Presented by : Dr M. A. Razzaque

1. International Trade and Competition Policy Presented by: Dr M. A. Razzaque

2. Content of the Presentation • International trade and trade liberalisation • Trade liberalisation and competition policy • Is trade liberalisation helpful to competition policy? • Does competition policy restrict international trade? or, does it promote trade competitiveness? • WTO and competition policy • Competition policy under trading blocs

3. International trade and trade liberalisation International trade – Exchange of goods and services amongst countries • Trade Liberalisation? • Undertaking liberal policies for imports • Having liberal policies for exchange transactions

4. Trade Policy and Instruments • Policy => sets out objectives and means to attain them • Instruments => a set of tools through which policy objectives are to be materialised.

5. Trade Policy Instruments to Control Imports • Import bans • Quota – quantitative restrictions • Tariffs (customs duty, supplementary duty, VAT, Dev surcharge) • Tariff rate quotas • Foreign Exchange restrictions • Import Licensing

6. Trade Liberalisation would imply: • Relaxation/removal of import bans • Relaxation/removal of quantitative restrictions • Reduction/removal of tariffs • Relaxation of foreign exchange restrictions • Simplifying the import licensing procedure

7. How trade measures are recorded: • Use of certain classification system (such as HS and SITC) • Use of codes to reflect disaggregation of commodities • Consider the Code: • HS 02 _ Meat and Edible Meat Offal • HS 0202 _ Meat of Bovine Animal Frozen • HS 0202200 _ Meat Bovine Cut w/Bone Frozen

8. Operative Tariff Schedule • OTS of Bangladesh 2003-04 Excel Sheet showing Bangladesh’s OTS

9. Calculate the impact of tariffs

10. On-going Trade liberalisation in Bangladesh • Significant changes in terms of abolition of import quotas, simplification of import licensing procedures, reduction in import tariffs, harmonisation of tariffs, reduction in the number of tariff slabs.

11. Bangladesh: Removal of QRs at the 4-digit HS Classification Level

12. Trade-Related Restrictions as Proportion of Total HS 4-digit Import Lines

13. Bangladesh: Un-weighted Average Duty Rates

14. Are all these liberalisation good for competition? • Certainly, liberalisation tends to promote competition We can work out the competitive effects from the impact of tariffs.

15. Domestic producers have to compete with international firms • Liberalisation could be an effective means for dealing with monopoly and oligopolistic market structures. • Liberalisation can ensure ‘love for variety’ and quality

16. Liberalisation however may not work, if: • Importers form cartel and/or are involved in tacit collusion • Foreign firms can manage to ‘avoid’ competition • Import of goods is restricted due to such factors as foreign exchange scarcity/import licensing procedure/political unrest leading to disrupted transportation and communication system, international crises leading to supply shortfall.

17. In the first place, liberalisation may not be possible, if: • If there is a strong pressure from the domestic industry groups (vis-à-vis given the isolation paradox and free rider problem amongst the consumers) • Political economy of protection – the connection between domestic producer groups and policy makers. • Infant industry argument (but what if the infants are never grown up?) • Employment argument (but who does the bear the costs?)

18. Sugar Price Hike • Shipment and insurance costs have not been considered here, which would be around 10 percent

19. For sugar price: http://www.sugartech.co.za/sugarprice/index.php • BUT, Note that alternative scenarios might result in loss of government revenue. • Flexible trade policy will require flexible revenue raising capacities. • The basic point is: on many occasions one can rely on international trade to tackle the anti-competitive practices.

20. Does competition policy restrict international trade? or, does it promote trade competitiveness? • Evidence for restricting international trade is unknown. • However, strong possibility of raising the competitiveness of domestic industry and thus expansion of exports. • The strategy of providing some protection to begin with and then setting industries free may be effective, if the right industries are selected.

21. WTO and competition policy • Still not an agreement under WTO • First proposed in Singapore 1996 but without any success • Many developing countries opposed the idea of bringing in competition policy in WTO – why? • Having competition policy is not WTO-inconsistent as long as the principle of non-discrimination is maintained. • In fact, it may be required to have CP to deal with unfair practices of international suppliers.

22. Competition policy under trading blocs • Consider SAFTA • Suppose, BD and India are to exchange 0 for 0 tariffs under SAFTA while the tariffs on rest of the world remains the same. • Let’s get back to our sugar example

24. Concluding Observations • Trade is usually good for competition. • Loss of revenue can however be a concern. • Trade and competition can promote competitiveness of the domestic sectors. • Trade and competition policy does not rule out the need for providing protection to local industry. • Bangladesh has made some significant progress on trade liberalisation.

25. But, there are further scopes for supporting consumers. • Well-thought out and flexible use of trade instruments can serve the purpose of consumers and domestic industry. • Regional trading arrangements will have to be carefully handled to protect consumers. • Behaviour of the importers need to be carefully monitored.

26. Thank You.