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Can competition policy control"301"?

  • Finger, J. Michael
  • Fung, K.C.
  • DEC

Should fair trade rules be replaced by national or international competition rules? A familiar argument for doing so is that more rigorously enforced competition standards might eliminate the basis for the burgeoning number of antidumping cases of recent years. A less familiar argument is that the implementation of internationally agreed competition standards might reduce the frequency with which the U.S government uses section 301 of U.S. trade law. Section 301 lists foreign government toleration of systematic anticompetitive activities as one of the bases for taking retaliatory action against foreign uncompetitive practices but were taken up through other mechanisms; extraterritorial application of U.S. antitrust law or direct negotiations sometimes capped by an understanding at the presidential level. These negotiations often included the threat of initiation of antidumping,"301,"or other trade remedies cases. (The structuralimpediments initiative negotiations with Japan are the most familiar example.) In several of these cases, the foreign government agreed to and implemented more rigorous antitrust enforcement, but these actions seldom ended the dispute. The U.S. government pressed on for tangible evidence of increased U.S. export sales. The authors conclude that removing the basis for these disputes -- alleged lax enforcement of competition policy -- did not remove the motive for them -- increased U.S. exports. Competition policy then is not the antidote for"301."The last section of the paper reviews the compatibility of"301"with the preservation of open international trading system. Of 70"301"cases (through December 31, 1992) that have led to policy changes, 52 have led to liberalizations, and only 18 have led to increased trade restrictions. Viewed from the point of view of results, the major shortcoming of"301"is that the United States is the only country whose policies do not come under its scrutiny.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1253.

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Date of creation: 28 Feb 1994
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Handle: RePEc:wbk:wbrwps:1253
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  1. O Thomas Bayard & Kimberly A. Elliott, 1992. "‘Aggressive Unilateralism’ and Section 301: Market Opening or Market Closing?," The World Economy, Wiley Blackwell, vol. 15(6), pages 685-706, November.
  2. Finger, J. Michael & DEC, 1994. "A rock and a hard place : the two faces of U.S. trade policy toward Korea," Policy Research Working Paper Series 1264, The World Bank.
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