Does the World Trade Organization Government Procurement Agreement Deliver What It Promises?

Abstract

The revised World Trade Organization (WTO) Government Procurement Agreement (GPA), which came into force on April 6, 2014, provides a limited number of WTO Members with a framework for ensuring that the tenders scheduled under the Appendix to WTO GPA are conducted in a competitive, non-discriminatory, and transparent manner satisfying the conditions on integrity. The purpose of this paper is to analyze empirically whether the WTO GPA is effective in promoting non-discriminant, open, transparent, competitive and efficient government procurement. To study this question, we make use of the micro-level data set released recently by the European Union (EU) covering more than 3 million tenders conducted in the European Economic Area (EEA), Switzerland and Macedonia during the years 2006-2015. We have four major results. First, the likelihood that the contract is awarded to a foreign firm is significantly higher when the contract is covered by the WTO GPA. Second, number of bidders are significantly higher in WTO GPA covered procurements. Third, we find that corruption risk is lower in WTO GPA covered tenders. We use two measures to assess corruption risk: procurements that receive only one bid, and the connection strength of a winning firm in the network of suppliers. We find that single bid procurement is significantly lower in tenders covered by the WTO GPA. Additionally, we conclude that the WTO GPA provides the opportunity for less connected firms to win contracts. Finally, we find that the WTO GPA does not have a significant effect of procurement costs.