World Trade Organization (WTO) headquarters in Geneva
The World Trade Organization has never been a favourite of President Donald Trump. His administration could be lining up a new shock attack on the Geneva headquartered entity. Image Credit: Reuters

Geneva (Bloomberg): The US is mulling a plan to withdraw from a global pact worth $1.7 trillion in government contracts.

Officials in President Donald Trump’s administration are circulating a draft executive order that would trigger a US exit from the World Trade Organization’s Government Procurement Agreement, or GPA, if the pact isn’t reformed in line with American views. Discussions are ongoing.

The purpose of the GPA is to open government procurement markets to foreign competition, and to help make public purchasing more transparent. An American withdrawal would create chaos for foreign companies that bid for access to the US’s $837 billion public procurement market and complicate nascent trade talks Washington is planning with the UK and European Union.

It could also pose problems for Canadian Prime Minister Justin Trudeau, who still needs to broker deals with his political rivals to ensure ratification of the US-Mexico-Canada Agreement; Canada is the only signatory of the updated Nafta deal that still needs to ratify the free-trade accord.

American first

A US withdrawal from the GPA would mean members including the UK, Japan, South Korea, Canada and the EU will lose their preferential access to US public procurement tenders. GPA members would instead become subject to the “Buy American Act”, which bars most foreign access to the US government contracts without a specific waiver.

The US awarded $12 billion of government contracts to foreign firms in 2015, according to a 2019 report by the Government Accountability Office. About $2.8 billion of those contracts went to the EU, $1.1 billion to Japan, $755 million to South Korea and $623.6 million to Canada.

It’s not the first time the Trump administration has called attention to the GPA. In an executive order issued just three months after Trump took office in 2017, the Commerce Department and USTR were given 150 days to assess the impacts of all US trade agreements and the GPA on the operation of so-called Buy American laws.

“It seems to me par for the course given the way the administration is operating,” according to Stuart Harbinson, a former senior WTO official and a senior consultant on international trade for the Brussels-based Hume Brophy communications agency. “Their general attitude is that the WTO needs them more than they need the WTO.”