An indication of future trends may be contained in a recent Economic Communique from the G7. It states one of the goals to be "enhancing the disciplines of and expanding the number of countries subscribing to the Agreement on Government Procurement and, in furtherance of this goal, by developing an interim arrangement on transparency, openness and due process in government procurement practices."6 This suggests that the some of the current signatories to the plurilateral GPA may be willing to sacrifice temporarily the principle of strict non-discrimination, and press instead for multilateral disciplines which ensure transparency of procedures and opportunities, and create mechanisms for challenge and review of procurement decisions. It remains to be seen whether this approach is sufficiently attractive to induce more countries to assume disciplines on procurement.
II.Trade and welfare effects of discriminatory procurement
Article III of the GPA states the fundamental principles of non-discrimination: national treatment and MFN treatment (described in the previous Section). These principles are stated both in terms of the country of origin (Article III:1) as well as in terms of the degree of foreign affiliation or ownership (Article III:2). However, Article V of the GPA allows developing countries to negotiate mutually acceptable exclusions from the rules on national treatment with respect to certain entities, products or services that are included in their lists of entities. Even though there is no explicit provision for it, most developed country members of the Agreement have specified exclusions from its basic disciplines in their schedules.
The rationale for these basic principles of non-discrimination is put in question by two results of economic theory. First, it has been shown that under certain conditions it may simply not matter if governments discriminate in their procurement - output and trade are unlikely to be affected. If this were generally true, then the GPA would be irrelevant in the context of international trade, and the administrative costs of compliance with it would be an unnecessary burden on society.7 Secondly, it has been demonstrated that in so far as preferential procurement does have real effects, it is likely to enhance the welfare of the procuring country. This would seem to imply that the prohibition of preferences under the
(G7 Lyon Summit Economic Communique, "Making a Success of Globalization for the Benefit of All", Lyon, 28 June 1996.
(Bronckers (1995), for instance, has argued that in certain cases the administrative burden of having to follow public procurement rules may have been too high in relation to the likely return.