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Bond, Eric --- "Trade Policy and Competition Policy: Conflict versus Mutual Support" [2004] ELECD 180; in Neumann, Manfred; Weigand, Jürgen (eds), "The International Handbook of Competition" (Edward Elgar Publishing, 2004)

Book Title: The International Handbook of Competition

Editor(s): Neumann, Manfred; Weigand, Jürgen

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843760542

Section: Chapter 4

Section Title: Trade Policy and Competition Policy: Conflict versus Mutual Support

Author(s): Bond, Eric

Number of pages: 18

Extract:

4 Trade policy and competition policy:
conflict vs. mutual support
Eric Bond



1 Introduction
Achieving allocative efficiency is a primary goal of trade liberalization and
of competition policy. Trade barriers impose costs or restrictions on actions
of foreign firms that do not apply to domestic firms. When markets are
perfectly competitive, the discriminatory nature of trade barriers prevents
goods from being produced in the lowest cost location. Trade liberalization
is a means of achieving an efficient international allocation of resources.
Competition policy, on the other hand, is primarily focused on limiting
actions of firms that might restrict competition in the domestic market. The
1994 OECD interim report on convergence of competition policies notes
that `There is general agreement that the basic objective of competition
policy is to protect and preserve competition as the most appropriate
means of ensuring the efficient allocation of resources ... in free market
economies.'
There are two problems with this simple characterization, in which trade
liberalization policy is aimed at achieving equal market access by all firms
and competition policy is aimed at preventing anti-competitive actions
within the domestic market. The first is that countries often depart from
efficiency motives in setting their trade and competition policies. Large
countries may benefit at the expense of other countries by imposing tariffs,
since the cost of the tariff is shifted onto the foreign suppliers. In addition,
special interest groups that benefit from trade barriers may successfully lobby
for the imposition of tariffs or quantitative restrictions. Similar examples
can ...