Procurement:  Using TTIP to Fill the Gaps Left by Brexit

In the wake of Brexit, much of the public discussion about the Transatlantic Trade and Investment Partnership (TTIP) — the comprehensive trade agreement being negotiated between the European Union and the United States — has focused on the delay that Brexit may cause the TTIP negotiations, and has reflected hope on the part of the British left that Britain can now stay out of TTIP.

In the long term, however, it is perhaps unlikely that a newly independent Britain would remain outside TTIP, which if concluded is likely to prove a critical tool to open markets, and reduce regulatory barriers, between European nations and the United States.  Although the White House has warned that an independent UK would be joining TTIP from a “different starting point,” TTIP, if successful, could simply be too attractive for Britain to ignore — especially if the alternative, a bilateral deal with the United States, would offer reduced access for a weaker Britain.

This possibility that Britain would, after Brexit, seek to join TTIP opens a strategic question:  could TTIP be used to close some of the gaps opened by Brexit?

In procurement, the most serious gap left by Brexit is uncertainty — will the UK agree to continue to follow the EU procurement directives, and can the UK continue to calm the protectionist voices emerging in the European Union?  TTIP may address both problems.

To understand why, we can look to the structure of other free trade agreements, such as the WTO Government Procurement Agreement (GPA), to make an educated guess as to how TTIP would be structured.  Under the GPA, each party lists the nations and agencies to be covered. Thus, under the revised GPA, the European Union has in Annex 1 agreed (with UK acquiescence) that certain United Kingdom agencies will be covered.

We can assume that the procurement provisions under TTIP would adopt the same structure, listing covered nations and agencies.  That has been the case under the Transpacific Partnership (TPP), which lists in Annex 15-A the agencies regarding which the TPP parties have agreed to open their procurements.

We can also assume that the European Union would not object to agreeing under TTIP that its member states will comply with the European procurement directives; agreeing to bind its member states to its own rules should not be difficult for the EU.  Finally, it seems safe to assume that the EU and the United States would be willing to stipulate that any nation that entered the TTIP structure would be allowed to enter only on terms at least as favorable as those that previously bound that state, under that agreement.  Neither the European Union nor the United States would have an obvious reason to object to such a condition; neither, of course, favors Brexit.

Under such a provision, if post-Brexit Britain sought to enter TTIP separately as a nation outside the European Union, Britain would be bound to the coverage terms that previously applied, i.e., arguably the same UK government agencies would be covered, and they would be bound to follow the European procurement directives (or a set of procurement rules as least as rigorous as the EU rules).

None of this would be simple, of course.  But by demanding that any new entrant — including  the United Kingdom — join TTIP on terms as least as favorable as before, TTIP might help bring stability and predictability to procurement in the U.S. and European markets.

That leaves, then, the question of emerging protectionism regarding procurement in the European Union, driven by European concerns that some trading partners, including the United States, have unfair access.  While the United Kingdom has often opposed new protectionism in Brussels, the UK’s influence will likely plummet under Brexit.  Under a redrawn arrangement in TTIP, however, Britain would be able to engage anew, not as a voice within the EU, but rather as another negotiating partner in TTIP.  The dynamics would be different, but the United States would regain an ally in opposing new European protectionism in procurement.

– Chris Yukins

Editor’s note:  On September 19, 2016, these Brexit developments will be discussed at our annual conference on transatlantic procurement at King’s College London; GWU Law School is a co-sponsor.  Attendance is free, and further information is available athttp://www.eventbrite.co.uk/e/opening-transatlantic-procurement-markets-tickets-25739851589 .