Does the WTO government procurement agreement influence steel imports?

Author:Benjamin Liebman
Position:Economics, St. Joseph’s University, Philadelphia, Pennsylvania, USA
Pages:153-167
SUMMARY

Purpose Government procurement policies containing domestic content requirements have faced increasing attention, as more traditional forms of trade discrimination have declined in recent decades. The most important effort to reduce discriminatory government procurement policies is the plurilateral Agreement on Government Procurement (GPA), in which a subset of WTO countries has agreed to provide increased access to imports from fellow signatory countries. This paper focuses on the Buy American policy, which mandates domestic content for all US Federal government purchase above the... (see full summary)

 
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Does the WTO government
procurement agreement
inuence steel imports?
Benjamin Liebman
Economics, St. Joseph’s University, Philadelphia, Pennsylvania, USA
Abstract
Purpose – Government procurement policies containing domestic content requirements have faced
increasing attention, as more traditional forms of trade discrimination have declined in recent decades.
The most important effort to reduce discriminatory government procurement policies is the plurilateral
Agreement on Government Procurement (GPA), in which a subset of WTO countries has agreed to
provide increased access to imports from fellow signatory countries. This paper focuses on the Buy
American policy, which mandates domestic content for all US Federal government purchase above the
micro-purchase level. The author tests whether steel imports from GPA and US Free Trade Agreement
(FTA) partners, both of which receive preferential access to US federal procurements, increase as the
value of federal construction contracts rise.
Design/methodology/approach – The author tracks federal construction contracts and seeks to
determine whether there is a link between these contracts and construction grade steel imports from
GPA and US FTA members. The author uses two-stage least squares to regress the import quantity of
steel from GPA and US FTA countries on the value of US federal construction contracts. Imported and
domestic steel prices as well as macroeconomic variables such as industrial production and
non-residential construction are controlled for. A panel data set is used that includes three different
construction-grade steel products and covers years 2004-2013.
Findings – The results indicate that increased federal construction contracts increase imports of
construction-grade steel from GPA and FTA partners. This effect is relatively small, however, which
may be due to the fact that federal construction is a small share of overall US construction. In general,
the results suggest that the primary determinant of US import sourcing behavior is the business cycle
as well as the price of steel. Nevertheless, the ndings indicate that the preferences provided by the GPA
and FTAs do have some impact on where US construction rms source their steel.
Originality/value – Previous research has studied the effect of the WTO’s GPA on foreign access to
federal construction and other service contracts. This is the rst study, however, to investigate whether
these contracts impact the import sourcing behavior of the steel that is used in construction.
Furthermore, while previous research measures the impact of GPA membership on the overall trade of
goods and services, this paper is the rst to link a particular industry with the inputs that are restricted
by local content requirements such as the Buy American policy but freed up under the GPA. In general,
previous research on the GPA has tried to capture the broad effect of GPA membership on trade, while
this study focuses on the relationship between the GPA, federal procurement in a particular industry
(construction) and import behavior of a key input, construction grade steel.
Keywords WTO, Government procurement policy, International trade policy, Steel industry
Paper type Research paper
1. Introduction
An increasingly controversial area of global trade policy involves domestic purchasing
requirements in the government procurement of goods and services. Discriminatory
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1477-0024.htm
WTO
government
procurement
agreement
153
Journalof International Trade Law
andPolicy
Vol.15 No. 2/3, 2016
pp.153-167
©Emerald Group Publishing Limited
1477-0024
DOI 10.1108/JITLP-07-2016-0015

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