Government Procurement Benefits in the U.S.-South Korea Trade Agreement
Government procurement typically represents 10 to 15 percent of a country’s Gross Domestic Product, or total economic output. When trade agreements open foreign government procurement markets, they provide significant export opportunities for U.S. companies and American workers. When U.S. companies are able to sell into those foreign government procurement markets, they can boost exports and support better, higher-paying U.S. jobs.
The U.S.-South Korea trade agreement’s Government Procurement Chapter increases opportunities for U.S. companies to supply their goods and services to the South Korean government by providing them with strong protections and additional access to the procurement market. At the same time, the agreement’s government procurement rules ensure that certain American business sectors – such as small businesses or textile companies bidding on Department of Defense procurement – continue to receive the same protections they have in other agreements, and also ensure that American environmental and labor safeguards will be maintained.
The agreement’s government procurement obligations build and expand on obligations that the United States and South Korea already have under the World Trade Organization’s Agreement on Government Procurement (GPA) – which first opened South Korea’s government procurement market to U.S. firms. The U.S.-South Korea agreement expands U.S. firms’ access to the $100 billion South Korean government procurement market, creating new opportunities for exporters, and ensures that U.S. firms will get to bid on contracts on a level playing field with South Korean firms. Every one-percent increase in the U.S. market share of South Korean government procurement would be worth approximately $1 billion.
The agreement’s procurement obligations grant U.S. suppliers rights to bid on contracts to supply more South Korean government ministries, agencies and other central government entities than are covered under the WTO procurement agreement. The U.S.-South Korea agreement covers the purchases of nine additional South Korean central government agencies – from the South Korean Fair Trade Commission to the South Korean Broadcasting Commission. In addition, for all 51 South Korean central government agencies covered under the trade agreement, American contractors will now be able to bid on contracts valued at $100,000 and above, instead of contracts at $200,000 and above, as under the WTO procurement agreement. This will expand the procurements to which U.S. suppliers will have access.
The agreement encourages South Korea to adopt the latest and best emerging practices in government procurement, such as the use of electronic procurement tools, which will help U.S. small businesses – and all U.S. firms – more easily participate in government procurement in South Korea.
The agreement preserves the U.S. right to set aside contracts for U.S. small and minority businesses. The agreement also does not give South Korean firms the right to bid on textile purchases by the Department of Defense.
The agreement clarifies that U.S. government agencies can include provisions in their contracts to promote environmental protection.
The agreement clarifies that requirements can be inserted into government contracts requiring suppliers to comply with generally applicable laws regarding labor principles and rights in the territory where the good is produced or the service is performed. These include freedom of association, collective bargaining, elimination of all forms of compulsory or forced labor, effective abolition of child labor and a prohibition on the worst forms of child labor, and elimination of employment and occupation discrimination based on gender, race, or other factors.