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Competition Polic y and Development

Competition Polic y and Development. CUTS - 7Up3 Project Launch Meeting 22-23 March - Entebbe, Uganda. Lucian Cernat Competition and Consumer Policy Branch Division on International Trade UNCTAD, Geneva. Main elements. The need for competition policy Domestic

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Competition Polic y and Development

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  1. Competition Policy and Development CUTS - 7Up3 Project Launch Meeting 22-23 March - Entebbe, Uganda Lucian Cernat Competition and Consumer Policy Branch Division on International Trade UNCTAD, Geneva

  2. Main elements • The need for competition policy • Domestic • International, including regional • CLP and development: Key lessons • UNCTAD’s role

  3. Benefits of Competition: Domestic level Mechanisms: Results: • Make prices more flexible and closer to costs • Promote efficient resource allocation throughout the economy • Augment variety of cheaper or better quality goods and services for customers • Encourage technological innovation • Encourage market entry by new firms • Increases economic efficiency • Safeguards and promotes consumer welfare

  4. Market access Export-oriented FDI/ supply capacity Increased competition Increased concentration International cartels Export competitiveness Benefits of Competition: Open economy Trade FDI ? ? Competition Policy

  5. The potential gains from trade liberalization • At multilateral level: • E.g. 50 per cent reduction of tariffs in agriculturewould increase world welfare by about $20 billion ($13,4 billion for developing countries); in all sectors, will double the amount (Cernat, Laird, Turrini 2003). • But… as a result of price fixing conspiracies during the 1990s (Levenstein and Suslow 2001), developing countries paid approx. $ 20-25 billionin excessive prices (Jenny 2003)

  6. FDI and competition • as in the case of trade in goods and services, open and contestable markets for FDI do not destroy all market power of incumbents • a wide range of RBPs - both horizontal and vertical- could affect potential entrants' investment decisions and impede FDI flows • moreover, MNC’s strong competitive position can lead to anti-competitive structures and behaviour and thus to the establishment of new entry barriers, especially when FDI is accompanied by M&As

  7. What have we learned? • anti-competitive practices impair the process of development in developing countries more significantly than has previously been thought • trade and FDI liberalization may not by themselves eliminate the propensity of firms to engage in anti-competitive practices

  8. What have we learned? (cont’d) Contrary to “traditional wisdom”: Competition policy is not a luxury for the rich: poor countries suffer most from RBPs There is need for competition law and policy in all countries, including LDCs

  9. What have we learned? (cont’d) • merely adopting a competition law is no panacea… • what really makes a key contribution to competitiveness and development is effective CLP implementation • If not part of a well-coordinated set of legal and economic institutions, the impact of competition policy on productive capacities and in favour of more competitive economies is likely to remain sub-optimal

  10. What have we learned? (cont’d) It is not possible to copy existing competition law and policy from developed countries: there is no “one-size-fits-all” system: Each country needs its own “tailor-made” competition law and policy (CLP); Each country will have to experiment and amend gradually its CLP; Each country will need to adopt its CLP as the economy develops.

  11. 2. UNCTAD’s mandate UNCTAD XI and 4th Review Conference: • to contribute to a more efficient, but also a more equitable world economy, based on competition principles at national, regional and multilateral levels • to boost competitiveness, and hence accelerate the development of developing countries, in particular LDCs, by promoting a competition culture • to defend consumer interests by ensuring that applying competition rules results in better quality and choice, and lower prices of goods and services

  12. UNCTAD’s strengths unique position as a fully multilateral body with full membership of developing countries long standing experience in Competition Law and Policy issues related to development addresses national, regional and multilateral competition issues comprehensive developmental approach, including linkages with trade, FDI, and other related policies

  13. Jointly with other organizations, UNCTAD: helps developing countries build capacities; strengthens competition advocacy of their public institutions responsible for competition and consumer protection; helps creating a competition culture, in developing and transition countries where competition is a new concept

  14. Main types of Technical Assistance: Introductory Seminars Economic Mapping and Needs Assessment Assistance in drafting competition laws Advisory Services for setting-up competition authorities and training of officials Seminars and workshops for exchange of expertise among countries in the implementation phase

  15. UNCTAD Competition Websitewww.unctad.org/competition All Competition policy studies and documents Reports of meetings Scheduled events: The 5th Review Conference of the UN Set 14-18 November 2005, Turkey

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