(1) Current status of the number of countries and regions participating in the WTO Agreement on Government Procurement
Originally there were 23 countries and regions participating in the WTO Agreement on Government Procurement, but during 1997, Hong Kong, the Principality of Liechtenstein, and the Republic of Singapore joined, and now, at the end of 1999, there are 26 signatory countries and regions. (Hong Kong: requested association 20 May 1997, effective 19 June 1997; the Principality of Liechtenstein: requested association 19 August 1997, effective 18 September 1997; Republic of Singapore: requested association on 20 September 1997, effective 20 October 1997.)
(Note) Parties to the World Trade Organization Agreement on Government Procurement
(as of 31 December 2000)
Japan, United States of America, Canada, European Community (EC), EC Members (United
Kingdom, French Republic, Federal Republic of Germany, Italian Republic, Kingdom
of the Netherlands with respect to Aruba, the Kingdom of Spain, Republic of Portugal,
Hellenic Republic, Republic of Finland, Kingdom of Sweden, Kingdom of Denmark,
Republic of Austria, Kingdom of Belgium, Republic of Ireland, Grand Duchy of Luxembourg),
Kingdom of Norway, Swiss Confederation, State of Israel, Republic of Korea, Hong
Kong, People's Republic of China, the Principality of Liechtenstein, the Republic
of Singapore
(2) The Working Group on Transparency in Government Procurement (Reference Materials III-2)
From 9 to 13 December 1996, the first Ministerial Conference
since the founding of the World Trade Organization (WTO) was held in Singapore,
with ministers and officials from 127 countries participating. At this first Ministerial
Conference, it was decided to establish a Working Group on Transparency in Government
Procurement.
In response to this, since the first meeting was held on 23 May 1997, further
formal meetings, a number of informal meetings and friends meetings have taken
place.
The Working Group on Transparency in Government Procurement is a forum to carry out studies on transparency in government procurement in a way designed to be conducive to the policies of each country, and since it is positioned to specify elements that each country could agree to on government procurement, countries other than the signatory nations (as mentioned above) to the WTO Agreement on Government Procurement have also become members of the Working Group.
At the third WTO Ministerial Conference in Seattle from 30 November to 4 December 1999, discussions were conducted on launching negotiations towards forming an agreement concerning transparency in government procurement, based on the discussions of such working groups.
(3) The Problem of United States Sub-Federal Government Procurement
a) Selective purchasing law legislation enacted by the Commonwealth of Massachusetts (United States)
Beginning in June 1996, the Commonwealth of Massachusetts enacted an Act Regulating State Contacts with Companies Doing Business with or in Burma (Myanmar), regulating government procurements from companies doing business with the government of Myanmar. This state government is one of the procurement entities among the applicable entities listed for the United States, a signatory nation to the WTO Agreement on Government Procurement. As such, it is obligated to guarantee non-discriminatory and fair procurement procedures in accordance with the Agreement. However, in this Act, the government of the Commonwealth of Massachusetts compiled a roster of companies doing business with or in Myanmar, based on information from United Nations reports and from private organizations, created a list of companies falling under the restrictions, and stipulated that if any of those companies offered bids to a public agency of the Commonwealth of Massachusetts, those bids would be automatically evaluated at 10% added to the price.
The procurement procedures of Massachusetts added a political element to the standards for successful bidders, namely commercial relations with Myanmar, and this effectively limited bids by Japanese and other foreign companies. This may violate the provisions of the WTO Agreement on Government Procurement, which call for non-discriminatory and fair procedures.
b) Japan's Request for Consultations and the WTO Suit
Japan and the EC asked that the state law in this case be revised so that the United States could implement its obligations under the WTO Agreement on Government Procurement. On 20 June 1997, the EC sought WTO consultations with the United States, and Japan did the same on 18 July 1997. These consultations were held in Geneva three times during 1997.
However, despite the efforts of both Japan and the EC, the session of the Massachusetts Legislature ended on 31 July 1998, and any prospects for an early revision of the Massachusetts Law disappeared. In these circumstances, Japan, based on the judgment that the Massachusetts Law violated various provisions of the WTO Agreement on Government Procurement (stipulations on national treatment, stipulations on non-discriminatory treatment, stipulations forbidding conditions for bidding other than those that make the party able to fulfill the contract, etc.), had requested the WTO Dispute Settlement Body (Reference Materials III-3) to set up a panel to discuss concerns of violations of the agreement in this instance, seeking revision of the Massachusetts Law through the WTO dispute settlement procedures. As a result, it was decided to establish a WTO panel was on 21 October 1998.
c) Decision on Unconstitutionality by the US courts and Lapse of the Panel
On November 4, 1998 the Boston Federal District Court ruled that this law was unconstitutional, consequently the law became invalid. The state of Massachusetts was not satisfied with this ruling and appealed, but on June 22, 1999, the decision of the federal district court was upheld. The state of Massachusetts then appealed to the Federal Supreme Court, but on June 19, 2000, the Supreme Court also upheld the decision by the appeal court, confirming that the law was unconstitutional.
On February 9, 1999, Japan, along with the EC, called for suspension of the panel for reasons that the Massachusetts law had been suspended based on the ruling of its unconstitutionality by the federal district court in November the previous year, and that thereby the discriminatory procurement measures of Massachusetts in violation of the WTO Government Procurement Agreement had been temporally suspended. Upon this request, the panel was suspended. Furthermore, on February 11, 2000, the authority for establishment of the panel lapsed. (WTO Dispute Settlement Understanding Article 12-12 stipulates: The panel may suspend its work at any time at the request of the complaining party for a period not to exceed 12 months. If the work of the panel has been suspended for more than 12 months, the authority for establishment of the panel shall lapse.)
Japan understands that the measures under this law which are inconsistent with the WTO Government Procurement Agreement will be withdrawn since the law has been confirmed to be unconstitutional and invalid by the US courts.