“…it is completely inappropriate for the New Zealand Government to prefer New Zealand companies over international companies. If we did, we would be a very, very small trading nation, because countries would not want to trade with us.”
So says Steven Joyce (on behalf of the Prime Minister) in response to a question by Annette King on 23 June about why the govt would not consider seriously the economic flow on effects of building railway wagons at Hillside workshops in Dunedin and Hutt workshops in Lower Hutt.
Let’s have a look at what other countries do. Many of these we trade with. And unpick the lies that Joyce and his government have been telling NZ about why they can’t possibly support Kiwi industry and Kiwi jobs when it comes to procuring big contracts.
China’s Government Procurement Law (GPL) issued in 2002 states that government agencies and entities must purchase domestic goods, works and services except in rare circumstances when:
the required items cannot be obtained within China under “reasonable commercial terms” defined as 20 per cent more expensive than foreign products.
Though the GPL provides for a wide variery of ways to procure goods and services – open and selective tendering, competitive negotiation, single-source procurement, and request for quotation – few foreign enterprises have been able to compete successfully in China’s public procurement market. For more see here
The Buy American provision in the stimulus package became law in 2009. Section 1605 of the American Recovery and Reinvestment Act of 2009 (ARRA) requires that all of the iron and steel and manufactured goods used in ARRA funded projects for construction, alteration, maintenance and repair of a public building or public works be produced in the United States. For more see here
This provision can be waived under certain circumstances, only when buying American would increase by 25%, not merely for the cost for the specific input, but the cost of the total project. The differential is considered so large, that in practical terms it is unlikely that the exception would be invoked.
The Indian government allows a price preference for local suppliers in government contracts and generally discriminates against foreign suppliers. In international purchases and competitive bids, domestic companies get a price preference in govt contracts and purchases.
Although over 20 countries have signed onto the World Trade Organisation’s (WTO) Agreement on General Procurement (China has not) it is scarely followed at all. This article is worth a read
Norway: the most recent statistics are from 2005. Of the USD 1.215 million procured, only 1.3% of supply, 6.9% of services and 1.3% of works contracts went to foreign companies
Japan: 98% was procured domestically in 2008.
South Korea: In 2004 (most recent data) procurement contracts were valued at USD 25 billion. Less than 1% wnt to foreign-based firms.
Australia. In June 2009 the NSW Govt released its revised govt procurement plan setting out its intention for procurement to be used to develop local industry capability and support local economic activity while achieving value for money.
It says substantial economic benefits are said to “flow from buying Australian or NZ goods and services and maximising opportunities for local service providers to compete for Govt business on the basis of value for money.”
It said value for money is about broader economic benefits and not just lowest price.
Couldn’t have put it better myself. What the hell is wrong with this National-Act government and what game are they playing with our local productive economy?
