WTO backs Israel on reciprocal procurement

Israel has protected its right to demand 30% reciprocal procurement from international companies.

Israel has attained a signal achievement in the World Trade Organization (WTO) by maintaining its right to demand 30% reciprocal procurement in contracts involving international companies. Israel’s rate of reciprocal procurement had been due to fall to 20% in early 2005.

Minister of Industry, Trade, and Labor Ehud Olmert said today that the extension of Israel’s right to demand 30% created a potential for Israeli companies of at least $75 million in reciprocal procurement deals from foreign companies.

36 countries are party to the WTO government procurement agreement, including the European Union, the US, Japan, South Korea, Canada, and Switzerland. The agreement arranges access to government agency tenders in the signatory countries.

The agreement is based on a ban against discrimination in government tenders between companies and vendors in the signatory countries, including discrimination in favor of local companies in each country. The agreement includes companies competing in public tenders published by the signatory countries.

The agreement in Israel applies to government ministries, local authorities, and a number of government companies, but does not apply to defense procurement.

The agreement took effect in Israel on January 1, 1996, following US pressure on Israel. Israel is the only signatory country with the right to demand that vendors and international companies make reciprocal procurement from Israeli companies amounting to 30% of the contract sum, as a condition for winning a tender.

The rate of reciprocal procurement had been scheduled to fall to 20% on January 1, but the current agreement was extended for a year, during which negotiations will continue. Israel hopes that the WTO will allow it to continue demanding 30% reciprocal procurement in 2006.

Israel’s claim in negotiations is its standing as a closed economy, and in particular, informal discrimination against Israeli companies in European tenders. Israel’s demand for reciprocal procurement constitutes a rare opportunity for Israeli companies to expose their products and make sales to European companies winning Israeli government tenders.

Published by Globes [online], Israel business news - www.globes.co.il - on December 16, 2004

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