X hits on this document

Word document

World Trade Organization - page 18 / 35





18 / 35

Do the non-discriminatory disciplines of the GPA withstand the theoretical assault?  It must be acknowledged that in certain circumstances the strict non-discrimination rules may prevent governments from pursuing preferential policies which would enhance national welfare.  However, the qualifications presented above suggest that the design of optimal discriminatory policy is likely to be difficult, and, in any case, the gains are unlikely to be large.  Most seriously, the legitimisation of discrimination may lead to adverse political consequences, both at the national and international level, which outweigh any potential gains.18    

The theoretical arguments in favour of preferences alone would, therefore, not be compelling, but there is another consideration which suggests that the GPA may need to compromise on its requirement of complete non-discrimination.  This concerns the desirability of expanding the limited membership of the GPA in a world where governments, for a variety of reasons, wish to continue protection of domestic industry.  In the present GPA, governments are confronted with an "all or nothing" choice - either a sector is not included at all or, if it is, procurement must be strictly non-discriminatory.  One possibility would be for countries to maintain preference margins, but to bind them and make them subject to unilateral or negotiated reductions - in a manner analogous to tariffs (see Low et al, 1996, and Hoekman and Mavroidis, 1995).  Such a sacrifice of the strict principle of non-discrimination in return for increased transparency and strengthened enforcement (discussed in the next Section) reflects the current thinking of some signatories of the GPA (as discussed in Section I).  Whether, this approach is sufficiently attractive to countries who have so far been unwilling to assume any international disciplines on their procurement remains to be seen.19

Discrimination through quality rather than price

    (Krugman's (1987, p. 143) conclusion about free trade would also seem appropriate in the context of government procurement:  "The economic cautions about the difficulty of formulating useful interventions and the political economy concerns that intervention may go astray combine into a new case for free trade.  This is not the old argument that free-trade is optimal because markets are efficient.  Instead it is a sadder but wiser argument for free trade as a rule of thumb in a world whose politics are as imperfect as its markets."

    (Article V of the GPA already allows developing countries to negotiate mutually acceptable exclusions from the rules on national treatment, but perhaps the need for exclusions to be "mutually acceptable" has reduced the attractiveness of this provision.


Document info
Document views122
Page views118
Page last viewedTue Jan 24 13:37:48 UTC 2017