Competition Policy: The Comparative Advantage of Developing Countries

Law and Contemporary Problems, Dec 2016

Eleanor M. Fox

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Competition Policy: The Comparative Advantage of Developing Countries

COMPETITION POLICY: THE COMPARATIVE ADVANTAGE OF DEVELOPING COUNTRIES ELEANOR M. FOX 0 1 0 Copyright © 2016 by Eleanor M. Fox. This article is also available online at 1 Walter J. Derenberg Professor of Trade Regulation, New York University School of Law. The author thanks Tim Büthe and Umut Aydin for their extraordinarily helpful suggestions. She thanks the Filomen M. D'Agostino and Max E. Greenberg Research Fund for generous support. 1. See Umut Aydin & Tim Büthe, Competition Law & Policy in Developing Countries: Explaining Variations in Outcomes; Exploring Possibilities and Limits , 79 L , USA I - 70 their own terms. In tailoring law to their needs, they have a flexibility unconstrained by path dependence.3 This article makes a similar but different claim regarding the outward-looking aspects of developing countries’ competition regimes. The claim is even more dramatic: Developing countries are better incentivized than are developed countries to craft workable solutions at the trade-and-competition interface in both regional arrangements and the world system. The argument starts from the observation that a huge swath of their market problems are cross-border problems, and that law and norms would ideally be commensurate with the scope of the affected market. The developed world is straight-jacketed or blindered from addressing the problems that arise from the gap between global markets and national-only competition regimes. A century of strategies fueled by vested interests keeps vision at a national level. In contrast, developing countries cannot afford to ignore trade-and-competition problems. Whereas the United States (the principal developed country example used throughout this article)4 functionally segregates the disciplines of trade and of competition and even cultivates their separateness,5 developing countries feel the immediate impact of restraints on competition, trade, and investment—local and foreign, public and private—as one juggernaut.6 They naturally develop integrated visions. For them, world connectivity requires an integrated vision. To say that developing countries face better incentives than do developed countries to consider workable solutions does not mean that they will design and pursue the better solutions. They face severe hurdles. Not least are lack of resources and human capital, as well as the political and economic contexts of their nations, which often include deeply embedded corruption and lack of trustworthy institutions.7 But the existence of hurdles does not detract from the fact of comparative advantage. This article is about the comparative advantages. 3. In keeping with its discrete confines, this article does not imply that developing countries are existentially free. Often they are saddled with histories of autocratic government, corruption, a privileged elite. See, e.g., MICHELA WRONG, IT’S OUR TURN TO EAT: THE STORY OF A KENYAN WHISTLEBLOWER (2009) (portraying a tradition where the regime in power lavished corrupt benefits on their own). Merely, given all of their handicaps, they do not also have the baggage of scores of years of specific competition law in place. They are free of this baggage. 4. The United States’ model is one of the two dominant models for antitrust in the world. It is not always in sympathy with the other dominant model, the European Union’s. In matters of unilateral conduct, U. S. law is more permissive. 5. See, e.g., I.M. Destler, U.S. Approach to International Competition Policy, in BROOKINGS TRADE FORUM 2006 395, 415–16 (2006). 6. Even their vested interests have a stake in supra-national norms that would limit multinational power. 7. See Michal S. Gal & Eleanor M. Fox, Drafting Competition Law for Developing Jurisdictions: Learning from Experience, in THE ECONOMIC CHARACTERISTICS OF DEVELOPING JURISDICTIONS: THEIR IMPLICATIONS FOR COMPETITION LAW 296, 304 (Michal S. Gal et al. eds., 2015). No. 4 2016] DESIGNING NATIONAL LAW FIT FOR DEVELOPMENT Developing countries are at many different stages of implementing competition law and policy. Some competition authorities, such as several in West Africa, are at earlier stages of development and may operate as ad hoc price control agencies when prices rise. Others are more mature and apply competition law principles credibly.8 Many of these agencies are still young agencies working to make their law relevant to their economies and people.9 Their law is still unformed or at least malleable. This part is addressed especially to young agencies whose law is unformed or malleable. The message is: The competition authorities and their nations have a unique opportunity to design the path of their law. They have the opportunity to consider what is good for their country, which usually means the implementation of rules of law that promote sustainable inclusive development and prioritize concerns of the poor. They have the opportunity to consider the wheel that has already been invented ( (...truncated)


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Eleanor M. Fox. Competition Policy: The Comparative Advantage of Developing Countries, Law and Contemporary Problems, 2016, Volume 79, Issue 4,