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Trading market access for competition policy enforcement

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  • Hoekman, Bernard
  • Saggi, Kamal

Abstract

Motivated by discussions at the World Trade Organization (WTO) on multilateral disciplines with respect to competition law, the authors develop a two-country model that explores the incentives of a developing country to offer increased market access (by way of a tariff reduction) in exchange for a ban on foreign export cartels by its developed country trading partner. They show that such a bargain is feasible and can generate a globally welfare-maximizing outcome. The authors also explore the incentives for bilateral cooperation when the developing country uses transfers to"pay"for competition enforcement by the developed country. A comparison of the two cases shows that there exist circumstances in which the stick (the tariff) is more effective in sustaining bilateral cooperation than the carrot (the transfer). Furthermore, the scope for cooperation is maximized when both instruments are used. An implication of the analysis is that developing countries have incentives to support an explicit WTO prohibition of export cartels.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3188.

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Date of creation: 15 Jan 2004
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Handle: RePEc:wbk:wbrwps:3188

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Keywords: Environmental Economics&Policies; Markets and Market Access; Labor Policies; Economic Theory&Research; ICT Policy and Strategies; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Economic Theory&Research; Environmental Economics&Policies; Access to Markets; Markets and Market Access;

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  1. James A. Brander & Barbara J. Spencer, 1983. "Trade Warfare: Tariffs and Cartels," NBER Working Papers 1193, National Bureau of Economic Research, Inc.
  2. Kyle Bagwell & Robert W. Staiger, 1999. "Domestic Policies, National Sovereignty and International Economic Institutions," NBER Working Papers 7293, National Bureau of Economic Research, Inc.
  3. Fink, Carsten & Mattoo, Aaditya & Neagu, Ileana Cristina, 2001. "Trade in international maritime services : how much does policy matter?," Policy Research Working Paper Series, The World Bank 2522, The World Bank.
  4. Kyle Bagwell & Robert W. Staiger, 2004. "The Economics of the World Trading System," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262524341, December.
  5. Henrik Horn & James Levinsohn, 1997. "Merger Policies and Trade Liberalization," NBER Working Papers 6077, National Bureau of Economic Research, Inc.
  6. Joseph Francois & Ian Wooton, 2000. "Trade in International Transport Services: The Role of Competition," Tinbergen Institute Discussion Papers, Tinbergen Institute 00-057/2, Tinbergen Institute.
  7. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
  8. Richardson, Martin, 1999. "Trade and Competition Policies: Concordia Discors?," Oxford Economic Papers, Oxford University Press, vol. 51(4), pages 649-64, October.
  9. Auquier, A A & Caves, R E, 1979. "Monopolistic Export Industries, Trade Taxes, and Optimal Competition Policy," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 89(355), pages 559-81, September.
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Cited by:
  1. Simon J. Evenett & Bernard M. Hoekman, 2006. "Economic Development and Multilateral Trade Cooperation," World Bank Publications, The World Bank, number 7412, August.
  2. Hoekman, Bernard & Saggi, Kamal, 2007. "Tariff bindings and bilateral cooperation on export cartels," Journal of Development Economics, Elsevier, Elsevier, vol. 83(1), pages 141-156, May.
  3. McCorriston, Steve & MacLaren, Donald, 2005. "Single-desk state trading exporters," European Journal of Political Economy, Elsevier, Elsevier, vol. 21(2), pages 503-524, June.

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