U.S.-Korea Free Trade Agreement: Potential Economy-wide ... - USITC

FTA Chapter 17—Government Procurement
Assessment
The government procurement provisions of the U.S.-Korea FTA would likely provide
improved access for U.S. firms bidding on government procurement contracts. In a Korean
procurement market of approximately $100 billion, 65 the FTA would increase the number
of Korean government agencies for which U.S. businesses can bid beyond those available
through the WTO Agreement on Government Procurement (GPA), and also reduces by
nearly one-half the contract thresholds available to bid on.
Chapter 17 broadly would address the procedural concerns raised by U.S. businesses about
government procurement in Korea; in particular, complaints about inefficient and
nontransparent procurement procedures. Provisions in the agreement would set out common
standards for supplier qualification and documentation requirements for tender, as well as
published and standard periods for procurement. The FTA would reinforce and clarify rights
and obligations of both parties under the GPA, thereby providing a dispute settlement
process should consultations under the FTA’s Working Group on Government Procurement
not resolve an issue.
From the more specific perspective of individual industries, benefits from the FTA
provisions on government procurement would vary by industry. For example, the
pharmaceutical and medical equipment industries have raised concerns about inefficient and
nontransparent procurement procedures, as well as arbitrary regulations, although such
procurement may fall under private rather than public sector (i.e., government) procurement.
The chapter’s exclusions of financial payments and other noncontractual procurement,
however, may limit the potential impact on finance-related industries.
The U.S. IGPAC mentioned in its report that the FTA makes no specific reference to U.S.
states and their possible obligations under this agreement, as well as to the fact that the annex
to the agreement does not extend to procurement contracts by subcentral government
entities. 66 Access to government procurement contracts by Korean subcentral and other
entities, however, is provided to U.S. firms under the GPA, which is incorporated into the
FTA. 67
65 The government procurement market in Korea is estimated at approximately 12 percent of Korea’s
gross domestic product (GDP) in a report by the U.S.-Korea Business Council and American Chamber of
Commerce in Korea. Korean GDP was approximately $888 billion in 2006, which would indicate the size of
its procurement market at roughly $100 billion. USKBC and AMCHAM in Korea, U.S.-Korea Free Trade
Agreement Position Paper, 2006, 30–31. Other estimates of the Korean public procurement market place its
size in 2003 at $67 billion, of which the Korean Public Procurement Service covers around 30 percent,
divided approximately into $7 billion for supplies and services, and $12 billion for construction. Choi,
“Republic of Korea: The Potential of E-Procurement,” 2005, 95.
66 IGPAC, Advisory Committee Report, April 24, 2007.
67 The Korean schedule under the GPA covers procurement contracts valued at Special Drawing Rights
(SDR) 200,000 for supplies and services, and SDR 15 million for construction services, for subcentral
government and other covered entities. Annex 2 lists the covered entities of Cheju-do, Chollabuk-do,
Chungchongbuk-do, Chungchongnam-do, Kang-wan-do, Kyonggi-do, Kyongsangbuk-do, Kyonsangnam-do,
City of Inchon, City of Kwangju, City of Pusan, City of Taegu, City of Taejon, and the Seoul Metropolitan
Government. (A -do suffix indicates the rough equivalent of an administrative province or state.) Annex 3
covers other entities that apply the provisions of the GPA, for example, a number of largely public-sector
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