Intra-industry trade and protectionism: the case of the buy national policy

Abstract

This article examines the factors that lead governments to open up their public procurement markets to international competition with a particular emphasis on the effect of intra-industry trade. Contrary to the conventional notion that intra-industry trade entails less political pressure for protectionism than inter-industry trade, I argue that such notion does not prevail in the case of discriminatory public procurement. Firms in a market with a high degree of intra-industry trade are more likely to resist the removal of discrimination than would firms in a market with a high degree of inter-industry trade. Empirically, I find support for the argument both at sub-national and cross-national settings.