Competition Policy and the International Trade Landscape: Assessing Recent Developments and Trends

Executive Summary

(Full report can be read here)

 

For most countries, competition law has become a crucial component of contemporary economic policy. It also has considerable overlap with trade and investment policy, as improving economic efficiency and liberalizing markets are usually central to its objectives. Competition policy can also have a direct impact on international trade and investment patterns, as the companies most likely to be active in international markets will often – due to their size and power – draw the attention of competition authorities. However, a multilateral agreement on competition policy has never been reached, despite several past attempts to include it in the GATT/WTO framework. At the same time, through bilateral agreements, FTAs, and intergovernmental “networks”, countries do cooperate with each other regarding competition policy, such that “international competition policy” does exist, albeit in a quite fragmented form.


This memorandum provides a detailed overview of this state of affairs, both by describing the current state of international competition policy, and by attempting to understand why it has the shape it has.


In section I, we provide a general description of competition law, followed by a discussion of why an international agreement might be desirable. Essentially, we live in a world with domestic competition authorities but international markets, and there is good reason to think that the under-regulation and over-regulation of anticompetitive conduct that results from this situation can give rise to gaps and shortcomings. This can be explained to some extent by the fact that countries have different approaches to competition law in order to achieve legitimate policy goals; however, countries may also have incentives to use their competition laws for protectionist reasons. 


In section II, we discuss extraterritoriality and cooperation agreements. These are the primary ways in which domestic competition authorities attempt to regulate international markets, and we attempt to identify the major strengths and shortcomings of these methods. Overall, these methods do address some of the issues identified in section I, and they have improved significantly over time; however, many issues remain, and some of these may be intractable without a deeper international agreement.  


In section III, we discuss both proposed and existing international regulatory strategies, and attempt to identify the strengths and shortcomings of those strategies. First, we provide a brief historical overview of efforts by international institutions to ‘harmonize’ domestic competition laws, including the 1927 World Economic Conference, the draft of the 1948 Havana Charter, the Munich Code proposal and the discussions in the WTO. Then, we analyze the fragmented form of “international competition policy” provided in some WTO Agreements and relatively recent Free-Trade Agreements. Finally, we discuss the efforts of national competition authorities in promoting cooperation and convergence between domestic competition laws through “competition networks” such as the Organisation for Economic Co-operation and Development Competition Committee (OECD CC) and the International Competition Network (ICN). 


In section IV, we attempt to provide insight into the future trajectory of international competition policy. This section proceeds in three steps. First, we argue that competition policy should remain dominated by domestic authorities, as this allows countries to preserve important “policy space.” Second, we present Anu Bradford’s analysis of why modest improvements to the status quo is the most realistic option for international competition policy. Third, we present Brendan Sweeney’s more ambitious proposal for a WTO-level competition policy agreement. While Sweeney’s proposal is not realistic at the moment, we feel that it is worth outlining, as it: 1) attempts to preserve as much domestic policy space as possible; and 2) identifies why the current regime will always struggle to prevent the protectionist use of certain competition laws.

 

Full report can be read here.

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