By David Gallacher

2012 will see changes regarding U.S. free trade agreements relating to, first, the dollar thresholds at which the various agreements apply to federal purchases and, second, the likely expansion of the scope of the World Trade Organization Government Procurement Agreement ("WTO GPA"). The updated dollar thresholds are important for government contractors because the thresholds determine when a contract is subject to the Buy American Act ("BAA") or the Trade Agreements Act ("TAA"). As to the WTO GPA, its expansion should provide significant increased access to the U.S and many of its trading partners in international procurements, although the hoped for accession of China to the WTO GPA remains stalled

Updated Dollar Thresholds

On December 8, 2011, the U.S. Trade Representative ("USTR"), Ronald Kirk, announced the dollar thresholds at which free trade agreements ("FTAs") will apply to U.S. procurements beginning in 2012. See 76 Fed. Reg. 76808. The USTR has raised some thresholds, maintained others, and even lowered some:

As we discussed previously in this blog when the thresholds were last adjusted in 2010
, it is unclear whether the FAR will need to be amended to incorporate the new thresholds or whether the new thresholds automatically become "effective January 1, 2012" as directed by the USTR. However, on January 30, 2012, the DFARS was amended to incorporate the new dollar thresholds. See 77 Fed. Reg. 4630. While the FAR Councils are no doubt also working on updating the relevant FAR clauses at FAR Subpart 25.4, any new rules will probably not be issued until February or March 2012. Contractors should be aware that Contracting Officers may take even longer to update individual contracts, or, for that matter, to agree that modifications to existing contracts are appropriate in the first place.

Pending Updates to the WTO GPA

In December 2011, the members of the WTO met in Geneva to revise the WTO GPA. Ever since Canada and the U.S. negotiated amendments to the U.S.-Canada FTA allowing Canada greater access to procurements by state and local governments (one of the primary outlets for stimulus funds through 2009 and 2010), members of the WTO have clamored for expanded access under the GPA. FTAs typically apply only to governmental agencies that are specifically listed in the free trade agreement; the new December 2011 agreement allows expanded access by foreign companies to U.S. procurements by listing twelve previously uncovered federal agencies (including the Social Security Administration and the Transportation Security Administration) as now covered by the WTO GPA. In exchange, U.S. companies will gain access to hundreds of foreign "central and sub-central" government procurements in countries such as Japan, South Korea, Israel, and many other E.U. countries. The new WTO agreement is expected to open significant international procurement markets, and the USTR hailed the new agreement as a major breakthrough for free trade. The changes to the WTO GPA are expected to be formalized by March 2012.

Meanwhile, in November 2011, China updated its submission to accede to the WTO GPA. But the submission fell short of U.S. and E.U. expectations, setting extremely high dollar thresholds and exempting a large number of Chinese sub-central agencies and state-run enterprises. China joined the WTO in 2001 and China has reiterated that it intends to accede to the WTO GPA. However, given the above high dollar thresholds and exemptions, China has thus far been unable to make the kind of aggressive offers demanded by the international community to complete its accession. Therefore, at least for the time being, products made in China will continue to be noncompliant under the Trade Agreements Act.

Current signatories to the WTO GPA include more than 40 countries: the U.S., the 27 member states of the European Union, Canada, Armenia, Aruba, Hong Kong, Iceland, Israel, Japan, Liechtenstein, Norway, Singapore, South Korea, Switzerland, and Taiwan. Armenia is the most recent addition to the WTO GPA, having just recently acceded to the WTO GPA on September 15, 2011. See 76 Fed. Reg. 58856; 77 Fed. Reg. 4631.