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 examine the different opportunities offered by RTAs relative to those under the multilateral trading regime

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

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

Policy responses Exporting country options use AT policies to discipline firm often not in national interest Importing country options 1.does not have ability to use AT rules 2.resurrect trade barriers losing all the gains from trade 3.implement anti-dumping (AD) policies only affects goods in import market prevents price discrimination

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

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

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?

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

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

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

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

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

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

As of 31 December 1989 Growth of anti-dumping laws Countries with AD law (49)Countries without AD lawNo information

Countries with AD law (94)Countries without AD lawNo information As of 31 December 2001 Growth of anti-dumping laws

Growth of WTO and AD laws

Stages of bilateral integration Trade Competition policy Self sufficiency (autarky) Autonomous competition (AT) policy Unilateral tariffsUnilateral AD actions RTA (free bilateral trade) Bilateral removal of AD Customs union (common external tariff) Common external AD policy Common marketCommon AT policy