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Number:
TISD-96-003
Author
Aaditya
Mattoo
World Trade Organization
Publishing date:
October
1996
Abstract
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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; trade policy, WTO
JEL codes
[F12]
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paper in MS Word format (123 KB, 32 pages)
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