The limited case for permitting SME procurement preferences in the Agreement on Government Procurement

Governments of countries with diverse levels of wealth maintain preferential procurement policies to support small and medium-sized enterprises (SMEs). The US is one of the most remarkable examples. With billions of dollars annually set aside for contract awards made exclusively to what in the US are known as small business concerns, the US maintains some of the most extensive SME procurement preference policies that can be found anywhere in the world. So much for all the rhetoric on President Obama as socialist; these programmes have been in existence since 1953. Irony is the notion that comes to mind when trying to understand the US approach, as the US also is able to liberalize substantial dollar values of its procurements as a contracting party to the World Trade Organization (WTO) Agreement on Government Procurement (GPA) and in unilateral and regional trade agreements. Other countries maintain preferential SME policies. South Africa maintains an evaluation preference system to award points to firms contributing to what is known as broad-based black empowerment in South Africa. Notably, South Africa’s programme is nowhere near as broad as the programmes found in the US. Some US programmes benefit firms owned by individuals who belong to historically disadvantaged groups in the US, but the US programmes also benefit ordinary SMEs, regardless of ownership. Malaysia maintains a substantial preference programme to award government contracts to people of Malay descent, the Bumiputera, who are the majority population in the country, to counter the market-dominant Chinese minority in that country.