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Will Govt purchasing deals prevent support for Living Wage?

22 November 2013

Will Government purchasing deals prevent support for local suppliers, Living Wage and health and safety initiatives?

The Government is about to sign a Government Procurement Agreement in the World Trade Organisation (WTO) that could stop future central and local governments giving an advantage to local suppliers to help economic development. It could also prevent governments requiring suppliers to meet conditions such as paying a living wage, or health and safety initiatives being developed by the government.

"These outcomes would add up to a hit on small New Zealand firms, not-for-profit service providers, and the ability of New Zealand workers to improve their pay and conditions," says CTU Economist Bill Rosenberg.

A government procurement chapter of the Transpacific Partnership Agreement (TPPA) could have similar effects. There is a high level, high stakes meeting of chief TPPA negotiators in Salt Lake City this week, and government procurement is one of the areas they are putting pressure on to finalise.

News reports from Washington say that New Zealand will sign the WTO deal within the next two weeks. They say that New Zealand has given in to pressure and extended the number of government agencies and reduced the financial threshold for purchases that will be bound by the deal.

CTU economist Bill Rosenberg says that New Zealanders need answers to many questions before the WTO deal is signed, and before the TPPA goes any further.

"Has the government insisted on exemptions to allow local suppliers and not-for-profit suppliers such as Plunket and the Salvation Army preference over potential multinational suppliers?" he asks. "For example, will local governments or central government agencies be allowed in future to accept tenders from local suppliers even if they are slightly more expensive than overseas competitors as many local governments have done? When local governments or central government agencies like District Health Boards are tendering out social services, will they be able specify that they will only accept proposals from local not-for-profit organisations or will they have to allow multinational for-profit suppliers in on the same terms?"

Rosenberg also says that the agreements do not allow conditions on suppliers other than those that are essential to ensure that they have the legal and financial capacities and the commercial and technical abilities to supply the goods or services [1]. "That does not allow governments to say suppliers should pay a living wage, as Labour and the Greens say they are committed to considering on becoming government. Nor does it allow a government to require that suppliers have workplace health and safety standards that above the minimum required for employers in general, as was recommended by the Independent Taskforce on Workplace Health and Safety and accepted by the Government."

"Will the Government be requiring an exemption from these requirements before it signs these agreements?" Rosenberg asked.

"The Government should also tell us which government entities are being bound up by these agreements. For example is KiwiRail one of those entities, preventing it favouring local manufacture or maintenance of its equipment should a future government decide it wants KiwiRail to do so? Are District Health Boards among the entities, preventing them from favouring locally owned not-for-profit providers of community services?"

"Will local and central governments in future be able to boycott goods from countries which are members of these agreements but commit gross breaches of human rights? Many New Zealanders boycotted goods from South Africa when it was under racist apartheid," Rosenberg asks. He says officials have confirmed that the agreements would prevent such government actions, under provisions that require all signatories to the agreement to be treated the same ("Most Favoured Nation" provisions). "Our future local and central governments will be able to take such actions in future only if the Government insists on exemptions for them. A security exemption may provide space for such actions in a few cases, but not when the action is purely on moral grounds."

New Zealand central government procurement rules already have these provisions, designed in anticipation of signing these agreements, Rosenberg says. "Future governments can change domestic rules - but not if these international agreements are signed."

"The Government may point to an exemption in most such agreements that allows for actions necessary to protect health. However this only works for a small number of conditions a future government may want to apply, and conditions are not likely to be regarded as 'necessary' if they require standards for government suppliers that are above what is legally required for other firms," he says.

"Agreements such as these tie the hands of future governments. There should be much more openness and debate before they are signed", Rosenberg concludes.

[1] This wording is taken from Article VIII: Conditions for Participation in the revised Agreement on Government Procurement in the WTO which the Government is intending to sign. Rule 25: Pre-conditions of the recently revised New Zealand Government Rules of Sourcing contains similar provisions as do likely models for the TPPA government procurement chapter.


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