Buying Competition: Developing Competition Regimes Through a WTO-Compliant Generalised System of Preferences

Abstract

There is a well-recognised link among trade, trade liberalisation, an effective competition regime and development. A common view to the promotion of development of Least Developed Countries is to assist their economic growth through trade-facilitating measures. The trade liberalisation regime of the WTO is a prime example of this. An effective competition regime can also help a country’s development. However, the implementation of a competition regime is costly, and there are significant opportunity costs associated with expenditure on such a regime: the choice may be between competition and public health or education.

This article considers a trade related means which can assist developing countries with the financial burdens of a competition regime. The article’s insight is the use of a generalised system of preferences (GSP) to extend tariff concessions to developing countries in exchange for their undertaking to develop such a competition regimes. Under certain circumstances, WTO law permits GSP regimes as exceptions to the Most Favoured Nations cornerstone of the GATT. The first part of the article considers the links among trade, trade liberalisation, development and the need for an effective competition regime to ensure that gains from trade are appropriately distributed in a society. The second part considers the conditions under which a GSP system is legal under WTO law. The third part demonstrates how a WTO-legal, competition-focused GSP system can be developed. This article does not advocate for a particular regime. Rather the article noted that designing a regime to the specific circumstances of a beneficiary country is not only a requirement for WTO-legality, but is also prudent given the need for an effective regime to garner popular acceptance.

Keywords: Competition, Developing Regimes, Development, Generalised System of Preferences

JEL Classification: F10, K21, L40, L49