Although WTO agreements contain a variety of provisions to encourage compliance by signatories, little attention is given to the incentives created by the mechanisms other than dispute settlement. The WTO's Agreement on Government procurement contains a number of such mechanisms, including detailed reporting requirements. This chapter examines the performance of the compliance mechanisms of the Uruguay Round’s Agreement on Government Procurement (GPA) during the Japanese economic slump of the 1990s. Using hitherto unanalysed data, it is shown that the share of Japanese government procurement contracts above GPA-specified thresholds fell during the years 1997 to 1999. Furthermore, the proportion of total contracts awarded to foreigners in 1998 and 1999 was lower than in 1990 and 1991. In the absence of these changes, the value of contracts awarded to foreign firms would have been approximately 25 percent higher in 1998 and 1999. These findings suggest that the current set of extensive compliance mechanisms in the GPA have failed to prevent reductions in foreign penetration to Japan's state procurement markets at a time when Japanese policymakers were under substantial pressure to bolster domestic economic performance.

1 We thank participants in the World Trade Forum 2003, in particular Jim Rollo and Bob Staiger, for their comments and suggestions. We are also grateful for the comments of Bernard M. Hoekman and the reviewers of this manuscript for their suggestions, which we have endeavoured to take on board. All remaining errors are our own.