Government procurement (in services) is where the government itself pays or contracts the service provider for some function. Strictly speaking government procurement in services would be any service that a government or council buys in for its own purpose e.g. computer networking at the council house. But the definition may be much wider, and include expenditure on local public services, PFI (Private Finance Initiative) projects, and so on. The point is, throughout the twentieth century governments have used procurement as an essential tool for developing the economy: preferring local/national suppliers gives them a boost and helps to stimulate the local/national economy. But in the language of free trade this is unfair intervention in the market. Politically, the EU would like to see government procurement "liberalised" (i.e. made so that you can't any longer preferentially procure services from local/ national suppliers) because they want their service multinationals to grab a slice of government expenditure in third countries, whatever the consequences for the citizens of those third countries.
Now government procurement is at the moment exempt from GATS (Article XIII) but nonetheless that article contains a mandate to develop new disciplines on it in the current GATS round. Specifically,
2. There shall be multilateral negotiations on government procurement in services under this Agreement within two years from the date of entry into force of the WTO Agreement.The EU are pushing hard to complete negotiations on government procurement, as demonstrated by the following exerpt from their press release on the 1st July:
Construction services procured by government at all levels are estimated to account for as much as half of the total demand for construction services. Government procurement practices, which often discriminate against foreign suppliers, have therefore a significant impact on trade in this sector. More open and effective competition in procurement markets would enable governments to obtain services at more competitive prices, thus getting better value for money. The EC therefore has a keen interest in moving forward the negotiations on government procurement of services under the mandate of Article XIII-2 GATS.
Furthermore, a recent "civil society dialogue" between GATS critics and DG Trade officials (the trade arm of the European Commission) raised the question of government procurement. DG Trade say that in terms of government procurement in goods they are pushing for transparency, which means that governments will be allowed "trade-distorting" intervention in the market but will have to be clear and explicit about the actual measures they are taking, why they are making the procurement, who is the service being procured from and so on. However, with regard to services DG Trade say that, because of the aforementioned mandate from Article XIII, they are looking not just for transparency in service procurement but also market access, which generally means non-discriminatory market-access. What does that mean? Well, it means foreign companies will be able to tender for procurement contracts and there will be no way of preferentially choosing a local/national company, even if the foreign company is a vast multinational and the local company is a fledgling start-up with good prospects for creating much-needed employment in the area. Worrying...