Identifier
Created
Classification
Origin
09GENEVA973
2009-11-05 12:32:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Mission Geneva
Cable title:  

CHINA, BUY AMERICAN PROMINENT AT OCTOBER

Tags:  ETRD WTRO ECON 
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ZNR UUUUU ZZH
R 051232Z NOV 09
FM USMISSION GENEVA
TO RUEHC/SECSTATE WASHDC 9976
INFO RUCNWTO/WORLD TRADE ORGANIZATION COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHOT/AMEMBASSY OTTAWA 0003
RUEHBJ/AMEMBASSY BEIJING 5882
RUEHAM/AMEMBASSY AMMAN 1083
RUEHYE/AMEMBASSY YEREVAN 0131
RUEHBS/USEU BRUSSELS
RUEHRH/AMEMBASSY RIYADH 0736
RUEHNY/AMEMBASSY OSLO 2059
RUEHIN/AIT TAIPEI 0642
RUEHEK/AMEMBASSY BISHKEK 0253
RUCPDOC/USDOC WASHDC
UNCLAS SECTION 01 OF 06 GENEVA 000973 

FOR EEB/TTP/MTA/MTAA
PASS USTR FOR JGRIER, AWINTER AND MPAGAN
USDOC/4110 FOR BWOODWARD, KKELLY, JPRUITT
TREASURY FOR GEARP

SENSITIVE BUT UNCLASSIFIED
SIPDIS

E.O. 12958: N/A
TAGS: ETRD WTRO ECON
SUBJECT: CHINA, BUY AMERICAN PROMINENT AT OCTOBER
GOVERNMENT PROCUREMENT SESSIONS

Ref: A) Geneva 400 B) Riyadh 1375

UNCLAS SECTION 01 OF 06 GENEVA 000973

FOR EEB/TTP/MTA/MTAA
PASS USTR FOR JGRIER, AWINTER AND MPAGAN
USDOC/4110 FOR BWOODWARD, KKELLY, JPRUITT
TREASURY FOR GEARP

SENSITIVE BUT UNCLASSIFIED
SIPDIS

E.O. 12958: N/A
TAGS: ETRD WTRO ECON
SUBJECT: CHINA, BUY AMERICAN PROMINENT AT OCTOBER
GOVERNMENT PROCUREMENT SESSIONS

Ref: A) Geneva 400 B) Riyadh 1375


1. SBU) SUMMARY: China?s WTO Agreement on
Government Procurement accession process
Garnered the most attention during the
October 7, 2009 WTO Committee on Government
Procurement session and related bilateral
meetings on Oct. 5-6. China circulated a
report on its progress in its accession
negotiations to the GPA, and promised to
submit a revised market access offer in

2010. Parties showed continued interest
in the status of the implementation of the
"Buy American" provisions in the American
Recovery and Reinvestment Act of 2009. The
status of Armenia, Jordan and Saudi Arabia
Accession processes were discussed during
The meetings, and a positive bilateral
meeting with the European Communities gave
the U.S. delegation some reason to believe
that progress may be possible on the
renegotiation of the GPA. The U.S.
delegation met bilaterally with Armenia,
China, Jordan, Saudi Arabia, the EC,
Japan and Norway. The next committee
meetings will take place the week of
December 7. End summary.

Buy American Issue Again on Agenda
--------------


2. (U) As in previous sessions (ref A),
the Buy American provisions of the American
Recovery and Reinvestment Act (ARRA)
generated much discussion during the
October 5-7 informal sessions of the
WTO Committee on Government Procurement
And related bilateral meetings. During
The plurilateral sessions on October 7,
the EC and Swiss delegations expressed
concern with the lack of final regulations
and OMB guidance on the implementation
of the "Buy American" provisions in ARRA.
The Israeli representative also noted
that his country awaited the final
regulations and OMB guidance. The U.S.
delegation reiterated that the interim
implementing regulations and OMB
guidance are in effect and ensure that
GPA parties? rights under the Agreement
remain protected. Committee Chair Nicholas
Niggli thanked the United States for
its useful replies and remarked that the
ability of parties to discuss the stimulus
package demonstrated the value of the
Government Procurement Agreement (GPA)
as an instrument.


Accession Progress Mixed

--------------

3. (U) China: Fulfilling a commitment made
at the U.S.-China Strategic and Economic
Dialogue meetings in July, during the Committee
session, China presented a report
outlining elements of a revised offer
that it intends to submit in 2010
limited to expansion of central
government procurement. China also
included in its document a list of
nine factors complicating China?s
efforts to submit arevised offer
(it has been nearly two years since
China?s initial market access offer).

GENEVA 00000973 002 OF 006


The reasons China cited for its delay
In submitting a revised offer expanded
on those stated before ? that
provincial government procurement
officials are unfamiliar with the GPA,
and while covered by the Government
Procurement Law, need time to decide
whether to include entities in the
revised offer, that Chinese procurement
law does not apply to state-owned
enterprises, and China needs more
time and domestic political buy-in
to reconcile Chinese procurementlaw
with the GPA. China said that they
realie more entities at the central
level government will need to be
covered; that provincial governmental
entities and state-owned enterprises
will need to be covered; that more
goods and services will need be
covered; and that threshold levels
will need to be lowered. In its 2010
revised market offer, China may add
more central government entities and
more subordinate entities,
substantially lower the threshold
levels, and expand coverage of goods
and services coverage. Despite the
fact that China is only committing to
improving one aspect of its offer in
its next revision, parties still
expressed appreciation to China for
outlining a revised offer, and
emphasized the need for China to
submit its revised offer as soon as
possible.


4. (SBU) China cont?d: In a bilateral
meeting, the Chinese delegation stayed
very close to the text of the document
that was subsequently circulated in the
plurilateral. They noted that the
State Council was soliciting comments
on draft regulations to implement
the revised Tendering and Bidding Law,
and provided the website where the
solicitation was posted. In
response to a U.S. question, China
indicated that the Ministry of Finance
was still working on the draft
implementing regulations for the
Government Procurement Law. Once
they are submitted, and approved
by the State Council, they will be
posted for public comments, hopefully
before the end of 2009.


5. (SBU) The Chinese delegation stated
that relevant ministries were still
working on regulations to define
what is a domestic product. In
articular, ministries must determine
the standards for determining what
constituted domestic production in
China. Currently, China only has
tandards and procedures for imported
products (products produced outside
China and subject to China Customs),
based on a December 2007 measure.
The U.S. delegation explained how
This issue is of great importance to
U.S. multinationals, including
concerns with how it will affect
determinations relating of

GENEVA 00000973 003 OF 006


innovative indQenous products.
During the July Strategic and
Economic Dialogue discussions, China
committed to treat, under its
Government Procurement Law, products
produced in China by foreign
invested enterprises the same as
products produced in China by
Chinese enterprises. The U.S.
delegation would like China to
confirm its Strategic and Economic
Dialogue commitment in a regulation
as soon as possible. While noting
that the two sides had established
a good channel of communication,
China expressed concern that
spending on other government
procurement issues in other fora)
will delay China?s GPA accession.


6. (SBU) Armenia: The U.S. delegation
met bilaterally with Avetis
Hovhannisyan, Armenia?s Permanent
Representative to the WTO, to discuss
his country?s initial GPA offer.
Hovhannisyan explained that a
delegation from capital that
includes procurement experts was unable
to attend, but offered to relay
questions to Yerevan. The U.S.
delegation noted to Hovhannisyan that
the initial offer appeared very
favorable, that it would send him
its comments and requests relating to
the offer and expected, with some
additional work, that Armenia?s
accession could proceed quickly.
Other delegations echoed these
sentiments in the plurilateral and
requested that Yerevan send a
delegation to the GPA Committee session
in December.


7. (SBU) Saudi Arabia: In a bilateral
meeting, Saudi representatives continued
to use the delay in approval of the
revised text of the GPA as a reason why
Saudi Arabia has failed to initiate its
accession to the GPA. Under Saudi
Arabia?s WTO commitment, it should have
begun its GPA accession in 2006.
The U.S. delegation continued to
respond to Saudi Arabia that this
is not an adequate excuse and
encouraged the Saudis to move
forward with an initial market
access offer. The Saudis thought
statements urging GPA accession by
AUSTR Wilson during his upcoming visit
(ref B) to Saudi Arabia could help
accelerate the process. The Saudis
also promised to consider whether
a workshop offered by the Department
of Commerce on the benefits of GPA
membership would assist accession
efforts.


8. (SBU) Jordan: The bilateral with
Jordan provided little room for
optimism. The Jordanian Permanent
Representative doubted that Jordan
would submit a revised offer this
year. In addition, he complained that
the Jordanian armed forces still

GENEVA 00000973 004 OF 006


resisted their inclusion under GPA.
He also indicated that Jordan was
studying its SME program, and may be
able to revise the SME proposal
that it include in its revised offer.


9. (U) Other countries: The Kyrgyz
Republic did not send a delegation,
but submitted updated responses to
the checklist of issues, its first
action since it suspended plurilateral
GPA negotiations in 2003. The
Secretariat reported on technical
assistance activities designed to
increase interest in accession to
the GPA. The Swiss noted increased
interest in the GPA due to new FTAs
including government procurement
provisions.

Coverage Issues -- Search for
Flexibility and Compromise
--------------


10. (SBU) The EC and U.S. delegations
held a productive bilateral. The EC
expressed its disappointment with the
delay in the final implementing
measures for the "Buy American"
provisions in ARRA. The U.S.
delegation said it hoped that final
implementing regulations would be
ready by the end of October, but
there was no guarantee. The EC
noted that it was receiving
complaints from European firms
regarding the inverted
corporations provision in pending
U.S. legislation, which would
prohibit contract awards to former
domestic firms that have moved
their incorporations to tax havens
to avoid U.S. taxes. The U.S.
delegation explained that the
Administration is in discussions
with the Hill on this subject.


11. (SBU) The EC expressed a
desire to kick start the
renegotiations of the GPA and
expressed the hope that the two
sides could find a way forward on
the outstanding issues. The United
States agreed noting that the
revised text is becoming dated and
will hit the three-year mark in
December. The EC acknowledged that
the United States cannot accept the
EC?s revised market access offer,
and indicated that it has some
flexibilities, including returning
to its initial offer. The EC would
like to see more from the United
States? own revised market access
offer. The U.S. indicated it would
consider whether it could further
clarify its revised offer and
perhaps add to it. The EC did not
disagree with the U.S. observation
that the EC has vulnerabilities
with the more than 500 modifications
in its existing coverage, which
ave never been notified, and would
need to be addressed in a final

GENEVA 00000973 005 OF 006


package. The EC would also want
a rendezvous clause in the final
package that would provide for
future market access negotiations
and a process for monitoring
discriminatory measures. The EC
proposed that the two sides meet
for a more lengthy bilateral on
the margins of the December
government procurement session.


12. (SBU) In a bilateral with
Norway, it appears that the two
sides may be close to agreement on
coverage. They agreed to meet
again in December to see what they
would need to reach agreement.


13. (SBU) In another bilateral,
the Japanese delegation suggested
that it was open to submitting an
expanded coverage offer, possibly
including two new designated
cities (which were not named).
The Japanese also provided
information to clarify that its
proposed revisions related to the
Japan Railway Construction,
Transport and Technology Agency
(JRTT) would not reduce GPA coverage.


14. (SBU) The Committee discussions
on market access offers confirmed
the sense from bilaterals that
agreement may be possible.
Singapore stated that it could be
flexible on its request for
technical revisions to the GPA
as long as parties achieved
improved market access. In other
matters, a mid-term review of the
status of the GPA renegotiation
process being championed by the
Swiss and EC delegations was
delayed due to U.S., Japanese,
Canadian and Israeli concerns
that the project would not advance
the renegotiation effort and was
misleading since the terms of
reference of the review did not
include a comparison to existing
market access coverage, but rather
would only look at initial and/or
revised offers. The Secretariat
will prepare a new draft of the
terms of reference. The Committee
agreed to compose a working
group that would meet on the margins
of future Committee meetings to
study government procurement
statistics and methodologies
for improving those statistics.
The United States, the EC and
others have acknowledged the
difficulty of identifying the
country of origin for significant
segments of respective government
contracts.

U.S. Delegation
--------------


15. (U) The United States delegation
was led by Jean Heilman Grier, USTR

GENEVA 00000973 006 OF 006


senior procurement negotiator, and
included Robert Kasper from
USTR/Geneva, Katrice Kelly and
Brian Woodward of the Department of
Commerce, and Nathan Lane of the
Department of State. This cable
has been cleared by all of the
Washington-based delegation members.
SHARK