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China WTO Proposal Is Disappointing for Foreign Multinationals

TAIPEI, Taiwan ( TheStreet) -- More than a decade after joining the World Trade Organization, China is still holding out on a follow-up agreement that would open up government contracts to foreign firms.

The issue came up again on Dec. 5, when China made its fourth offer to join the WTO's Government Procurement Agreement.

The terms Beijing is offering have already generated public criticism from Europeans and are likely to leave other trading partners dissatisfied.

The proposal would allow foreign companies to bid on government contracts for cars, photocopiers and even the paint for new office interiors, the 1,700-member European Chamber of Commerce in China calculates.

But that's just a grain in the potential cement mixer of projects that foreign multinationals could bid on if China went as far as some of its WTO peers want. Projects like airports and high-speed rail lines.

China's latest proposal would exclude foreign companies from building infrastructure, which is already largely off-limits for nationalistic and security-related reasons (meaning you might not get a permit even if you won a procurement bid).

Infrastructure falls under China's Tendering and Bidding Law rather than its Government Procurement Law, keeping foreign companies outside the gate.

Calling Beijing's latest offer "highly disappointing," the European Chamber of Commerce in China estimates that it would open up just 2% of China's procurement market, worth as much as 1 trillion euros and 20% of the country's GDP.

For now, then, your investments in the likes of Bombardier (BBD.B:Toronto) and Siemens (SI) should carry on much as before, lacking a lift from China.

Bombardier might have gotten more railway and urban mass transit projects. It has worked with China since 1954. Siemens, after 140 years in the country, could have bid on projects to put together high-speed rail systems and environmentally friendly buildings, both stated priorities of the Chinese government. Both companies will have to continue working with -- and sharing profits with -- Chinese partners to have access to government contracts.

As civil aviation soars in China, Unisys (UIS) announced in September it had finished a year's work to provide "core airport operational systems" in Chengdu, the busiest terminal in western China with a 12.6% increase in passenger flows from 2010 to 2011. The U.S. contractor did that through a China subsidiary, a sign of what's needed to score procurement deals unless China gets generous with the WTO.
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