The significance of government-procurement policies as nontariff barriers to trade was recognized by the General Agreement on Tariffs and Trade (GATT), whose Agreement on Government Procurement came into effect in 1981. This sets out rules on how government

We model the bidding for a government contract in which there is imperfect competition; each bidder is better informed about his own costs than either his rival bidders or the government; and the distribution of the domestic firms’ costs differs from the distribution of foreign firms’ costs because of comparative-advantage effects. We find that the gcyemment minimizes its expected procurement cost by operating a pii;;\;prcf&eni;i: policy, not necessarily purchasing from the lowest bidder.