Research Paper on Trade and Competition Policy

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The Department of Foreign Affairs and Trade (DFAT) today released a research paper entitled Trade and Competition Policy: A Survey of the Issues.

The paper, which aims to contribute to the evolving international debate on the linkage between trade and competition policies, represents a first step in promoting discussion of the issue of trade and competition policy among business, government and the wider community. It concludes that despite the growing consensus among policy makers about the value of competition, the potential gains from trade liberalisation initiatives are being constrained in many countries due to internal barriers to market access.

The main findings of the research paper are:

• While relaxation of border protection has liberalised trade significantly, many enterprises continue to encounter a remaining layer of protection - in the form of private anti-competitive behaviour - in seeking access to foreign markets. The paper points out that as we move to a borderless business world, it is important that international rules adapt to create favourable conditions for enterprises to operate on a global scale.
• Benefits to be derived from greater harmonisation of competition policies include:
  • Enhanced market access for Australian goods and services in those markets
    which are effectively closed due to restrictive trade practices;
  • Stronger world economic growth, flowing from efficiency gains generated
    by a reduction in anti-competitive domestic practices;
  • Reduced transactions costs and business uncertainty associated with inconsistency
    in the application of competition policy across jurisdictions; and
  • A more sophisticated framework for dealing with trade frictions arising
    from anti-competitive market conduct. Such a framework would limit the scope
    for renewed protectionist pressures.
• There are significant practical difficulties in moving to a harmonised international agreement on competition policy. These include the significant international differences in strength and scope of competition policies.
• Initially, convergence in national competition policies is more likely to progress through bilateral and regional agreements. As convergence within regions spread, these groupings might conceivably form the basis of a multilateral agreement.
• By world standards, Australia has in place a well-developed and sophisticated competition policy framework, and is thus relatively well-placed to adjust to any new regional or multilateral codes.

For further information, contact Tony Urbanski, Director, Trade Competitiveness Research Section, DFAT, on (06) 261 3061.