A few months ago, as part of a long string of protectionist-oriented disputes involving China, the heads of 30 industry groups from North America, Asia and Europe wrote a letter to Chinese ministers in protest of a recent law involving the procurement policies of the Chinese government. From October 2009 onwards, China’s public purchases were to start favoring domestic technologies. The legislation was deemed a significant blow to trade for international high-tech firms, as China’s government procured USD 88 billion worth of goods and services in 2008, including 14% of the nation’s 40 million PC purchases.

The favoring of domestic enterprises is not an issue exclusive to China, however. Although over 20 countries have signed on to the World Trade Organization’s (WTO) Agreement on General Procurement (China has not), it is scarcely followed at all.

In the WTO’s own words, the agreement, “[has] not worked well”. It requires “non-discriminatory practices and open procedures in government procurement among member states, and covers not only central government purchasing of goods… but also procurement of services, including public works, and procurement at the sub-central levels of government. Procurement in public utilities is also included.” This applies only to contracts valued above a certain threshold, as set by the WTO for various procurement categories; below the threshold, countries can be as discriminatory as they please.

Participants are supposed submit statistics of their procurement activities on an annual basis, to include countries of origin and totals. Only eight countries have bothered to present anything at all. Their submissions suggest anything but engagement in “non-discriminatory practices”.

• Norway: The most recent statistics are from 2005. Of the USD 1,215 million procured, only 1.3% of supply, 6.9% of service and 1.3% of works contracts went to foreign companies  
  

• South Korea: In 2004, the most recent data from South Korea, procurement contracts were valued at over USD 25 billion. Less than 1% went to foreign-based firms, these almost exclusively entered into by the Ministry of National Defense with firms based in the United States, Germany and the Netherlands

• Japan: 98% was procured domestically in 2008. Ironically, its Foreign Trade Commission did not contract at all with foreign-based companies

• US: The US submissions to the WTO are not broken down by country of origin. However, the website of the US Federal Procurement Data System does give this data, although buried within around 100 xls files – one for each federal agency. Sampling these files reveals that beneath the column heading “Country of Origin”, if there is anything at all, there is only 'US.' The USD 417 billion procured by the US in 2007 most likely came from its own 50 states

• Switzerland: Switzerland reports the highest proportion of overseas procurement. In its most recent submission of 2003 data (in French), it lists 60% of its above-threshold contracts going to domestic bidders, 29% to US firms and 9% to the EU, with 2% categorized as “other”

• Canada: does not list country of origin. The country reports 1,759 contracts made in 2007 valued at USD 1.9 billion

• Hong Kong: consistently submits a two-page document with their name, the date, and nothing else of informational value.

• Liechtenstein (yes, Liechtenstein): This constitutional monarchy of 35,000 people is a model of transparency. It lists all 109 of its 2008 government contracts, and even goes so far as to give the name of the company it has procured from. Somehow even tiny, landlocked, mountainous Liechtenstein manages to largely avoid procurement from abroad. Besides domestic contracts, there were only a handful from Switzerland, two from Iceland, one from Germany and one from Austria.

It seems discrimination in government procurement is a worldwide phenomenon. If the heads of these international industry groups want the Chinese government to partake in fairer procurement practices, the first step may be to convince their own governments to do the same.