Tuesday, February 21, 2012

Competition policies and international trade

Pascal Lamy recently spoke about the interlinkage between competition policies and international trade, 
"Let me mention three examples:
First, very important synergies exist between market-opening trade measures in government procurement markets and the enforcement of competition or antitrust laws. If governments fail to put in place tough measures to address bid rigging, the welfare gains made possible by market-opening measures — facilitated, for example, by the WTO Agreement on Government Procurement (GPA) — will surely be jeopardized. Conversely, opening procurement markets to foreign participants — while certainly not making antitrust enforcement redundant or unnecessary — can undeniably make collusion more difficult, thereby also making good performance more likely. It is for this reason that the WTO Secretariat takes care to reflect the importance of competition law enforcement in this sector. This indeed seems like a fruitful area for collaboration between the relevant international organizations.
Second is the relationship between competition policy and intellectual property rights, already recognized in the WTO Agreement on Trade-Related Intellectual Property Rights but meriting input and reflection from diverse institutional actors. I recognize that this relationship is a delicate and subtle one, and I am not advocating any rash approaches in this area. Nonetheless, the TRIPS Agreement itself refers to the harm that may be caused by anti-competitive practices in this area, and permits governments to take appropriate remedial measures. This begs important questions — for example, what kinds of restrictive licensing practices are genuinely harmful to economic welfare, and what remedies are appropriate for these practices? These questions, it seems to me, cannot be answered by any organization acting in isolation. Rather, they call for joint reflection and deliberation by organizations such as WIPO, the OECD, UNCTAD, the International Competition Network (ICN) and the WTO, in addition to national competition agencies with experience in this field.
A third area of policy interaction brings us back to the subject of international cartels, whether in primary products or other markets. The point here is that, when cartels are permitted to operate, they directly undermine the intended benefits that more open trade can bring, in the form of expanded supply, employment gains, lower prices, and expanded choices for consumers. Instead, supply, and therefore employment, will be restricted; prices will rise and consumer choice will be reduced. For this reason, it seems to me that all participants in the world trading system have a stake in ensuring that cartels, abuses of dominance and other harmful anti-competitive practices are not tolerated."

The issue of opening up Government procurement to foreign competition brings to the fore the same question - primacy of domestic policy space vis a vis international obligations. Should it be the prerogative of  a national government to decide it's procurement policies or should it be liberalised and open to competition. Should the goal of the efficiency of international competition have primacy over domestic producer interests? Is domestic cartelisation a lesser evil than foreign competition since the latter has the potential to hurt domestic interests? Does international competition always lead to increased competition or does it open up a country to the vagaries of international cartelisation?

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