Author: Jonathan Webb - Categories: Economy & Current Affairs
Procurement rarely has its moment of glory. Arguably, it never has. But international politicians are currently abuzz with the prosaic world of tenders and contracts.
The rise of procurement coincided with a recent spate of free trade agreements. The US has been signing bi-lateral deals across Asia and the Pacific and Europe has been keen to get into bed with the rising powers of South Korea and India. Often, these arrangements include provisions for open public procurement roles.
Essentially, there are reciprocal agreements which guarantee to either parties that public contracting will consider bids from companies based in either country. Further to which, the WTO holds relatively rudimentary calls for open contracting under its Government Procurement Agreement.
The procurement hit the fan recently when China’s application to the WTO stumbled upon its failure to satisfy the GPA, leading to a stream of complaints from other member states. Most vociferous amongst these being the US, which added the complaint to its long catalogue of trade grievances it holds against the world’s second largest economy.
However, with the recent crisis and rise in more extremist political parties, free trade is falling out of fashion. My colleague Steve Hall only recently discussed the calls for protectionism in the hitherto bastion of trade: the EU.
Public procurement is traditionally the protectionist’s first target. Discriminating against companies based elsewhere is easy to include in evaluation criteria, and the result is palpable: local firms providing local staples for local governments. That these staples are enormously overpriced, sub-standard and possibly lacking the dynamic edge one observes in those flashy foreign staples does not matter. Waving the flag trumps savings.
For many of us free traders, this sub-optimal outcome is apparent. Restricting purchasing on a geographic basis necessarily reduces competition and therefore ensures that the government will not receive the best deal.
In the procurement world, the inefficiency of protectionism should be (I hope) obvious. Perhaps then purchasing professionals should resist such moves. Parties and leaders are advocating practices which would be entirely unacceptable and possibly even unhinged if applied to the commercial world. If this is the case, then procurement has a valuable contribution to make to a global discussion.