Abstract
Competition law and international trade law (“trade law”) traditionally have “sailed under different flags.” Competition laws sanction business conduct that is deemed to harm the competitive process—in particular, collusive or exclusionary agreements among competitors, anticompetitive mergers, and abuses of monopoly power. Trade laws, by contrast, generally impose specific limitations (tariffs and non-tariff barriers) on business transactions that cross national boundaries. Furthermore, national trade laws, unlike competition laws, increasingly have been constrained by international agreements, and litigation generated by those laws has been reviewed by international tribunals.
The views expressed herein are solely attributable to the authors and do not necessarily represent the views of their employers. This article draws substantially on Abbott/Singham, Enhancing Welfare by Attacking Anticompetitive Market Distortions, Concurrences 8 (2011) 4. The authors benefited greatly from the comments of Randolph W. Tritell, Director, Office of International Affairs, Federal Trade Commission.
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Notes
- 1.
The beneficial effects of trade liberalisation are summarised at OECD, Benefits of Trade Liberalisation, available at: http://www.oecd.org/about/0,3347,en_2649_36442957_1_1_1_1_1,00.html. Technical questions regarding the welfare effects of specific trade liberalisation policies (such as whether the welfare benefits due to “trade creation” associated with bilateral or regional “free trade” outweigh the welfare losses due to “trade diversion” that reduces trade with non-liberalising jurisdictions) are beyond the scope of this article. A classic work that explores trade diversion and trade creation is Viner, The Customs Union Issue, 1950. For a more recent review of the literature on trade creation versus trade diversion, see, e.g., Eicher/Henn/Papageorgiou, Trade Creation and Trade Diversion Revisited: Accounting for Model Uncertainty and Natural Trading Partner Effects, Journal of Applied Econometrics 27 (2010) 2, available at: http://faculty.washington.edu/te/papers/EHP.pdf.
- 2.
We use the term “consumer welfare” as including the sum of consumers’ and producers’ surplus. This is consistent with the approach recommended by the legal scholar Robert H. Bork, see Bork, The Antitrust Paradox, (Revised ed.) 1993, pp. 90–106 (deeming the maximisation of allocative and productive efficiency (that are associated with consumers’ surplus and producers’ surplus, respectively) to be the appropriate goal of US antitrust enforcement). Consumer welfare-reducing restrictions could be either private (such as, for example, “naked” price fixing, division of markets among competitors, and other anticompetitive contracts) or public (such as, for example, onerous licensing requirements, other restrictions on entry into businesses or professions, and prohibitions on truthful advertising). Public restraints tend to be the most pernicious, because the normal market forces that tend to undermine private restraints (for instance, entry by new competitors) cannot undermine such restraints, which are backed by the force of law. Only changes to the law, which will be lobbied against by the beneficiaries of the anticompetitive status quo, can undo restraints imposed by government. For an overview of the growing international consensus regarding the harmful nature of government restraints on competition, see Cooper/Kovacic, US Convergence with International Competition Norms: Antitrust Law and Public Restraints on Competition, Boston University Law Review 90 (2010) 4, p. 1555, available at: http://www.ftc.gov/speeches/kovacic/2010convergencecomment.pdf.
- 3.
The WTO has also established a binding trade dispute resolution framework for assessing complaints regarding the alleged illegal application of anti-dumping and countervailing standards, among other rules. This framework, albeit imperfect, has provided a means for somewhat constraining international “trade wars” and constraining the application of protectionist policies. The WTO has been characterised as a multinational structure that, by reducing the power of protectionist interest groups found in individual countries, can simultaneously promote welfare-enhancing trade and accountable government. See McGinnis/Movsesian, The World Trade Constitution, Harvard Law Review 114 (2000) 2, p. 511 (558).
- 4.
As explained in the references in note 1, such agreements diminish welfare, however, to the extent that they divert more trade away from the rest of the world than they create within the liberalised trade bloc.
- 5.
For a good description of the European Union’s proposal for inclusion of competition within the WTO framework, and, the failure of this initiative in light of opposition from the United States and developing countries, see generally Papadopoulos, The International Dimension of EU Competition Law and Policy, 2010, pp. 211–245. As explained therein, the United States was particularly concerned about the lack of experience of many developing countries with competition law and policy, and the risk that application of the WTO dispute resolution system would risk politicising the application of competition rules (due to the second-guessing of discretionary prosecutorial decisions based on complex evidentiary evaluations). The European proposal dealt with competition laws and policies as they related to private restraints, as opposed to limiting the WTO’s jurisdiction over the Anti-Competitive Market Distortions we discuss in this article, and therefore prompted many of these concerns.
- 6.
Report of the Appellate Body, WT/DS276/AB/R, Canada – Measures Relating to Exports of Wheat and Treatment of Imported Grain. This case is discussed later in this article following note 11.
- 7.
The OECD Competition Assessment Toolkit is available at: http://www.oecd.org/document/48/0,3746,en_2649_37463_42454576_1_1_1_37463,00.html.
- 8.
One of the authors has advocated the creation of a multilateral public sector restraints agreement, building on existing WTO jurisprudence and introducing more centrally concepts of consumer welfare enhancement into the discussions of trade restricting government measures. See Singham, A General Theory of Trade and Competition: Trade Liberalisation and Competitive Markets, 2007, pp. 542–546. Although the authors strongly support such an approach, political constraints may preclude its adoption (or even serious consideration) in the near future. The more modest short-term approach advocated in this article, which emphasises reliance on non-binding advocacy, is fully consistent with the more ambitious long-term goal of establishing a binding international agreement; the two approaches are complements, not substitutes.
- 9.
Report of the Panel, WT/DS44/R, Japan – Measures Affecting Consumer Photographic Film and Paper.
- 10.
See Report of the Panel, WT/DS204/R, Mexico – Measures Affecting Telecommunications Services, paras. 7.222-7.224. The discussion of the Mexican Telecoms matter is based on Fox/Crane, Global Issues in Antitrust and Competition Law, 2010, pp. 413–417, and on Dispute Settlement: Dispute DS-204, Mexico – Measures Affecting Telecommunications Services, available at: http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds204_e.htm.
- 11.
The following discussion of this case draws upon Singham, A General Theory of Trade and Competition: Trade Liberalisation and Competitive Markets, 2007, pp. 203–218.
- 12.
A partial equilibrium analysis “analyses the behaviour of a single market, household, or firm, taking the behaviour of all other markets and the rest of the economy as given.” See Samuelson/Nordhaus, Economics, (14th ed.) 1992, p. 287. We do not consider the possibility, suggested by the “theory of the second best,” that the welfare harm in the market primarily affected by the ACMD would be more than offset by welfare gains elsewhere, due to the interaction among markets. Leading antitrust commentators have consistently upheld partial equilibrium approaches as key to the carrying out of competition policy, and have dismissed second best concerns, based on the real world impossibility of analysing all potential interactions among markets and on the high likelihood that market-specific partial equilibrium competition analyses “get it right.” See, e.g., Bork, The Antitrust Paradox, (Revised ed.) 1993, pp. 113–114; Posner, Antitrust Law, (2nd ed.) 2001, p. 13 n. 5.
- 13.
For a good overview of the importance of competition advocacy as a tool to combat government-sponsored restraints on competition, see Cooper/Kovacic, US Convergence with International Competition Norms: Antitrust Law and Public Restraints on Competition, Boston University Law Review 90 (2010) 4, p. 1555, available at: http://www.ftc.gov/speeches/kovacic/2010convergencecomment.pdf.
- 14.
The ICN was established in 2001 as an international “virtual network” for the promotion of “soft convergence” among competition policy regimes through the exchange of information among competition agencies and expert “non-governmental advisors.” The ICN states that it “provides competition authorities with a specialized yet informal venue for maintaining regular contacts and addressing practical competition concerns. This allows for a dynamic dialogue that serves to build consensus and convergence towards sound competition policy principles across the global antitrust community. The ICN is unique as it is the only international body devoted exclusively to competition law enforcement and its members represent national and multinational competition authorities. Members produce work products through their involvement in flexible project-oriented and results-based working groups. Working group members work together largely by Internet, telephone, teleseminars and webinars.” See http://www.internationalcompetitionnetwork.org/about.aspx. Information on the ICN’s Advocacy Working Group is available at: http://www.internationalcompetitionnetwork.org/working-groups/current/advocacy.aspx. The following main textual discussion is drawn from this web entry.
- 15.
- 16.
Indeed, we believe that the long-term plan of the Advocacy Working Group is in harmony with our proposed reform. See http://www.internationalcompetitionnetwork.org/uploads/library/doc763.pdf.
- 17.
For the most part, all WTO agreements apply to all GATT members. However, when the WTO was established in 1995, four “plurilateral” agreements were made applicable only to those WTO members that had agreed to them: the Agreement on Trade in Civil Aircraft, the Agreement on Government Procurement, the International Dairy Agreement, and the International Bovine Meat Agreement (the latter two agreements were scrapped in 1997). See http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm10_e.htm. The WTO framework would allow for the creation of additional plurilateral agreements.
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Abbott, A.F., Singham, S. (2013). Competition Policy and International Trade Distortions. In: Herrmann, C., Krajewski, M., Terhechte, J. (eds) European Yearbook of International Economic Law 2013. European Yearbook of International Economic Law, vol 4. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-33917-2_2
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