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Competition Policy and Trade: Interactions and Challenges

Explore the relationship between competition policy, trade liberalisation, and foreign direct investment, and the challenges faced by competition authorities in privatisation and deregulation. Discusses the impact of trade liberalisation on domestic producers, transitional problems, restrictive business practices, and the importance of effective competition law in the era of globalization.

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Competition Policy and Trade: Interactions and Challenges

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  1. The interface between competition policy, trade, investment and developmentGeneva, 23 July 2007 The Interaction of Competition Policy with Other Government Policies Presentation by: Ursula Ferrari Consultant – Competition Law and Consumer Policies Branch/ Division on International Trade in Goods, Services and Commodities

  2. Overview and objective with the presentation Upon concluding this presentation, participants should be able to: • Specify the relationship between competition law and trade liberalisation, • Explain how competition law interacts with foreign direct investment, and • Describe challenges faced by a competition authority with respect to privatisation and deregulation. Ursula Ferrari2/10

  3. Measures Towards Freer Trade Have Led To: • New export opportunites for many domestic producers (expansion of horizons) • Increased competition from imports for local producers mainly dependent on the domestic market Ursula Ferrari3/10

  4. Transitional Problems Resulting From Trade Liberalisation • Failure of firms as a result of strong import competition, • Higher levels of concentration in some markets as a result of transnational corporations buying small/medium-sized domestic firms. Ursula Ferrari4/10

  5. Structural adjustments can have serious social implications… • Example: Loss of jobs due to increased competition Are there compensations? Ursula Ferrari5/10

  6. Some examples of restrictive business practices to consider: • Exclusive arrangements between domestic suppliers and local distributors, denying importers access to markets, • Large retail chain may refuse to stock imported goods, • Establishment of an import cartel to fix prices. Ursula Ferrari6/10

  7. Some scenarios of foreign direct investment • New greenfield investment (e.g. new factory, new technology) • Acquisition of an existing domestic enterprise (or joint venture with one) • Establishment by two transnational corporations of two independent affiliates. Then, overseas merger of the two TNCs. Ursula Ferrari7/10

  8. MANY TNCs PREFER TO INVEST IN DEVELOPING COUNTRIES WITH A COMPETITION LAWWHY? Ursula Ferrari8/10

  9. « Have trade liberalisation and deregulation of flows of foreign direct investment made competition law unnecessary/irrevelant? »Why would this question be asked?What objections to this question could be put forward? Ursula Ferrari9/10

  10. GLOBALISATION TRENDScan: • Stimulate increased competition • Contribute to more rapid economic growth BUT A STRONG EFFECTIVE COMPETITION LAW is required to avoid: • Restrictive business practices • Abuse of market power Ursula Ferrari10/10

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