NEW ZEALAND TAKING LOOK AT WTO GOVERNMENT PROCUREMENT

UNCLAS WELLINGTON 000459

SIPDIS

SENSITIVE
SIPDIS

STATE PASS USTR-BWEISEL
STATE FOR EAP/ANP-DRICCI, EB/TPP/MTA-MBGOODMAN AND
EB/TPP/MTA/MST-TNISSEN
COMMERCE FOR ABENAISSA/4530/ITA/MAC/AP/OSAO

E.O. 12958: N/A
TAGS: ETRD PGOV PREL NZ
SUBJECT: NEW ZEALAND TAKING LOOK AT WTO GOVERNMENT PROCUREMENT
AGREEMENT



1. (U) Summary: Urged by members of the New Zealand business
community, the New Zealand government has agreed to review its
decision not to join the WTO Government Procurement Agreement.
However, government officials expect the review to show that the
government's costs of complying with the agreement would exceed the
benefits that New Zealand companies could expect to gain through
increased access to other countries' government procurement markets.
End summary.


2. (U) According to a Ministry of Economic Development official, the
WTO Government Procurement Agreement (GPA) is so highly prescriptive
that it would require New Zealand to re-regulate its already
deregulated and decentralized public sector management regime.
Since 1992, New Zealand has had no legislation regarding government
procurement and, therefore, no requirement that government
purchasers favor domestic products over foreign-made products, said
Rory McLeod, manager of the ministry's International Technical and
Regulatory Coordination Team. There are no government-wide
procurement procedures. Instead, purchasers are guided by
government policy that advises them to make decisions based on
"value for money." McLeod said cost-savings -- not the product's
origin -- is the determinant of purchasing decisions. Underscoring
that principle, department heads must fulfill performance agreements
that include the containment of costs.


3. (U) Thus, New Zealand already provides open access to its
government procurement market, McLeod said. By contrast, the GPA is
less liberal, setting thresholds for the value of purchases covered
by the agreement and allowing members to bilaterally negotiate
exclusions of purchasing entities and industry sectors. In
addition, the agreement would require procedures that would raise
New Zealand's administrative and transaction costs. To join the
plurilateral agreement, New Zealand would have to engage in
cumbersome bilateral, sector-by-sector negotiations with GPA
members. McLeod doubted that those costs would be outweighed by the
increased sales that New Zealand companies might realize from
greater access to foreign government procurement markets.


4. (U) Ministry of Commerce policy does require that government
departments obtain origin and local-content information on all
offers to supply goods. The Labour government is funding a "Buy
Kiwi-Made" program, as part of a post-election agreement with the
Green Party, encouraging New Zealanders to buy locally made products
and use local services, McLeod noted. However, the program would
not affect government purchases.


5. (U) Further complicating the issue, the GPA would apply to
procurement practices by state-owned enterprises and local
governments -- practices over which the central government has no
jurisdiction, McLeod added.


6. (U) The Wellington Regional Chamber of Commerce has pushed for
New Zealand's membership in the GPA. The chamber's chief executive
officer, Charles Finny (a former GNZ trade negotiator),contends
that membership would open a number of restricted government
procurement markets to New Zealand's exporters, including the U.S.
federal government's US $200 billion market. McLeod conceded that,
because of the chamber's pressure, the government decided to review
its position on the GPA. The review is expected to be completed by
year's end. Meanwhile, McLeod said the government had no intention
of becoming an observer to the WTO GPA Committee.


7. (U) In its free-trade agreements, New Zealand has won varying
access to its partners' procurement markets. As part of their
Closer Economic Relations, New Zealand and Australia are committed
to according each other's goods, services and suppliers equal
treatment in their government purchasing. In the Trans-Pacific
Strategic Economic Partnership Agreement between Brunei, Chile, New
Zealand and Singapore, the parties made the same commitment, but
specified entities and services covered by the agreement and set
thresholds. The agreement applies only to procured goods above a
value of 50,000 SDRs (IMF Special Drawing Rights, equivalent to
about US $34,000); services, 50,000 SDRs; and, construction, 5
million SDRs. The free-trade agreement between New Zealand and
Thailand commits them to working toward eliminating barriers related
to government procurement. Meanwhile, New Zealand is aiming to
reach agreement on a multilateral approach to government procurement
within the WTO system.


8. (SBU) While the Embassy has received no complaints from U.S.
industry regarding access to New Zealand's government procurement
market, we noted local media reports on the chamber's call for GPA
membership and asked the Department whether we should raise the
matter with the government. Based on the Department's advice that
the USG encourages all WTO members to join the agreement, we

requested a briefing from the government. That briefing was
provided May 19 by McLeod, senior adviser Tim Barber and policy
analyst Bastiaan van der Scheer of the Ministry of Economic
Development, as well as by Maria Alcalde, foreign policy officer in
the Ministry of Foreign Affairs and Trade's trade negotiations
division. Embassy will monitor the government's review and report
developments.

MCCORMICK