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Ian Wooton University of Strathclyde and CEPR

Ian Wooton University of Strathclyde and CEPR. Trade and competition policy anti-dumping and anti-trust policies in RTAs. Competition policy. Disciplines behaviour of imperfectly competitive firms in the international marketplace

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Ian Wooton University of Strathclyde and CEPR

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  1. Ian WootonUniversity of Strathclydeand CEPR Trade and competition policy anti-dumping and anti-trust policies in RTAs

  2. Competition policy • Disciplines behaviour of imperfectly competitive firms in the international marketplace • examine the different opportunities offered by RTAs relative to those under the multilateral trading regime

  3. Competition in autarky • In a world of self-sufficient countries • firms produce entirely for domestic consumption • If firms competitive and no distortions • free market is efficient • If a firm (or firms) exercise an inappropriate degree of market power • government should use competition policies to address this behaviour • “anti-trust” (AT) policies

  4. Competition and trade • When trade barriers are lowered • penetration of domestic markets by foreign firms • bringing aggregate benefits • If firms behave competitively • global efficiency with free trade and free markets • If foreign firms exercise market power • government intervention justified • but limited instruments available

  5. Policy responses • Exporting country options • use AT policies to discipline firm • often not in national interest • Importing country options • does not have ability to use AT rules • resurrect trade barriers • losing all the gains from trade • implement “anti-dumping” (AD) policies • only affects goods in import market • prevents price discrimination

  6. AT versus AD 1 • AT focused on encouraging competition • AT rules designed to ensure firms do not undercut the benefits of market integration by collusive behaviour • whereas AD often works to reinstate some of this lost power • If governments had single goal of promoting efficiency and competition • AT the superior instrument • increasingly seems that AD being used to pursue other goals

  7. AT versus AD 2 • Advantage of AD over AT • does not need supranational powers • Disadvantage of AD over AT • does not directly address misuse of market power, except for predation • only works indirectly • often the disadvantages of AD overwhelm the advantages • Could be complementary policies • AT for domestic markets • AD to deal with foreign firms

  8. Anti-dumping legislation • AD a twentieth century phenomenon • particularly rapid growth in 1990s • when developing countries increasingly adopted AD legislation • by 2000, more than 90% of world trade potentially subject to AD actions • may have pervasive effects even when duties not imposed • Strong correlation with trade liberalization • a pressure safety valve for system? • an instrument of retaliation?

  9. AD and RTAs • Preferential trading is flourishing • what is relationship between competition policy and RTAs? • does RTA creation result in the elimination of AD on intra-regional trade? • is AD replaced by AT? • No clear pattern has emerged • seems to depend on goals of the RTA

  10. RTA examples: polar extremes • EU • has substituted AD with AT for intra-union trade • applies common AD procedures for third-country trade • driven by goal of single market • NAFTA • on AD, only concession by US was establishment of bi-national panels • no harmonization of AT • no acceptance of supranational authority

  11. Multi-dimensional integration 1 • Both trade liberalization and competition policy can be pursued multilaterally or bilaterally • range of available policy options • depends on the desired degree of integration • Most basic level of regional integration is FTA • only obligation is zero tariffs on bilateral trade with other member nations • could parallel this with elimination of AD on intra-regional trade • no reduction in national sovereignty

  12. Multi-dimensional integration 2 • Could match deeper trade integration with coordination on competition • e.g. common AD together with common external tariffs • regional AD more consistent for external firms • AD more effective as protection • ambiguous welfare implications • common AT policies part of achieving a common market

  13. Conclusions • RTAs can facilitate the multilateral process in moving towards free trade • by removal of intra-regional AD policies in addition to tariff elimination • This is especially true given • the increasing complexity of the multilateral negotiations, and • the expected expansion in RTAs

  14. Reference • Ian Wooton and Maurizio Zanardi • “Trade and Competition Policy: Anti-Dumping versus Anti-Trust” • Forthcoming in James Hartigan, ed., Handbook of Trade and Law, London: Basil Blackwell

  15. Growth of anti-dumping laws Countries with AD law (49) Countries without AD law No information As of 31 December 1989

  16. Growth of anti-dumping laws Countries with AD law (94) Countries without AD law No information As of 31 December 2001

  17. Growth of WTO and AD laws

  18. Stages of bilateral integration

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