, dated 6 May 2004, from the delegation of the European 
Communities is being circulated to the Member s of the Working Party on GATS Rules.   
 
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1. Within the framework of the negotiations unde r the mandate given by GATS Article XIII:2, 
the European Communities (hereina fter the EC) submitted in July 2002 and May 2003 contributions 
with proposals on a framework that could be de veloped under the GATS for government procurement 
in services, and on the benefits that could be draw n from them.  The EC is hereby putting forward a 
new contribution aiming at replying to questions on  its two communications mentioned above, which 
were raised by WTO Members, including by Singapore in its Non-Paper of November 2003, 
circulated as JOB(03)/216.   
2. As requested by several WTO Members in previous meetings of the Working Party on GATS 
Rules, this contribution includes examples of  government procurement commitments and MFN 
exemptions that could be scheduled by Members.  It proposes to define the scope of application of 
future GATS provisions on government procuremen t and clarifies the relationship between the 
proposed GATS framework for government procurem ent in services and the plurilateral Agreement 
on Government Procurement (GPA).  Finally, it not es the importance attached by several Members to 
the development of an appropriate set of procedural rules.  
I. SCHEDULING OF GOVERNMENT PROCUREMENT COMMITMENTS AND OF 
MFN EXEMPTIONS 
A. S
PECIFIC GOVERNMENT PROCUREMENT COMMITMENTS  
 Example 1 – no government procurement commitment 
Sector or 
subsector Limitations on 
market access Limitations on 
national treatment Additional 
commitments Limitations on government 
procurement 
Advertising (CPC 871)   Modes 1,2,3) None 
Mode 4) Unbound 
except as indicated in the horizontal 
section Modes 1,2,3) None 
Mode 4) Unbound 
except as indicated in the horizontal 
section  Unbound 
 S/WPGR/W/48 
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 3. This example reflects the current situation,  when no commitments have been made for 
government procurement in services. In such a s ituation, laws, regulations and requirements 
governing government procurement in services in this particular sector would only be subject to the 
GATS provisions, to which they are already subject today, i.e. all GATS provisions other than GATS 
Articles II, XVI and XVII.  This includes notably (but not only) GATS Article III on Transparency 
covering relevant measures of general applicati on, GATS Article VI on Domestic Regulation (in 
particular as regards domestic review), GATS Ar ticle VII on Recognition, GATS Article XII on 
Restrictions to safeguard the Balance of Paym ent, GATS Article XXIII on Dispute Settlement and 
Enforcement. 
 Example 2 – full government procurement commitment above a specific threshold 
Sector or 
subsector Limitations on 
market access Limitations on 
national treatment Additional 
commitments Limitations on government 
procurement 
CPC 84 – 
Computer 
services Modes 1,2,3) None 
Mode 4) Unbound 
except as indicated 
in the horizontal 
section Modes 1,2,3) None 
Mode 4) Unbound 
except as indicated 
in the horizontal 
section  None for contracts above 
200.000 SDR (Special 
Drawing Rights) 
 
4. In this situation, a commitment has been ma de for all government procurement contracts in 
the CPC 84 sector above the 200.000 SDR (Special Drawing Rights) threshold.  This means that all laws, regulations, procedures and practices regardi ng government procurement in services above this 
threshold have to be open to services regardless of their country of production and to foreign service 
providers and to locally-established suppliers w ith foreign affiliation or  ownership on a National 
Treatment and MFN basis (unless MFN exemptions have been scheduled – see section B hereafter).  All entities listed in GATS Article I:3, i.e. central,  regional & local governments and authorities, as 
well as non-governmental bodies in the exercise of powers delegated by centra l, regional or local 
governments or authorities, are covered by this commitment. WTO Members could schedule 
thresholds adapted to their economic size and needs, on a sector by sector basis. 
 Example 3 – partial government procurement commitment  
Sector or 
subsector Limitations on 
market access Limitations on 
national treatment Additional 
commitments Limitations on government 
procurement 
Architectural Services 
(CPC 8671) Modes 1,2,3) None 
Mode 4) Unbound 
except as indicated 
in the horizontal section Modes 1,2,3) None 
Mode 4) Unbound 
except as indicated 
in the horizontal section  None for central procuring 
entities only, and for 
contracts above 200.000 
SDR. Domestic price preference of 5%. 
 
5. In this situation, only procurement by central  governments and authorities is covered.  The 
threshold is 200.000 SDR.  In addition, a 5% pr ice preference may be awarded to domestic service 
providers.  S/WPGR/W/48 
 Page 3 
 
 
  Example 4 – articulation between government proc urement commitment on one side and market 
access and national treatment commitments on the other side 
Sector or 
subsector Limitations on market 
access Limitations on national 
treatment Additional 
commitments Limitations on gov. 
procurement 
Construction services 
(CPC 51) Modes 1,2) Unbound 
Mode 3) None 
Mode 4) Unbound 
except as indicated in the horizontal section Modes 1,2) Unbound 
Mode 3) None, except that 
the CEO is subject to a 
residency requirement. Mode 4) Unbound except 
as indicated in the 
horizontal section  None for contracts 
above 5.000.000 
SDR.  
 
6. In this situation, procedures to award public  contracts above the 5 million SDR threshold in 
the construction sector have to be open to fo reign service providers, on a National Treatment and 
MFN basis (unless MFN exemptions have been sch eduled – see section B hereafter).  Central, 
regional & local governments and authorities, as we ll as non-governmental bodies in the exercise of 
powers delegated by centra l, regional or local governments or  authorities, are covered by this 
commitment.   
7. However, these commitments for government pr ocurement have to be read in conjunction 
(i.e. cumulatively) with Members’ existing market  access and national treatment commitments for the 
relevant sector (including horizont al commitments – or limitations).  This means that a foreign service 
provider having been awarded a govern ment procurement contract woul d then have to comply with 
market access and national treatment conditions a pplying to foreign service providers.  This is a 
general rule – i.e. the validity of this comment is not limited to this specific example.  In the particular 
case above, it may be obliged to establish a comme rcial presence and to comply with a residency 
requirement, as such conditions may be imposed on  all foreign construction companies willing to 
provide services in the territory of the WTO Member under consideration.   
8. This means that the GATS commitments for government procurement would not apply to 
measures affecting trade in servi ces other than measures regardi ng government procurement:  any 
benefit gained from government procurement comm itments under the GATS would be subject to the 
traditional GATS commitments on market access and national treatment. 
 Example 5 – government procurement commi tment limited to some modes of supply 
Sector or 
subsector Limitations on 
market access Limitations on 
national treatment Additional 
commitments Limitations on government 
procurement 
Telecom 
services Modes 1,2,3) None 
Mode 4) Unbound 
except as indicated 
in the horizontal section Modes 1,2,3) None 
Mode 4) Unbound 
except as indicated 
in the horizontal section As contained 
in the attached 
Reference 
Paper Modes 1, 2) Unbound 
Modes 3, 4) None for contracts 
above 200.000 SDR, except 
that Mode 4 is limited to ICTs. 
 
9. In this situation, government procurement of telecom services may be open only to foreign 
service providers that have established a commercia l presence in the territory of the WTO Member 
under consideration.  
10. The indication of an “Unbound” in modes 1 a nd 2 in the government procurement column 
serves precisely to indicate that companies that are not established in the territory of the WTO 
Member under consideration, may not bid for a gove rnment procurement contract in the telecom 
sector.   S/WPGR/W/48 
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 11. It may be recalled that in financial services, some WTO Members have already opened, under 
the Understanding on Commitments  on Financial Services, governme nt procurement of financial 
services to suppliers of other WTO Members established in their territory.   
 Example 6 – government procurement of services covering several sectors  
Sector or 
subsector Limitations on market 
access Limitations on 
national treatment Additional 
commitm. Limitations on government 
procurement 
CPC84 – 
Computer 
services Modes 1,2,3) None 
Mode 4) Unbound 
except as indicated in the horizontal section Modes 1,2,3) None 
Mode 4) Unbound 
except as indicated in the horizontal 
section  None for contracts above 
200.000 SDR (Special 
Drawing Rights) 
Management Consulting Services & 
Related 
(CPC 865 & 
866) Modes 1,2,3) None 
Mode 4) Unbound except as indicated in 
the horizontal section Modes 1,2,3) None 
Mode 4) Unbound except as indicated 
in the horizontal 
section  None for contracts above 
200.000 SDR (Special Drawing Rights) 
 
12. In this situation of a govern ment procurement contract covering services falling in several 
CPC categories, e.g. CPC 84 (computer services)  and CPC 865 (Management Consulting Services), 
procedures to award such contract would have to  be open to foreign service providers, on a National 
Treatment and MFN basis (unless MFN exemptions have been scheduled – see section B hereafter), since commitments have been made in all ser vices categories covered by the contract.   
13. If GATS government procurement commitments have been made only in one of the two 
sectors concerned, e.g. CPC 84 but not CPC 865, and if  the contract cannot be divided into two 
different contracts – one covering activities falli ng in CPC 84, which would be covered by GATS 
commitments in this example, and the other cove ring activities falling into CPC 865, which would not 
be covered by GATS commitments in this exampl e –, a specific provision of the GATS Annex on 
government procurement would define how to determine the “main object of the contract” 
(determined according to the value of each categor y of service covered). This provision would be 
similar to the one dealing with mixed contracts covering the procurement of goods and services (see 
Part II of this paper).  In this example, if th e “main object of the contract” appears to be the 
procurement of computer services, the contract would then be covered by the Member’s GATS government procurement commitments. 
B. MFN
 EXEMPTIONS  
14. The proposed agreement on government procurem ent in services would provide that the MFN 
Treatment should apply to the government procuremen t procedures in sectors opened to international 
competition. 
15. However, at the time when the GATS entered into force, WTO Members had the possibility 
to list MFN exemptions.  GATS Article XIII:1 specifically provided that Article II on MFN does not 
apply to government procurement, which rendered irrelevant the scheduling of MFN exemptions at 
that point in time.  Since the agreement on pr ocurement that will result from GATS Article XIII:2 
negotiations would extend the application of MFN to procurement, consistency would require that this 
extension should be accompanied by the one-off possibility to schedule MFN exemptions. This 
possibility would be provided for in a specific article of the GATS Annex on Government 
Procurement.  S/WPGR/W/48 
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 16. MFN exemptions could for instance be scheduled by WTO Members to provide more 
favourable treatment to service providers originating from countries of their region or from developing countries.  They would follow the usual structure of GATS MFN exemptions. 
 Example  – government procurement MFN exemption that could be scheduled 
Sector or 
subsector Description of measure 
indicating its inconsistency with 
the MFN Treatment obligation Countries to 
which the 
measure applies Intended 
duration Conditions creating 
the need for the 
exemption 
Architectural 
Services (CPC 8671) Measures aimed at offering 
preferential conditions for the 
provision of architectural by 
nationals of countries X, Y, Z.   Countries X, Y, 
Z. 10 years This measure reflects 
the wish to foster regional cooperation. 
 
17. These MFN exemptions would not serve to cover the benefits deriving from being a Party to 
the GPA. The relationship between the GPA and the GATS would be done through the inclusion of 
specific provisions in the future GATS Annex on  Government Procurement (see part III), which 
would ensure that the GATS does not extend on an MFN-basis to other WTO Members the more favourable treatment that GPA parties may accord to each other in the framework of the GPA regime.  
This specific provision would cover current GPA Par ties, as well as future GPA Parties, who will not 
need to schedule an MFN exemption for that purpose. 
II. SCOPE OF THE GATS AGREEMEN T ON GOVERNMENT PROCUREMENT 
18. Several Members underlined the need to de fine the scope of government procurement 
provisions under the GATS, since the GATS covers trad e in services.  The situation is similar to the 
one prevailing before the entry into force of the WTO Agreement, when the GATT was covering 
trade in goods and the GATT Code on Government Pr ocurement was applying to the procurement of 
goods. 
19. Article 1-1 (a) of the GATT Code on Governme nt Procurement was providing that it applied 
to any law, regulation, procedure and practice re garding the procurement of products by the entities 
subject to the Code, and that this included services in cidental to the supply of products if the value of 
these incidental services did not exceed that of the products themselves, but not service contracts per 
se. 
20. An analogous provision could be included in  the "Annex to the GATS on Government 
Procurement of Services".   
III. RELATIONS WITH THE GPA 
21. It was underlined in several meetings of the Working Party on GATS Rules that new 
government procurement rules and obligations under the GATS should not extend on an MFN-basis 
to other WTO Members the more favourable treatment  that GPA parties may accord to each other in 
the framework of the GPA regime. 
22. The EC has proposed that a specific provision would organise appropriate interface between 
the GPA and the "Annex to the GATS on Government  Procurement in Services".  This provision 
would ensure that the GATS agreement on government  procurement would not affect GPA rules and 
obligations, which would continue to  apply between existing and future GPA parties.  It would also 
make clear that benefits gained by GPA parti es from GPA commitments would not be extended under 
the GATS on an MFN-basis to other WTO Members. S/WPGR/W/48 
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 23. In a specific service sector, a GPA-party may make no governme nt procurement commitment 
under the GATS, but may have made a commitmen t under the GPA.  In this case, government 
procurement contracts awarded by the GPA-party under consideration would only have to be opened 
to GPA-parties, under the conditions set out by the GPA. 
24. In another specific service sector, a GPA party may make a limited government procurement 
commitment under the GATS (limited sectoral coverage , limited coverage of procuring entities – for 
instance restricted to the central  level, + scheduling of price preferences), and a broader commitment 
under the GPA (broader sectoral coverage, broade r coverage of procuring entities and no price 
preference).  A WTO Member that would not be party to the GPA would only be assured of having 
access to the government procurement contracts aw arded by the GPA party under consideration, as 
limited by the GATS commitments of that GPA party.  This is not dissimilar to the situation that 
prevails today with the coexistence of bilatera l and regional government procurement agreements 
between WTO Members, some of wh ich may be party to the GPA and some of which may not be, e.g. 
NAFTA. 
25. In order to ensure the effective co-existence and coherence of both systems (GPA and future 
GATS regime), further in-depth consideration shoul d be given on the relative level of government 
procurement commitments under the GPA and under the GATS. 
IV. PROCEDURAL RULES 
26. The importance of developing appr opriate procedural rules, in order to ensure that access to 
procurement opportunities will be effective, has been  underlined in previous contributions and in 
discussions of the Working Party on GATS Rules, w ith several Members mentioning in particular 
challenge procedures.  
27. The EC underlined that a number of such provisions were already included in the text of the 
GATS, such as for instance in GATS Article VI on Do mestic Regulation, in particular as regards 
domestic review.  More specific rules on the transp arency of bidding procedures may have to be 
developed in the GATS Annex on Government Procurem ent.  The rules contained in the bilateral and 
regional agreements listed by the WTO Secretariat in S/WPGR/W/44 may be a useful source of 
inspiration in this regard.  The EC would therefore like to invite Members to share the experience they 
may have got from the bilateral, regional and/or plurilate ral agreements they have signed, and to 
discuss procedural rules that they think have to be implemented to ensure the effective application of 
future GATS obligations regarding opportunities to  bid, national treatment and MFN treatment.  
 
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