This paper examines the conventional wisdom concerning competition advocacy, paying particular attention to the applicability of such wisdom to developing countries. The definition of competition advocacy, its evaluation, and the likelihood of its successful implementation are discussed in some detail. The paper concludes with a call for considerably more thought about what, hitherto, has been one of the relatively uncontroversial aspects of many competition authorities' activities.
Like their wealthier counterparts, the poorest developing economies saw their share of foreign direct investment (FDI) in the form of mergers and acquisitions (M&A), and privatizations rise in the late 1990s. To be sure, greenfield investments still dominated overall FDI inflows, but certain sectors (notably utilities) saw considerable M&A by overseas firms. Without in any way diminishing the potential benefits of overseas takeovers and participation in privatization deals, policymakers need to be aware of-and take action against-the possible deleterious effects that can occur when foreign investors exercise market power against domestic consumers and producers. A first line of defense is to ensure that domestic barriers to entry remain as low as possible. A second line of defense-which is particularly powerful in tradeable sectors where the distribution channels are not all owned by manufacturers-is to have no policy-induced impediments to trade. A third line of defense is an open FDI regime, which allows other overseas investors to chase profitable opportunities. Unfortunately, bitter experience has taught is that sometimes these three lines of defense are not enough-and that carefully calibrated interventions to support a competition culture are needed. The widespread adoption of competition laws in developing world in the 1990s suggests that this lesson has been learnt. Moving from legislation to legal implementation is the next challenge-and provides the final line of defense against the persistent exercise of market power, be it by foreign or domestic firms.
Looking back over the first four years of negotiation of the Doha Round this paper identifies and discusses a number of factors that are shaping negotiations among WTO members as they try to fulfil the development mandate for this multilateral trade negotiation. These factors are not just diplomatic in nature, indeed many relate to changes in how many view the potential impact of further multilateral trade rules and the "legacy" effects of existing rules. Some of the proposed changes to WTO governance processes are assessed in the light of these considerations, and many are found wanting. The paper concludes that the fundamental implications of adopting a development mandate have not yet been comprehensively taken on board by WTO members and their officials.
In September 2003 members of the World Trade Organization (WTO) must decide the terms of upon which any negotiations on a multilateral framework on competition policy are to be conducted. This decision will involve determining which, if any, provisions should be included in such a framework, and of particular interest here is the desirability of including of possible provisions on so-called hard core cartels.
Many developing countries have actively participated in discussions on competition policy-related matters at the WTO and they can be expected to play a full part in the deliberations in Cancun. This paper assesses the potential costs and benefits of negotiations on potential provisions for hard core cartels for developing economies and begins by reviewing the factual record in this regard.
Estimates are presented here on the likely damage done to developing countries by the forty or more private international cartels that were prosecuted by government agencies in the industrial economies in the 1990s. In the case of the international vitamins cartel, which was worldwide in scope and lasted 10 years, there is robust evidence that cartel members targeted those jurisdictions with little or no cartel enforcement for greater price rises and larger overcharges to customers. This evidence, and others, raises the question of what measures, if any, are being taken to protect developing economies' interests against this form of international anti-competitive practice.
It is important to appreciate how large the world's government procurement markets are. Although precise estimates are hard to come by, a recent analysis by the Organisation for Economic Co-operation and Development (OECD) indicates that total central government expenditures of its members, excluding military spending and the compensation of state employees, was just under $2 trillion in 1998.1 The comparable figure for 106 non-OECD members, which account for 90% of the developing world's national incomes, was just under $0.3 trillion. The latter is still a sizeable sum as it equals six times the total annual multilateral and bilateral aid currently received by developing economies. Moreover, prior studies have estimated that local and provincial governments tend to spend approximately half this amount on goods and services, bringing the size of the world's procurement market to well over $3 trillion.
