competition policy

A number of actual or proposed bilateral and regional agreements, such as NAFTA and the Free Trade Area of the Americas already contain sections on competition policy. The aim of those pushing for competition policy to be included in free trade agreements is to curtail the discretion and flexibility of host governments in regulating the entry and operations of foreign firms, and to prevent any favourable treatment being given to domestic firms. Competition policy has been a key tool in economic development, North and South. New Zealand trade and investment analyst Bill Rosenberg comments: “The large industrial economies had effective protection from competition long after their industry took root, through explicit or informal rules, or from being first into a market. That greatly helped their development. They are now proposing to kick away the ladder they used, to prevent other countries from ascending it. The effect in the long run is to lessen competition.” This means exposing local businesses to competition with transnational corporations.

Meanwhile, many Third World governments have resisted further WTO expansion to draw in yet more issues into the international arena hitherto subject to domestic policymaking. The EU-led agenda on competition policy at the WTO has little to do with addressing the explosion of mergers and acquisitions of transnational corporations (TNCs) which have seen the consolidation of political and economic power and control in the hands of a few companies and increasing abuse of market power. Instead it would limit policy options of countries in the global South so that European corporations can break into new markets. And enforce domestic competition laws so that TNCs can operate in markets on the same basis as local firms. Meanwhile, the EU has also been criticized for insisting on the inclusion of competition policy in its Economic Partnership Agreements (EPAs) with African, Caribbean and Pacific countries. Malaysia’s competition policy has also been a significant point of friction in FTA talks with Washington.

Agreements on competition policy written into trade and investment liberalization agreements could lock countries into establishing new competition authorities or adjusting existing domestic competition regimes into a “one-size-fits-all” global policy framework. While burdening them with compliance costs such as creating new competition agencies and laws which may not be appropriate to their local contexts (not to mention overloading trade officials with a set of new and complex issues), it would prevent governments from using the same kinds of tools and flexibility to choose appropriate policies for their situations which the proponents of these agreements themselves have used in various stages of industrial development.