treatment to domestic bidders, and establish domestic sourcing clauses. In the first two columns, we submit the data to two standard gravity specifications that control for importeryear and exporter-year fixed effects: in column (1) with time-invariant shifters of bilateral trade costs, and in column (2) with country-pair fixed effects that absorb that influence of time-invariant factors. The coefficients have the expected signs. The positive and large coefficient on the internal trade dummy indicates that trade is disproportionally domestic even when controlling for other determinants of bilateral trade. Distance depresses trade, while sharing a border, an official language, and (to a lesser extent) the origin of the legal system and having had a colonial relationship boost bilateral imports. The specification in column (2), by controlling for all time-invariant characteristics, attenuates the endogeneity bias that can affect especially the effects of time-varying policy variables (Head and Mayer 2014; Baier and Bergstrand 2007). Entering PTAs with provisions on government procurement has strong positive effects on trade. The estimates suggest that when two countries are members of a PTA with provisions on government procurement, bilateral imports go up by 32 percent. This result can be interpreted as a trade-creation effect of trade reforms in government procurement (through purchases of foreign goods and services by governments or by domestic firms that win procurement contracts) or other related trade policy areas included in PTAs (e.g., liberalization of trade in services, investments). They are consistent with those of Mulabdic and Rotunno (2022), who estimate different versions of the specification in column (2) using cross-border flows in government procurement as dependent variable (and on the 1995-2015 period).

Columns (3) to (6) present our main specifications, which include an interaction between the same-country dummy and the protectionism indicator. The estimates suggest that the border effect is higher in importing countries that are classified as protectionist in their procurement laws, but the difference relative to other importers is not statistically significant. The size of the interaction effect is slightly higher when we control for other importer-specific variables interacted with the internal trade dummy (columns (4) and (6)). Also, controlling for trends in the border effect in columns (5) and (6) does not alter the estimates significantly.

_Table 2. Bilateral imports and protectionism in government procurement, gravity estimations_

||(1)|(2)|(3)|(4)|(5)|(6)|
|---|---|---|---|---|---|---|
|Dep. variable: bilateral imports|||Bas|eline|With ti|me trends|
|Internal trade|2.208***<br>(0.158)||2.167***<br>(0.153)|2.425***<br>(0.338)|||
|Log(distance)|-0.555***<br>(0.092)||-0.566***<br>(0.094)|-0.435***<br>(0.087)|-0.567***<br>(0.095)|-0.424***<br>(0.088)|
|Common border|0.379***||0.374***|0.454***|0.376***|0.453***|
||(0.108)||(0.110)|(0.119)|(0.108)|(0.117)|
|Common language|0.390***||0.407***|0.229*|0.407***|0.245**|
||(0.116)||(0.118)|(0.125)|(0.116)|(0.120)|
|Common legal origin|0.058||0.054|0.165***|0.055|0.169***|
||(0.055)||(0.057)|(0.049)|(0.057)|(0.051)|
|Colony|0.321*||0.309|0.346|0.306|0.355|
||(0.179)||(0.190)|(0.223)|(0.192)|(0.220)|
|WTO w/out GPA|0.782***|-0.136|0.755***|0.724***|0.761***|0.715***|
||(0.267)|(0.111)|(0.285)|(0.241)|(0.281)|(0.245)|
|GPA|0.661*|0.035|0.608|0.553**|0.601|0.545**|
||(0.341)|(0.132)|(0.383)|(0.265)|(0.385)|(0.267)|
|PTA w/out procurement|0.573***|0.086|0.547***|0.961***|0.558***|0.993***|
||(0.177)|(0.093)|(0.178)|(0.189)|(0.181)|(0.198)|
|PTA with procurement (except EU)|0.147|0.275***|0.095|0.191**|0.085|0.205**|

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