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
 Growth of anti-dumping laws
As of 31 December 1989

Countries with AD law (49) Countries without AD law No information

 Growth of anti-dumping laws
As of 31 December 2001

Countries with AD law (94) Countries without AD law No information

 Growth of WTO and AD laws
Countries
140
120

100
80

60
40

20
0
1900 1920 1940 1960 1980 2000
Year
AD law, by year GATT/WTO member, by year
 Stages of bilateral integration
Trade Competition policy
Self sufficiency Autonomous competition
(autarky) (AT) policy

Unilateral tariffs Unilateral AD actions

RTA
Bilateral removal of AD
(free bilateral trade)
Customs union Common external
(common external tariff) AD policy

Common market Common AT policy