The collapse of global trade, murky protectionism, and the crisis:

VOX
Research-based policy analysis and commentary from leading economists
crimination in public procurement. Among these are the WTO's Government
Procurement Agreement (GPA), and bilateral trade agreements with Australia, Jordan,
and Chile as well as plurilateal trade agreements such as the North American Free
Trade Agreement (NAFTA). These agreements reflect decades of US diplomacy that has
sought to open procurement markets around the world. The Obama administration,
alarmed by the prospect of a public procurement trade war, interceded and helped
broker a less harmful compromise. While Section 1605 of the US stimulus legislation
retained certain "Buy American" requirements, the legislation ultimately requires
implementation in accordance with existing commitments under international
agreements.
While that compromise resolved many of the legal issues posed by the legislation's
"Buy American" provisions, the broader political problem remained. Faced with a crisis,
the US seemed poised to quickly jettison its decades-old leadership role in, and
commitment to, open procurement markets and the pursuit of value for money. This
sentiment emboldened free-trade sceptics and empowered states inclined to favour
domestic firms and industries in their own procurement systems. To repair the damage
left by this imbroglio, leaders must clarify that, as a matter of law and principle,
the world's largest economies remain committed to open markets, in procurement
and otherwise.
Protectionism is bad for procurement
Putting aside trade considerations, protectionism undermines the fundamental business-based
and value-oriented underpinnings of successful procurement regimes.
While protectionism no doubt serves a political purpose, from a public procurement
policy perspective, research and experience demonstrate that it is bad policy.
Protectionism restricts markets and limits competition
Yet competition is one of the foundations upon which effective public procurement
regimes depend. Faced with limited access to the world's best (and best-priced) firms,
facilities, materials, and talent, governments inevitably pay premiums for what they
buy. Past studies routinely identify welfare losses in those countries with high barriers
to procurement trade.
For example, as with many stimulus packages around the world, one of the stated
aims of the pending US stimulus package is to rebuild crumbling infrastructure. If,
however, protectionist impulses prevail, favouring domestic steel in US infrastructure
spending could result in the government paying above-market prices for raw materials;
as a result, the infrastructure stimulus will result in fewer workers employed on
fewer public works projects, and the public ultimately will enjoy fewer miles of
improved roadways, bridges, and renovated classrooms.
Protectionism increases transaction costs
Artificial constructs that favour domestic over foreign end products based upon percentages
of materials or labour or nuances of the manufacturing or "transformation"
process are difficult and time consuming to administer. These devices sap human
resources that could be better employed seeking optimal value-based purchasing outcomes.
Moreover, many of these rules ignore the realities, and reduce the efficiency,
of the global supply chain.
Experience shows that customer agencies or bureaus – tasked with actually provid-
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