International Competition Policy

International Competition Policy

Maintaining Open Markets in the Global Economy

Michael A. Utton

The book begins by setting out the principles of competition and trade policies, and then goes on to address the impact of market globalisation on what are usually thought of as traditional antitrust concerns. These include the analysis of the difficulties arising from collusion and other restrictive practices, government sponsored ‘voluntary co-operation’, vertical restrictions and market access, pricing strategies of dominant firms and international mergers, all illustrated with a number of prominent case studies. The author concludes with an illuminating discussion on the feasibility of international co-operation on competition policy, the faltering progress that has been made so far and the prospects for future advances.

Chapter 4: Government Sponsored ‘Voluntary’ Co-operation

Michael A. Utton

Subjects: economics and finance, competition policy, industrial economics, international economics


I INTRODUCTION Through the successive GATT rounds of international trade negotiations substantial progress was made to free the world trading system of the traditional restrictions such as tariffs and quotas. However as these impediments were removed governments came under increasing pressure from special interest groups for assistance in the face of intensifying foreign competition. From the 1970s until the 1990s there was consequently an explosive growth of non-tariff barriers to trade. These were given a series of respectable sounding names, such as Orderly Marketing Arrangements (OMAs) and Voluntary Export Restraints (VERs), but their common purpose was to restrict imports, protect domestic industry and thus distort international trade. Many governments were simultaneously supporting GATT efforts to reduce formal trade restrictions and, often covertly, engineering these more informal restrictions. While the effects of these arrangements were broadly similar to those of tariffs and quotas, more significant for our purposes was the boost they gave to collusive behaviour both between groups of exporting firms and in many instances between exporters and domestic producers. This chapter therefore complements Chapter 3 which dealt with more conventional stimulants to collusion. Section II of this chapter describes the most common forms of these restrictions and discusses their effects. Section III then assesses their impact when they were at their height and outlines the measures taken in the Uruguay Round to deal with them. II THE EFFECTS OF ‘VOLUNTARY’ RESTRAINTS We need first to define our terms. OMAs are informal agreements between governments to restrict the volume of...

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