Edited by Chris Milner and Robert Read
9. State trading, agriculture and the WTO Steve McCorriston and Donald MacLaren There has been a considerable literature in recent years on the links between competition policies and trade, the obvious implication being that these links should be seen as an important aspect of trade negotiations under the auspices of the WTO. More speciﬁcally, while the eﬀects of trade policy instruments in restricting market access to or aﬀecting competition in export markets are well known to trade economists, the anti-competitive practices of ﬁrms can have equivalent eﬀects. To take the case of an importing country, the exercise of market power in the domestic market can limit the extent of import competition from foreign ﬁrms where the exercise of that market power is not restricted to ‘horizontal’ activities but also extends to vertical ties and contracts. For example, the use of vertical restraints or vertical integration (or contracts that replicate such an outcome) can foreclose competition between domestic and foreign ﬁrms (see, for example, Spencer and Jones, 1991). Horizontal mergers may also limit competition by giving domestic ﬁrms greater market share at the expense of foreign competitors (Barros and Cabral, 1994). On the export side, price discrimination or dumping gives foreign ﬁrms an ‘excess’ market share in the domestic market and gives rise to the use of countervailing measures and anti-dumping duties. At a broader level, the exercise of market power over a number of jurisdictions, for example market-sharing agreements involving a limited number of ﬁrms that...
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