UNCTAD The interface between competition policy, trade, investment and development Geneva, 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

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Ursula Ferrari2/10 Overview and objective with the presentation Upon concluding this presentation, participants should be able to: Specify the relationship between competition law and trade liberalisation, Specify the relationship between competition law and trade liberalisation, Explain how competition law interacts with foreign direct investment, and Explain how competition law interacts with foreign direct investment, and Describe challenges faced by a competition authority with respect to privatisation and deregulation. Describe challenges faced by a competition authority with respect to privatisation and deregulation.

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Ursula Ferrari3/10 Measures Towards Freer Trade Have Led To: New export opportunites for many domestic producers (expansion of horizons) New export opportunites for many domestic producers (expansion of horizons) Increased competition from imports for local producers mainly dependent on the domestic market Increased competition from imports for local producers mainly dependent on the domestic market

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Ursula Ferrari4/10 Transitional Problems Resulting From Trade Liberalisation Failure of firms as a result of strong import competition, 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. Higher levels of concentration in some markets as a result of transnational corporations buying small/medium-sized domestic firms.

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Ursula Ferrari5/10 Structural adjustments can have serious social implications…  Example: Loss of jobs due to increased competition Are there compensations?

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Ursula Ferrari6/10 Some examples of restrictive business practices to consider: Exclusive arrangements between domestic suppliers and local distributors, denying importers access to markets, Exclusive arrangements between domestic suppliers and local distributors, denying importers access to markets, Large retail chain may refuse to stock imported goods, Large retail chain may refuse to stock imported goods, Establishment of an import cartel to fix prices. Establishment of an import cartel to fix prices.

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Ursula Ferrari7/10 Some scenarios of foreign direct investment 1) New greenfield investment (e.g. new factory, new technology) 2) Acquisition of an existing domestic enterprise (or joint venture with one) 3) Establishment by two transnational corporations of two independent affiliates. Then, overseas merger of the two TNCs.

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Ursula Ferrari8/10 MANY TNCs PREFER TO INVEST IN DEVELOPING COUNTRIES WITH A COMPETITION LAW WHY?

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Ursula Ferrari9/10 « 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?

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Ursula Ferrari10/10 GLOBALISATION TRENDS can:  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