Whether the US remains in the Government Procurement Agreement is being discussed by the Trump administration, but congressional opposition to leaving is strong. The administration would also like to form a coalition of nations to resist Chinese bullying of single nations, like Australia at present and South Korea previously.
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Occasionally the news is what likely isn’t going to happen. In this case, it is whether President Trump, during his remaining seven weeks in office, will withdraw from the Government Procurement Agreement (the GPA, not to be confused with the grade point averages we all fretted over in school).
The short answer is that the president likely won’t withdraw.
The GPA is an agreement even older than the World Trade Organization, which presently has responsibility for maintaining it. In the WTO’s own words: “The fundamental aim of the GPA is to mutually open government procurement markets among its parties. As a result of several rounds of negotiations, the GPA parties have opened procurement activities worth an estimated US $1.7 trillion annually to international competition…”
Lighthizer raises the issue again
Recent remarks by US Trade Representative Robert Lighthizer raised concerns that exiting the GPA might be a final feathered missile from the departing administration’s protectionist trade quiver. Lighthizer raised the possibility informally in video remarks last week to the Dole Institute of Politics in Kansas. He also met with presidential aides to discuss it.
Lighthizer believes the GPA disadvantages the US by not allowing the broad imposition of Buy American requirements. Under the agreement, with some exceptions, the US must give companies from other signatory countries the same access to bids for government contracts as US companies. The great difference in size of the large US government procurement market compared to the smaller markets of other signatories means the US is “basically giving more than we are getting,” Lighthizer argues.
This is not a new idea. It attracted considerable interest within the White House earlier this year.
Lighthizer’s end-game
Despite discussion about withdrawing, Lighthizer’s preferred end-game would seem to be to only revise the agreement to make it more amenable to his overall protectionist program. To withdraw, a country has to give the WTO sixty days notice, so it is now too late for the Trump administration to complete a pullout. Biden would be president before it takes effect and could reverse it. That doesn’t rule out that the Trump administration may still notify the WTO of plans to withdraw but makes it less likely.
Joe Biden, anticipated successor as president on January 20th, also wants to strengthen “Buy America” provisions but has taken no position to date on the GPA. Withdrawing from or bullying others to make US-demanded changes to the GPA would go in the opposite direction from Biden’s stated commitment to cooperate with other countries and respect international agreements.
Bipartisan opposition
Reports that GPA withdrawal was again under discussion provoked a response in Congress. Senate Finance Committee ranking Democrat Ron Wyden (D-OR) released a strong statement saying, “The Trump administration is once again ceding ground to China. If the US pulls out of the GPA, countries like China and Russia will fill the vacuum, entering the supply chain of our strategic allies and breaking down rules against graft and corruption that the US has written for the world.”
Wyden was joined by Finance Committee Chairman Chuck Grassley (R-IA), who warned, “Congress approved the WTO agreements. Both by law and the Constitution, only Congress can decide to end US participation in those agreements. The relevant statute says congressional approval shall cease to be effective ‘if, and only if’ a joint resolution is enacted to that effect. Congress has spoken – and recently – by declining to act on such a resolution earlier this summer.”
That’s a powerful bipartisan rebuff working against GPA withdrawal, and it is likely one reason why the White House seems to have decided against taking action at this time.
Weakening WTO
But even just the idea that the US, a founding GPA member, would contemplate withdrawing – when other countries including China (and Russia) are trying to negotiate their way into GPA membership – is a blow to the WTO. It joins a long list of actions openly contemplated by or implemented by the Trump administration that undercut the WTO. These include:
- considering doing away with the most-favored nation principle for setting duties;
- treating undervaluation as a countervailable subsidy;
- concluding limited trade deals that include discriminatory managed trade elements and voluntary export restraints;
- using Section 232 in a way that is viewed as abusing the WTO’s national security exception,
- Section 301 to impose tariffs without going through WTO dispute settlement,
- methodologies in antidumping and countervailing duty cases that have been rejected by WTO panels (and not complying with those panel decisions);
- freezing appointments to the Appellate Body; and
- blocking a consensus on the next director-general.
Targeting China
Some actions the president is reportedly considering on his way out are targeted at China and would likely also be supported by Biden, if only to neutralize charges during the campaign that he was Beijing’s preferred candidate. Trump may block more imports from Xinjiang over human rights concerns. He is also looking at bringing together allied countries to protect each other if one of their members is singled out for retribution by China – as Australia currently is.
It would be an alliance whose members would react to such Chinese action by compensating the injured country or taking its exports to make up for those China is rejecting. In explaining the plan, the Wall Street Journal quoted a senior administration source saying, “China is trying to beat countries into submission by egregious economic coercion. The West needs to create a system of absorbing collectively the economic punishment from China’s coercive diplomacy and offset the cost.” Officials are reportedly already discussing the idea with allies.
Yet even the Australians – with their current conservative (“Libera”) government – are looking to placate China and not exacerbate the US-China rift that leads to further pressure from Beijing. This week, Prime Minister Scott Morrison stated directly that “our preference in Australia is not to be forced into any binary choices” between Washington and Beijing. But that reluctance could change once a coalition existed to resist China’s divide-and-conquer bullying.
Time to a tactic from the American Revolution
While it may be more difficult to create such a group now that so many potential members are in RCEP with China and few countries are in a position to take over importing a significant amount of the exports any one country usually sends to China or to provide compensation, the idea of a collective defense against China’s bullying is clearly an idea whose time has come. One possibility that is possibly more workable would be to collectively boycott selected Chinese exports, just as the thirteen US states united in boycotting British goods in response to the Townshend Acts.
In the meanwhile, the Biden administration, if it wants to go in the direction of strengthening alliances against China, could seek to reenter the CPTPP.
It could also consider that if it takes a dogmatic stance of “Buying America” at the expense of the GPA, the US taxpayer will find itself making purchases like the infamous US Air Force coffee mugs bought at $1,000 a cup instead of obtaining them from a US ally and GPA member at a fraction of that price. Dogmatic “Buy America” is better pronounced “Tax America” and suffer American companies to be excluded from foreign government procurement markets.
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