OECD Trade Policy Papers

This series is designed to make available to a wider readership selected trade policy studies prepared for use within the OECD.

NB. No. 1 to No. 139 were released under the previous series title OECD Trade Policy Working Papers.


How government procurement measures can affect trade

A number of countries used discriminatory government procurement policies as part of stimulus packages designed to alleviate the effects of the global economic crisis. This paper collates and updates the evidence related to the size of procurement markets, the level of home bias they exhibit, and the effectiveness of multilateral and bilateral procurement agreements in reducing that bias. The share of procurement in GDP has been increasing gradually since 1995 with clear spikes during 2000-2002 and 2008-2010, the latter in response to the global economic crisis. The analysis presents evidence of domestic bias in government procurement markets, bias which has been increasing over recent years. The analysis in this paper suggests that the results of international efforts to address home bias in government procurement have been mixed to date. The World Trade Organisation's Government Procurement Agreement (GPA) is found to reduce discrimination in procurement markets, although available -- but limited -- evidence does not indicate a significant effect for bilateral agreements. The evidence suggests liberalisation of investment barriers undertaken in parallel with trade agreements increases the ability of those agreements to reduce discrimination. This suggests that countries negotiating procurement agreements could also benefit from negotiating investment agreements in parallel.


Keywords: home bias, International Trade, preferential trade agreements, Government procurement, Auctions, Government Procurement Agreement (GPA)
JEL: H57: Public Economics / National Government Expenditures and Related Policies / National Government Expenditures and Related Policies: Procurement; F15: International Economics / Trade / Economic Integration; F13: International Economics / Trade / Trade Policy; International Trade Organizations; F53: International Economics / International Relations, National Security, and International Political Economy / International Agreements and Observance; International Organizations; D44: Microeconomics / Market Structure, Pricing, and Design / Auctions; F14: International Economics / Trade / Empirical Studies of Trade
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