Trump considers withdrawing from WTO's US$1.7t purchasing pact

Geneva

THE US is mulling over a plan to withdraw from a global pact worth US$1.7 trillion in government contracts, a person familiar with the matter said, in a move that may anger close allies during a delicate moment for trade.

Officials in President Donald Trump's administration are circulating a draft executive order that would trigger a US exit from the World Trade Organization's Government Procurement Agreement, or GPA, if the pact isn't reformed in line with American views, according to the person, who asked not to be identified because discussions are ongoing.

A spokesman at the office of the US Trade Representative didn't immediately respond to emails seeking comment.

The purpose of the GPA is to open government procurement markets to foreign competition, and to help make public purchasing more transparent. A US withdrawal would create chaos for foreign companies that bid for access to America'a US$837 billion public procurement market and complicate nascent trade talks Washington is planning with the UK and European Union.

It could also pose problems for Canadian Prime Minister Justin Trudeau, who still needs to broker deals with his political rivals to ensure ratification of the US-Mexico-Canada Agreement; Canada is the only signatory of the updated Nafta deal that still needs to ratify the free-trade accord. Procurement was a contentious issue in USMCA.

A US withdrawal from the GPA would mean members including the UK, Japan, South Korea, Canada and the EU will lose their preferential access to US public procurement tenders. GPA members would instead become subject to the Buy American Act, which bars most foreign access to the US government contracts without a specific waiver. The law does not apply to foreign procurement of US public services contracts.

The US awarded US$12 billion of government contracts to foreign firms in 2015, according to a 2019 report by the Government Accountability Office. About US$2.8 billion of those contracts went to the EU, US$1.1 billion to Japan, US$755 million to South Korea and US$623.6 million to Canada.

It's not the first time the Trump administration has called attention to the GPA. In an executive order issued just three months after Mr Trump took office in 2017, the Commerce Department and USTR were given 150 days to assess the impacts of all US trade agreements and the GPA on the operation of so-called Buy American laws.

If acted upon, the US move would fit Mr Trump's pattern of threatening to exit international pacts in order to increase leverage in negotiations, even when the party across the table is a close ally. BLOOMBERG