Advances in Competition Policy Enforcement in the EU and North America
Edited by Abel M. Mateus and Teresa Moreira
Chapter 19: Competition Policy and Competitiveness in Europe
John Fingleton INTRODUCTION In looking at competition policy and competitiveness in Europe, the Irish experience is relevant in two key ways. Firstly, with enlargement, the European Union now has a number of smaller Member States (including Portugal), who as small, open economies face very similar issues, both within Europe and globally; secondly, operating as part of a globalised world the European Union itself has characteristics not unlike a small, open economy. As a very good example of a small, open economy, Ireland dismisses one persistent myth, which is that trade, or openness to trade, automatically drives competition in an economy. Ireland has been open to trade for some 30 years but the domestic economy has been riddled with restrictions on competition. Primarily using examples from Ireland, I will argue that competition policy is good industrial policy and that strong, politically independent national competition policies contribute to the competitiveness of Europe as a whole. More specifically, I will address some of the flaws I see with the arguments for national champions and national ownership, and I will then draw some policy conclusions. COMPETITION IS GOOD INDUSTRIAL POLICY There is now a range of literature showing the strong relationship between competition and productivity growth.1 The core relationship is explained through three mechanisms: (i) within firm effects dealing with issues like principal – agent problems, cost reduction within the firm and questions 1 See, eg., Aghion and Griffith (2005) and OFT (2007c). 300 Competition policy and competitiveness in Europe 301 of X-inefficiency; (ii) between-firm...
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