As New Zealand has taken the lead in ensuring that Asian Pacific Economic Co-operation (APEC) includes competition on its agenda, Commerce Commission Chairman Dr Alan Bollard has been invited to present a paper to the APEC workshop on competition and deregulation in Quebec City today.
The theme of Dr Bollard's paper is that in the Pacific rim competition policy reform on its own is not enough to increase a country's economic welfare. Both the country's trade policy - issues like import licensing and tariffs - and its industry policy, which includes government-imposed restrictions, regulation and planning of industries must also be liberalised for reform to have economic benefit.
"Trade liberalisation frees up international prices and signals; industry deregulation frees up domestic market signals; and competition policy reform allows for businesses to structure themselves in response to these signals," Dr Bollard said.
As these reforms progress in various APEC countries, it is becoming clear that other areas of government regulation can create new barriers to increasing economic welfare.
As tariffs, quotas and import licenses are removed, non-tariff barriers can be imposed by applying domestic laws, e.g. in the areas of labour, animal welfare and the environment, to overseas producers. The impact of these social and environmental constraints should be seen as relevant to trade policy.
Traditional trade policy only occasionally supports competition policy. Some countries use it in ways that are primarily anti-competitive.
For example, anti-dumping laws typically take into account the interests of the local producers competing with the imports, but not of consumers and industrial or commercial users of the imports. Import expansion agreements and export restriction agreements provide mechanisms for businesses to use for collusion that can lead to anti-competitive cartels and market sharing arrangements.
Likewise as government regulation and planning of industry is reduced, other types of regulation that impact on management roles and shareholder rights can be imposed. Quality regulation, occupational regulation, prudential supervisions, occupational safety and health, employment conditions, environmental law and ethnic promotion policies can impact on competition.
At the same time, competition policies are developing to focus more on prohibiting anti-competitive behaviour, rather than promoting what the law makers see as desirable behaviour and industry structures. Economic efficiency is becoming a goal as well as the more traditional goal of consumer protection.
Social and environmental laws do not necessary reduce economic efficiency, but they do have impacts on businesses. At times these laws can be deliberately used as new forms of barriers to new competitors entering markets and as ways of regulating industry. At other times these results may not be deliberate but the result of uncoordinated legislation.
For economic reform to produce the benefits it can, the other legal and policy areas that impact on it must also be considered.
Media contact: Communications Officer Vincent Cholewa
