[Federal Register Volume 66, Number 88 (Monday, May 7, 2001)]
[Notices]
[Pages 23062-23064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11354]
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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
Annual Report on Discrimination in Foreign Government Procurement
Pursuant to Executive Order 13116 (``Title VII'')
AGENCY: Office of the United States Trade Representative.
ACTION: Notice.
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SUMMARY: Notice is hereby given that the United States Trade
Representative (``USTR'') has submitted the annual report on
discrimination in foreign government procurement, published herein, to
the Committees on Finance and on Governmental Affairs of the United
States Senate and the Committees on Ways and Means and on Government
Reform and Oversight of the United States House of Representatives,
pursuant to Executive Order No. 13116 of March 31, 1999.
DATES: The report was submitted on April 30, 2001.
FOR FURTHER INFORMATION CONTACT: Melida Hodgson, Associate General
Counsel, Office of the US Trade Representative, 600 17th Street, N.W.,
Washington, DC 20508, 202-395-3582.
SUPPLEMENTARY INFORMATION: The text of the USTR report is as follows:
Annual Report on Discrimination in Foreign Government Procurement
April 30, 2001.
I. Introduction
A longstanding objective of U.S. trade policy has been to open
opportunities for U.S. suppliers to compete on a level playing field
for foreign government contracts. The first major breakthrough in
this area was the 1979 conclusion of the Government Procurement
Agreement (GPA), followed by the ten-fold expansion of that
Agreement during the Uruguay Round negotiations that led to the
creation of the World Trade Organization (WTO). The WTO estimates
that, under the GPA, the United States and the 26 other GPA Parties
provide their suppliers with non-discriminatory access to government
tendering procedures worth more that $300 billion annually. In 1995,
Mexico agreed to provide comparable access to its government
procurement markets under the North American Free Trade Agreement
(NAFTA).
The Administration continues to push for the reciprocal removal
of discriminatory government procurement practices in a wide range
of multilateral, regional and bilateral fora. As a result of our
efforts, the 34 countries of North, South and Central America that
are participating in negotiations to create a Free Trade Area of the
Americas (FTAA) have agreed that the FTAA will provide for openness
and transparency of government procurement processes and non-
discrimination in tendering procedures within a scope to be
negotiated. The Administration is also urging the early conclusion
of an Agreement on Transparency in Government Procurement that would
apply to all 140 Members of the WTO. Within the Asia-Pacific
Economic Cooperation (APEC) forum, the United States and other
economies in the region are pushing for concrete steps that will
build on the progress APEC has made in developing non-binding
principles on government procurement.
The ``Title VII'' process, initially established under Title VII
of the Omnibus
[[Page 23063]]
Trade and Competitiveness Act of 1988 (``Title VII''), as amended,
provides a vehicle for identifying priorities for international
negotiations that may address discriminatory foreign government
procurement practices and for monitoring and enforcing existing
international agreements. After the Title VII legislation expired in
1996, the process was re-instituted by Executive Order 13116 on
March 31, 1999.
II. Summary
The Executive Order mandates that the United States Trade
Representative (``USTR'') submit a report to the Congressional
committees of jurisdiction within 30 days of the submission of the
National Trade Estimate Report for the years 1999, 2000, and 2001,
and publish these reports in the Federal Register. This is the third
of the three annual reports required by the Executive Order.
USTR's 1992 identification of the European Union (``EU'') for
discriminatory procurement practices applied by government-owned
telecommunications entities in certain member states, as well as the
resulting sanctions, remains outstanding. There are no other
outstanding Title VII identifications.
As in previous years, however, this report describes a number of
foreign procurement practices that are of significant concern to
U.S. exporters and that the United States is monitoring closely.
Those practices, discussed in detail below, are:
Japan: Various discriminatory practices relating to
procurement for public works.
Taiwan: Certain discriminatory practices and procedural
barriers.
Canada: Provincial governments' discriminatory procurement
practices.
Germany: Exclusion of certain suppliers affected by
discriminatory ``sect filters.''
The United States is working actively in a range of bilateral
and multilateral fora to resolve these issues. As a result of recent
bilateral consultations with Germany, this report announces that our
concerns relating to the use of ``sect filters'' appear to have been
resolved.
III. Provisions of the Executive Order
Under Executive Order 13116, USTR is required to submit to the
Congress each year a report identifying foreign countries that:
(1) have failed to comply with their obligations under the WTO
Agreement on Government Procurement (``GPA''), Chapter 10 of the
North American Free Trade Agreement, or other agreements relating to
government procurement to which that country and the United States
are parties; or
(2) maintain, in government procurement, a significant pattern
or practice of discrimination against U.S. products or services
which results in identifiable harm to U.S. businesses, when those
countries' products or services are acquired in significant amounts
by the U.S. Government.
If any country is identified under one or both of these
criteria, the Executive Order requires USTR to initiate an
investigation under section 302 of the Trade Act of 1974. If the
matter is not resolved within 90 days of the submission of the
report and USTR determines that the rights of the United States
under an international procurement agreement are being violated or
that a significant pattern or practice of discrimination exists, the
Executive Order permits USTR, inter alia, to initiate formal dispute
settlement proceedings under relevant international agreements or
withdraw any waivers of U.S. purchasing requirements that have been
granted to the discriminating foreign country.
International dispute settlement procedures are available to
address discriminatory government procurement practices covered by
the WTO Government Procurement Agreement (GPA) and the North
American Free Trade Agreement (NAFTA). Under authority provided in
the Trade Agreements Act of 1979, as amended, the United States
waives domestic purchasing requirements for countries that are
Parties to the GPA and the NAFTA, for certain Caribbean Basin
Initiative countries; and for countries included on the United
Nations' list of ``least developed countries.''
IV. Identification of Specific Discriminatory Foreign Procurement
Practices
EU--Telecommunications: In 1992, USTR identified EU
telecommunications entities that have ``special and exclusive
rights'' in certain member state markets as engaging in
discriminatory procurement practices. Those entities were required
to apply discriminatory practices under the 1990 EU ``Utilities
Directive.'' After bilateral negotiations did not resolve this
issue, the United States imposed sanctions in May 1993. Those
sanctions remain in place today.
In 1999, the European Commission informed the United States that
it considered telecommunications operators in most EU member states
to be no longer bound by the procurement requirements in the
Utilities Directive, and requested that the United States remove the
sanctions imposed in 1993. The Administration has asked the
Commission for clarification of the legal requirements currently in
effect in the EU and what further steps the Commission is taking to
revise Utilities Directive requirements. Once agencies have
evaluated the information received from the Commission, the
Administration will review the overall market access conditions in
the EU telecommunications market, with a view toward deciding
whether the 1993 sanctions are still warranted.
In developing this report, USTR has given careful consideration
to a wide range of views and information, including the
recommendations of other executive agencies and U.S. embassies and
consulates overseas, private sector responses to USTR's request for
comments for this year's Title VII report (published in the Federal
Register on February 28, 2001), and information on foreign
government procurement practices reported in the 2001 National Trade
Estimates Report.
On the basis of this information, and after consultation with
other agencies, USTR has determined that no practices meet the
criteria for Title VII identification this year. As in previous
years, however, there remain a number of foreign government
procurement practices of concern which the Administration is
pursuing in bilateral and multilateral fora, or that require
continued monitoring and study.
V. Other Foreign Government Procurement Practices of Concern to the
United States
Japan--Public Works
U.S. companies are well-known around the world for their
excellence in design/consulting and construction. Yet the U.S. share
of Japan's $300 billion public works market was only $50 million in
1999 (the most recent year for which data are available).
The United States has repeatedly expressed concern to Japan that
Japanese procuring entities continue to engage in discriminatory
procurement practices that impede American design/consulting and
construction companies from participating in Japan's public works
sector. These practices include: failure to address rampant bid-
rigging; unreasonable restrictions on the formation of joint
ventures, including the three-company joint venture rule; the use of
discriminatory qualification and evaluation criteria; and the
structuring of individual procurements so they fall below thresholds
established in international agreements.
The United States is seriously disappointed by the lack of
progress in addressing these practices, and also is concerned that
Japan has repeatedly refused the U.S.'s request to continue regular
bilateral consultations since the consultative mechanism set forth
in the 1994 U.S.-Japan Public Works Agreement expired last year. The
United States will continue to monitor Japan's public works sector
and urges Japan to take immediate, concrete steps to address these
concerns, strengthen the integrity of its system for procurement of
public works, and eliminate discriminatory practices which prevent
U.S. suppliers and workers from participating in this market.
Taiwan--Discriminatory Practices and Procedural Barriers: Taiwan
is in the process of acceding to the World Trade Organization (WTO),
and has committed to join the WTO Government Procurement Agreement
(GPA) as soon as it enters the WTO. Taiwan's accession to the GPA
will allow U.S. exporters to compete on a level playing field for
major projects worth billions of dollars, including in the power
generation, transport, environmental, and other infrastructure
sectors.
The 2000 Title VII report noted a number of U.S. concerns with
existing discriminatory practices and other barriers to Taiwan's
government procurement market. As a result of ongoing bilateral
consultations intended to clarify the terms of Taiwan's GPA
accession and address other bilateral concerns, significant progress
has been made on these issues. However, the United States continues
to have serious concerns relating to the following:
restrictions on the ability of suppliers to joint
tender, based on market considerations;
the need for appropriate and predictable contract
provisions relating to contingent liabilities, consistent with
international norms.
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The Administration continues to urge the Taiwan authorities to
take concrete steps to bring these practices into conformity with
GPA requirements and ensure that they do not constitute an
unnecessary barrier to fair and open competition in Taiwan's
government procurement market.
Canada--Provincial Government Restrictions: A number of Canadian
provinces apply price preferences and other significant restrictions
that discriminate against U.S. suppliers interested in bidding on
provincial government procurement contracts. To date, the
Administration has identified particular concerns with respect to
procurement restrictions applied by the provinces of Ontario, Quebec
and British Colombia. The Administration is concerned that the
application of such restrictions may result in a significant
imbalance of bilateral market access opportunities in government
procurement. Canada is the only GPA Party that has yet to open its
sub-Federal procurement markets. Working closely with interested
U.S. states, the Administration continues to urge Canada to bring
provincial governments and other government-owned entities within
the scope of NAFTA and GPA procurement rules.
Germany--``Sect Filters'': In September 1998, the German
Ministry of Economics promulgated a ``protection clause'' (commonly
referred to as a ``sect filter'') meant to be incorporated into
government contracts for certain training and consultation services.
Among other elements, the clause would have prohibited firms from
bidding on German government contracts if they have employees that
attend or participate in Scientology seminars. Following the
promulgation of this ``protection clause,'' the United States
expressed concern in bilateral consultations and in the 2000 Title
VII report about the clause's potentially discriminatory effects on
government procurement. In subsequent consultations with German
government and industry representatives, the Administration urged
Germany to rescind the sect filter requirements.
In response, the German government has revised its ``protection
clause'' in a manner that no longer prohibits firms from competing
for government contracts on the basis of the affiliation of its
management or employees with the Church of Scientology. This
decision represents significant progress in addressing U.S. concerns
relating to the use of ``sect filters.'' The Administration will
continue to monitor the implementation of the revised policy to
ensure that U.S. firms and workers are not discriminated against in
procurement by German Federal and sub-Federal governments.
A. Jane Bradley,
Assistant U.S. Trade Representative for Monitoring and Enforcement.
[FR Doc. 01-11354 Filed 5-4-01; 8:45 am]
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