Competition Policy and Poverty Reduction: A Holistic Approach

Abstract

This paper examines the role of competition law and policy as tools for poverty reduction and development. The authors put forward five related principles, building upon the important work on related issues that has been done by the OECD, the International Competition Network (ICN), UNCTAD and civil society organizations such as CUTS in recent years, in addition to the earlier work done on these topics in the WTO Working Group on the Interaction between Trade and Competition Policy when that body was active from 1997 through 2003. Together, these principles comprise the "holistic approach" to competition law and policy which is referenced in the title of the paper:

•First, the focus of policy makers in using competition policy as tool for poverty reduction should be on approaches that are relatively easy to implement but have a track-record of being effective and economically sound.

•Second, for competition policy reforms and legislation to be successful, public acceptance and support is critical and must be an essential focus of related initiatives.

•Third, to serve as an effective tool of poverty reduction, competition policy needs to address the needs of the citizens of poorer societies in their capacities as producers (and, therefore, as users of extensive input goods and services, including public infrastructure), in addition to their capacities as final consumers/households.

•Fourth, it is posited that "competition policy" is more than just "what competition agencies do" and includes the full spectrum of measures that governments employ to enhance competition and improve the performance of markets.

•Fifth, in order to address the challenges posed by the changing landscape of competition policy worldwide, new forms of international co-operation may need to be considered.

The paper then develops the application of these principles with respect to five specific areas in which competition policy can contribute to poverty reduction, namely: (i) the reform of public and business infrastructure sectors, particularly in the context of developing and transition economies; (ii) the complementary roles of competition law enforcement and market liberalization in public procurement markets; (iii) various related dimensions of competition policy as they relate to public health objectives; (iv) the addressing of possible monopsonistic practices in international supply chains that may affect the ability of developing country producers to reap gains from participation in international markets; and (v) measures to address the enduring problem of international cartels which, despite an impressive record of prosecutions by developed jurisdiction competition agencies over the past decade, continue to impose substantial costs on developing economies. The paper concludes with some observations regarding the future of international co-operation in the competition policy sphere.

Keywords: Competition policy, poverty reduction, development, infrastructure reforms;,international trade, government/public procurement, public health, international supply chains, international cartels, international co-operation

JEL Classification: F1, F13, F5, H5, H51, H57, I1, I18, K2, K21, K23, O13, O19, O24