Industrial Policy and Competition–Developing Countries as Victims and Users

Industrial Policy and Competition–Developing Countries as Victims and Users

Description

Developing countries are double targets. They suffer the impact of developed countries' selective protective industrial policies (antidumping, subsidies), and they are deeply criticized when they apply protective industrial policy in their own internal markets. We argue that competition policy and protectionist industrial or trade policy are related antagonists; that the relationship all too often goes by default, in part because specialist professionals are trained or disciplined to avoid the issue. We argue that the costs to competition from protectionism need to be better documented and highlighted, and that the inverse relationship, including better practices for trade-offs, needs to be worked out. We believe that the costs to developing countries' competition should especially be better documented, for this information is a necessary guide to appropriate policy in a globalized world. This article explores the use and impacts of certain industrial policies on developing countries—their own policies and their trading partners'. This is a vast subject, and we have chosen to carve out a certain domain. First, for most of this paper we do not focus on the “bright side” industrial policies designed, for example, to cure market failures by supporting research and development (although such support is implicated on one of our examples). Principally, we treat policies that are protective. Second, we focus on the world. We have two framing hypotheses. The first begins with the observation that the world is the market (often literally, always figuratively). Developing nations, when designing policies to enhance their economic well-being, must have regard to the world. They are induced, at least by the rhetoric of the developed nations, to liberalize their economies and participate in world trade and competition. But world trade and competition is pock-marked by illiberal policies of the developed nations whenever it so serves the developed nations, inducing in return illiberal policies of developing nations. Second, developing countries face not only the demons from without but the demons from within. These include cronyism and corruption, as well as past legacies of statism and discrimination. In this short paper, we observe these problems by examples. Most, but not all of our examples, are about protectionist policy that either obstructs the world trading system or obstructs the integration of developing countries with the world economy; but two examples—from South Africa and China (attacking internal protectionist policy)—involve positive stories of adjustment to the world. First, we address the world trade Doha Development agenda, its recognition that prior trade rounds have especially helped the developed world, and its thus far failed attempt to shift that balance. Second, we examine certain trade and competition issues of China; namely (1) the interplay of U.S. antidumping laws that keep low-priced Chinese goods out of the United States, and U.S. antitrust laws that punish the Chinese response (agreeing to higher prices), (2) China's and its provinces' own industrial policy to protect incumbents against outsiders, and (3) China's merger and foreign investment law; and we consider certain other aspects of China's Anti-Monopoly Bill that incorporates industrial policy in ways that are representative of certain antitrust measures in a number of other nations. Third, we examine the case of South Africa, which uniquely has a moral obligation as well as an economic imperative to provide opportunity for the long-excluded black majority, and to open up channels for competition that were blocked not only directly by the measures of apartheid but indirectly by the economic boycott designed to pressure apartheid's downfall. Also, we examine ramifications for South Africa's competition law of its financing incentive packages designed to enhance exports and jobs. Fourth, we examine a particular trade/competition/industrial policy issue that blossomed into the first WTO antitrust case—a claim of the United States against Mexico for snuffing out competition on cross-border telecom termination fees, which Mexico (not its Competition Commission) defended unsuccessfully as necessary to carry out industrial policy to build infrastructure in poor areas. Fifth, completing the circle, we note the separation of antitrust and industrial policy in the United States, and the always continuing politics of protectionism. Finally, we make recommendations for trying to break the vicious circle of protectionism breeding protectionism.

Source Publication

2006 Fordham Competition Law Institute: International Antitrust Law & Policy

Source Editors/Authors

Barry E. Hawk

Publication Date

2007

Industrial Policy and Competition–Developing Countries as Victims and Users

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