Public procurement under WTO Rules
A possible consequence of Brexit for Irish businesses selling to state bodies in the UK and Northern Ireland is a shift to procurement under WTO rules. Irish businesses bid for and win contracts in overseas markets like the UK and Northern Ireland currently on a routine basis. This is especially the case with businesses on either side of the border between the Irish State and Northern Ireland. It is also true more generally for many businesses selling into other parts of the United Kingdom. Fewer Irish businesses currently trade on a routine basis in other EEA states like Iceland, Norway, and Switzerland although some do of course. A feature of the current Brexit process is the probable requirement for a hard border with physical infrastructure between Northern Ireland and the Irish state. The requirement for such infrastructure has been outlined by numerous actors on numerous occasions on the EU side. Norway has such infrastructure between its State and Sweden for instance.
A hard border will not simply make it more difficult to trade on a cross-border basis. It will complicate other aspects of relationships that the single market has allowed to flourish and this includes the opportunity to bid on public contracts anywhere in the EU. Assuming Brexit does proceed, the transition period concludes and a hard regime is in place for relations between the UK and the EU, the implications are quite profound. Regional Trade provisions do not automatically include procurement provisions. As the table below makes clear.
The World Trade Organisation’s GPA system overseeing procurement rules is much more restrictive than the EU single market. There are, for instance, just 41 full members in the World Trade Organisation of the GPA system. Additional information on the system can be found here.
|Services||Goods (NT & MFN)||Bid challenges||Offsets prohibition||Has exceptions||Subsidies||Dispute Settlement|
FYR: Bosnia, Macedonia, and Montenegro (separate agreements);
NT & MFN: National treatment and most favoured nation;
GP general provision:
Y yes covered by the agreement;
N not covered by the agreement
Practical impacts of a WTO regime
Companies that currently provide services may lose access to foreign markets altogether or only if the contracts they target exceed the level at which common market rules kick in. This can be as high as €5m for construction works (for instance). Once covered by general procurement agreements (GPA), the degree to which companies can access local contracts is set under the WTO GPA rules on an annual or bi-annual basis. The current thresholds for goods and services apply from approximately €130k for central government and €200k for other government bodies. Irish firms, without a legal entity in the UK that is registered for tax purposes as a UK entity, may be precluded from bidding on work below this level post-Brexit. The same is true for UK (and Northern Irish) firms seeking to bid into the EU (of which Ireland will remain a constituent member).
There are many companies today providing services like:
- Web design,
- Direct marketing,
- Professional services,
- Educational supplies, and
- Healthcare suppliers;
that will no longer be eligible for contracts below these levels. A company could be providing €125,000 per annum in healthcare supplies to a number of different hospital groups and see these different income streams disappear.
It is in the interest of every business to assess how a much a change to public procurement under WTO rules will impact their business and put plans in place to manage the impact of such a change.