Economic drivers of public procurement‐related protection

Public procurement represents a substantial share of gross domestic product (GDP) in many countries and is notoriously home‐biased as a result of often opaque practices. However, little is known about the determinants of restrictions on public procurement policies. To explore this issue, we map information from the Global Trade Alert (GTA) database on regulatory obstacles to public procurement alongside international trade flows at the country pair‐product level and applied bilateral tariffs. Considering the universe of restrictions introduced over the period 2009–2016 by importers on exporters and products, we highlight three novel facts. First, the main foreign providers are not the most targeted, suggesting long‐term contractual relationships between buyers and sellers in public markets. Second, the ear of retaliation is alleviating the protectionist pressure in the importer country. Third, we document substitutability between public procurement restrictions and tariffs.