Government Procurement and Sustainable Development in the WTO

Yang (2012), p. 373.

United Nations Conference on Trade and Development, Competition policy and public procurement (TD/B/C.I/CLP/14), 24.4.2012, 3.

The size of general government procurement spending is estimated using data from the OECD National Accounts Statistics (database) based on the System of National Accounts (SNA). General government procurement is defined as the sum of intermediate consumption (goods and services purchased by governments for their own use such as accounting or information technology services), gross fixed capital formation (acquisition of capital excluding sales of fixed assets, such as building new roads), and social transfers in kind via market producers (purchases by general government of goods and services produced by market producers and supplied to households). Public corporations were excluded in the estimation of procurement spending. The distribution between central and sub-national governments’ overall public procurement spending remains broadly unchanged with 64% of OECD-European Union countries’ procurement spending taking place at the sub-national level. Health expenditures represented the largest share of public procurement spending, averaging 29.3% across OECD countries in 2019. In Italy, Japan, and the Slovak Republic, almost 45% of public expenditure for procurement was in the health sector. Notable exceptions to this include Lithuania and the United States where economic affairs represented the largest share of government spending and Switzerland where general public services, and social protection formed the largest share. The next largest areas of public procurement spending across OECD countries were economic affairs (16.7%), education (11.6%), defence (10.5%), and social protection (10%) with relatively little variability among countries. OECD (2021), p. 162.

Woolcock and Grier (2015), p. 298.

Grandia (2016), pp. 124, 183.

Cheng et al. (2018), p. 771.

At the same time, there is a risk that, if the price difference between environmentally friendly and conventional products increases, private consumers who previously purchased green products will begin to purchase other types of products. A sectoral legislation that establishes a higher environmental standard for all suppliers and not just for the public sector would leave no room for the so-called demand substitution. On the other hand, substitution risks depend on the share of private consumption in the relevant market. Halonen (2021), pp. 549–550.

Koch (2020), p. 24.

Witjes and Lozano (2016), pp. 112, 39.

Ruttan (2006), p. 176.

Id., 177. See also Brenton et al. (2011).

The Rio 92 summit and Agenda 21 were the first international policy documents of high profile to include a direct reference to the role and impact that public procurement could have on the environment. Correia et al. (2013), p. 59.

http://​www.​un.​org/​esa/​sustdev/​documents/​WSSD_​POI_​PD/​English/​WSSD_​PlanImpl.​pdf.

Since the new GPA was officially adopted at a meeting of the Government Procurement Committee held on 30 March 2012, it should be known as the GPA 2012 and not the GPA 2014 (the agreement entered into force on 6 April 2014). It is generally accepted that the relevant date for the purposes of Art. 30 of the Vienna Convention on the Law of Treaties of 23 May 1969 is the date of conclusion or adoption of a treaty regardless of whether the treaty may have been ratified or entered into force at different times. Pauwelyn (2002), pp. 40–41.

The text of the GPA 2012 can be found in the Official Journal of the European Union L 68, 7.3.2014, 1–24.

In the Shrimp/Turtles case, the Appellate Body ignored “the State Consent aspects” of the WTO agreements and assumed “the legislative role of the Ministerial Council under the guise of interpretation.” Kelly (2005), p. 476.

Imperiale (2001), p. 242.

Mavroidis (2008a), p. 354.

Lida (2004), p. 219.

The Appellate Body’s decision in this case “was nothing short of shocking.” Chaudhary (2005), p. 181.

The application of the principle of evolutionary interpretation can also give rise to problems of conciliation with the principle of legal certainty as it results from the Pacta sunt servanda principle and from Art. 3:2 of the Memorandum of Understanding on the Resolution of Disputes. Canal-Forgues (2008), p. 122.

Jackson (2008), p. 450.

Reif and Eckert (2004), p. 686.

Reimers (2021), p. 222.

Zarbiyev (2012), p. 276.

Mavroidis (2008b), p. 445.

Howse (2001), p. 56.

The use of life-cycle costing or life-cycle cost (LCC) assessment in public procurement is not a recent idea:

Already in the 1960s the Department of Defence of the United States Government applied LCC in the procurement of military equipment as they found that acquisition costs only accounted for a small part of the total costs of weapon systems, while operation and support costs represented up to two-thirds of overall costs. Querol et al. (2021), p. 50.

At the same time, the Agreement on Technical Barriers to Trade specifically adds, with respect to the adherence to existing international standards, that these need not be followed when they would be “ineffective or inappropriate, for instance, because of an insufficient level of protection or fundamental climatic or geographical factors or fundamental technological problems” (Code of Good Practice for the Preparation, Adoption and Application of Standards, point F). This arguably amounts to a clear opportunity for states to determine their own level of desired protection and, even though scientific evidence may facilitate proof that no unnecessary obstacle to trade has been put in place, such proof is arguably not dependent upon the production of scientific evidence.

The Energy Star is the most widespread standard to estimate energy consumption (in kWh/year), which can easily be transformed into costs with the energy price of the contracting authority. Querol et al. (2021), p. 60.

It is estimated that compliance with the Energy Star label by the United States Federal Administration resulted in a reduction in greenhouse gas emissions equivalent to 22 million tons of carbon dioxide. van Asselt et al. (2006), p. 220.

Dragos and Neamtu (2021), p. 26.

Van Calster (2009), p. 366.

Van Calster (2002), p. 302.

The Forest Stewardship Council has members of very diverse natures including environmental and social non-governmental organizations, private companies, academic institutions, religious organizations, and individuals from over 60 countries. Röben (2010), para. 10.

On the distinction between product/process or production method, see, for example, Silva et al. (2015), pp. 97–132.

McCrudden (1999), p. 36.

Kunzlik (2003), p. 110.

Hanley (2002), p. 722.

van Asselt et al. (2006), p. 223.

The text of the GPA 1994 can be found in the Official Journal of the European Union C 256, 3.9.1996, 1–18.

Arrowsmith (2011), p. 323.

Davies (2009), p. 295.

Baron (2014), p. 25; Hollander and Marx (2014), p. 5.

Rainville (2017), p. 1034. “Our analysis, based on ISO-14001 adoption levels in 147 countries over the 1999-2014 period, shows that a greater uptake of the ISO-14001 standard is associated with lower levels of emissions of greenhouse gases (GHGs), namely carbon dioxide (CO2) and methane (CH4).” Ubaldo et al. (2022), p. 2.

Tarullo (2000), p. 173.

Reich (2009), p. 1012.

Giles (2018), pp. 407–408. See also Uysal (2021), p. 53: “Considering the role of the state in protection of human rights, it is only natural to expect the government to have business relations with the enterprises that are considerate of human rights effects of their conduct.”

OECD (2021), p. 164.

Koch (2020), p. 98.

Van den Bossche (2006), 320.

Orakhelashvili (2007), p. 166.

Cottier and Delimatsis (2008), p. 337.

Brenton et al. (2011), p. 22.

Vogel (1995), p. 6.

Vogel (2000), pp. 269–270.

Perkins and Neumayer (2012), p. 232.

Kullmann (2018), p. 122; Marty (2014), p. 7.

Wiesbrock (2013), p. 121.

Tosoni (2013), p. 46.

Kunzlik (2003), p. 115.

Dragos and Neamtu (2021), p. 25.

For example, because of Burma’s (nowadays Myanmar) registration on the protection of human rights, Massachusetts adopted, on 25 June 1996, the so-called Act Regulating State Contracts with Companies doing Business with or in Burma, passing to apply an automatic 10% markup to the prices quoted by companies determined to do business with Burma. The increase applied to both US and foreign companies carrying out commercial transactions with Burma. One year after the adoption of the Burma Act by Massachusetts, the European Communities requested the United States to carry out consultations under Art. 4 of the WTO Dispute Settlement System, alleging that Massachusetts law violated, for example, the following provisions of the GPA 1994:As the consultations did not put an end to the dispute, the European Communities requested, on 8 September 1998, the creation of a panel that was created at the meeting of the Dispute Settlement Body held on 21 October 1998. However, the Federal District Court of Massachusetts having declared the law of the state of Massachusetts unconstitutional on 4 November 1998, the European Communities applied to the WTO on 10 February 1999 for the suspension of the dispute settlement procedures because they understood that the Burma Law had become obsolete in practice. It should also be noted that some indicate that the security exception provided in the GPA 1994 was invoked by the United States in order to defend the so-called Act Regulating State Contracts with Companies doing Business with or in Burma adopted by Massachusetts on 25 June 1996 (Goodman 2001, pp. 101–102). Moreover, the security exception seems to be moving towards a greater scope in terms of its scope of application. For example, Annex 8-E to Art. 28.6 of the Comprehensive Economic and Trade Agreement (National Security) between Canada and the European Union states that “measures related to the maintenance of international peace and security” include the protection of human rights.

Hamilton (2022), p. 24.

Baron (2014), p. 16.

European Commission (2016), p. 22.

Art. 69:3 of the current Public Procurement Directive provides that, if the reason why the tender is abnormally low is due to the fact that the obligations under Art. 18:2 are not complied with, the tender shall be rejected. It results from Art. 18:2 that “Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X”, ie: International Labour Organization (ILO) Convention 87 on Freedom of Association and the Protection of the Right to Organise; ILO Convention 98 on the Right to Organise and Collective Bargaining; ILO Convention 29 on Forced Labour; ILO Convention 105 on the Abolition of Forced Labour; ILO Convention 138 on Minimum Age; ILO Convention 111 on Discrimination (Employment and Occupation); ILO Convention 100 on Equal Remuneration; ILO Convention 182 on Worst Forms of Child Labour; Vienna Convention for the protection of the Ozone Layer and its Montreal Protocol on substances that deplete the Ozone Layer; Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal (Basel Convention); Stockholm Convention on Persistent Organic Pollutants (Stockholm POPs Convention); Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade (UNEP/FAO) (PIC Convention) and its 3 regional Protocols.

Semple (2017), p. 303.

Green Public Procurement (GPP) refers to the inclusion of environmental criteria in the public procurement process. Thereby, the term is narrower than the more frequently used term “sustainable public procurement” since the latter encompasses not only environmental but also social and economic aspects. The European Commission defines the GPP as a process whereby public authorities seek to procure goods, services and works with a reduced environmental impact throughout their life-cycle when compared to goods, services and works with the same primary function that would otherwise be procured. Koch (2020), p. 21.

Schefer and Woldesenbet (2018), p. 1131.

Chabrost (2021), p. 129.

Chabrost (2021), p. 129.

Abbott (2001), p. 275.

Darleen Druyun “was the senior career civilian procurement official-second only to the political appointees that cycle through the Assistant Secretary of the Air Force for Acquisition position. In other words, she was the highest-ranking long-term procurement official providing continuity to the Air Force acquisition community throughout changes in administrations.” Branstetter (2005), p. 444.

Dietrich (2005), p. 522.

Branstetter (2005), p. 446.

Yukins and Schooner (2007), pp. 548-549. Darleen Druyun was convicted in 2004.

Pauwelyn (2013), p. 248. The GPA 1994 does not contain any special rules against or explicitly mention corruption in public procurement. However, indirectly, it is evident that the agreement contributed to fighting corruption through the principles of non-discrimination and transparency. On the other hand, there are other commercial instruments that have helped to strengthen the relationship between trade and the fight against corruption. For example, the European Union’s system of generalized preferences has offered additional trade preferences to developing countries that ratify and implement certain conventions on principles of governance, including the United Nations Convention against Corruption.

The text of the United Nations Convention against Corruption, signed in 2003 and in force since 14 December 2005, can be found in Diário da República, I Série, No. 183, 21.9.2007, 6718-6738. It is interesting to note that many of the current parts of the GPA are not parties to the United Nations Convention and that this convention specifically contains an article for public procurement, Art. 9, entitled “Public Procurement and Management of Public Finances”. It calls for transparency ex ante in the sense that clear criteria regarding the upcoming procurement should be established as well as ex post by stressing the need for accountability of the procuring entities.

The text of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (signed on 17 December 1997 and in force since 15 February 1999) can be found in Diário da República, I Série A, No. 77, 31.3.2000, 1408-1411.

The text of the Inter-American Convention against Corruption adopted in Caracas on March 29, 1996 and in force since March 6, 1997 can be found in OAS :: SLA :: Department of International Law (DIL) :: Inter-American Treaties.

Lo (2015), p. 39; Pauwelyn (2013), p. 256.

Lo (2015), p. 28.

https://​treaties.​un.​org/​Pages/​ViewDetails.​aspx?​src=​IND&​mtdsg_​no=​XVIII-14&​chapter=​18&​lang=​en (page visited on 9.6.2022).

Anderson et al. (2017), p. 95.

Harpaz and Peled (2020), p. 225.

Anderson et al. (2019), p. 1293.

Anderson, et al. (2019), p. 1236.

Halonen (2021), p. 546.

Anderson, et al. (2019), p. 1294.

Dawar et al. (2019), pp. 614, 621, 628 and 633.

In September 2015, world leaders adopted the 2030 Agenda for Sustainable Development, a global effort under the auspices of the United Nations (UN) to tackle poverty, climate change, and violence while promoting more equal, inclusive, and prosperous societies. They agreed on 17 Sustainable Development Goals (SDGs) and 169 ambitious SDG targets covering all areas of human development and the environment to guide development efforts through the 2030 time horizon. Some of the SDGs explicitly call for the active use of trade measures, in particular Goal 2 (Zero Hunger) includes a call to correct and prevent trade restrictions and distortions in world agricultural markets, Goal 14 (Life Below Water) points to the need to reduce fishery subsidies to avoid overcapacity and overfishing, and trade benefits for poorer states are also explicitly raised in Goal 17 (Partnership for the Goals). From a broader economic perspective, general economic growth remains the most important channel through which trade can support the SDGs. The agenda itself affirms that “international trade is an engine for inclusive economic growth and poverty reduction, and contributes to the promotion of sustainable development” (United Nations 2015, para. 68).

As of October 2022, the WTO had 164 members.

Anderson. et al. (2011), p. 561.

Anderson et al. (2015), p. 20.

Gourdon and Messent (2019), p. 700. Countries are increasingly including disciplines on government procurement in their bilateral and preferential trade agreements. In 1990, only seven international trade agreements included provisions regarding government procurement; by 2010, this number had grown to at least 70, and these numbers have risen further since then. Id., 682.

Yukins and Schnitzer (2015), p. 118.

Yukins and Schnitzer (2015), p. 91.

Hoekman (2015), p. 4.