The government procurement agreement: Implications of economic theory

Aaditya Mattoo

No TISD-96-03, WTO Staff Working Papers from World Trade Organization (WTO), Economic Research and Statistics Division

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.

Keywords: government procurement agreement; trade policy (search for similar items in EconPapers)
JEL-codes: F12 (search for similar items in EconPapers)
Date: 1996
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: The Government Procurement Agreement: Implications of Economic Theory (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wtowps:tisd9603

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