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The government procurement agreement: Implications of economic theory

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  • Mattoo, Aaditya

Abstract

This paper analyzes the provisions of the new Agreement on Government Procurement (GPA), drawing insights from trade theory and recent developments in the economics of information and law. A central conclusion is that in a world where imperfectly informed procurers purchase from imperfectly competitive firms on behalf of imperfectly informed tax-payers, it is not easy to devise rules which would be optimal in all situations. Nevertheless, the non-discriminatory provisions of the GPA seem to approximate closely the rules which would maximize global welfare. A significant benefit of the GPA is in helping to overcome national agency problems in procurement by creating mechanisms for reciprocal international monitoring supported by multilateral enforcement. There is, however, scope for improvement. First, the GPA does not equip bidders for government contracts to vault over trade restrictions, so the creation of genuine international competition for government procurement remains crucially dependent on the liberalization of trade. Secondly, weaknesses remain in the enforcement mechanism. These include the low level of compensation to a successful challenger, the absence of restrictions on settlements, and the lack of provision for challenge and review of bail-outs. The paper proposes certain improvements.

Suggested Citation

  • Mattoo, Aaditya, 1996. "The government procurement agreement: Implications of economic theory," WTO Staff Working Papers TISD-96-03, World Trade Organization (WTO), Economic Research and Statistics Division.
    • Handle: RePEc:zbw:wtowps:tisd9603
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    References listed on IDEAS

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    Cited by:

    1. Anirudh Shingal, 2015. "Econometric Analyses of Home Bias in Government Procurement," Review of International Economics, Wiley Blackwell, vol. 23(1), pages 188-219, February.
    2. Federico Trionfetti, 2002. "Politiques d'achats publics et spécialisations internationales," Economie & Prévision, La Documentation Française, vol. 0(1), pages 141-150.
    3. René L. Frey & Christoph Kilchenmann & Nicolai Krautter, 2004. "International Public Procurement Agreements - Problems of Implemetations in Switzerland," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 2(03), pages 31-37, October.
    4. repec:ces:ifodic:v:2:y:2004:i:3:p:14567756 is not listed on IDEAS
    5. Štěpán Veselý & Mirko Dohnal, 2012. "Decision making in goverment tenders: A formalized qualitative model," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 60(4), pages 397-406.
    6. Benedikt Herz & Xosé-Luís Varela-Irimia, 2020. "Border effects in European public procurement [Information costs and home bias: an analysis of US holdings of foreign equities]," Journal of Economic Geography, Oxford University Press, vol. 20(6), pages 1359-1405.
    7. Marius BRÜLHART & Federico TRIONFETTI, 2000. "Public Expenditure and International Specialisation," Cahiers de Recherches Economiques du Département d'économie 00.23, Université de Lausanne, Faculté des HEC, Département d’économie.
    8. Mattoo, Aaditya, 1997. "Dealing with monopolies and state enterprises: WTO rules for goods and services," WTO Staff Working Papers TISD-98-01, World Trade Organization (WTO), Economic Research and Statistics Division.

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    More about this item

    Keywords

    government procurement agreement; trade policy;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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