Trading Market Access for Competition Policy Enforcement

35 Pages Posted: 20 Apr 2016

See all articles by Bernard Hoekman

Bernard Hoekman

Robert Schuman Centre for Advanced Studies; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); Centre for Economic Policy Research (CEPR)

Kamal Saggi

Southern Methodist University (SMU) - Department of Economics

Date Written: December 2004

Abstract

Motivated by discussions at the World Trade Organization (WTO) on multilateral disciplines with respect to competition law, Hoekman and Saggi develop a two-country model that explores the incentives of a developing country to offer increased market access (by way of a tariff reduction) in exchange for a ban on foreign export cartels by its developed country trading partner. They show that such a bargain is feasible and can generate a globally welfare-maximizing outcome. The authors also explore the incentives for bilateral cooperation when the developing country uses transfers to "pay" for competition enforcement by the developed country. A comparison of the two cases shows that there exist circumstances in which the stick (the tariff) is more effective in sustaining bilateral cooperation than the carrot (the transfer). Furthermore, the scope for cooperation is maximized when both instruments are used. An implication of the analysis is that developing countries have incentives to support an explicit WTO prohibition of export cartels.

This paper - a product of Trade, Development Research Group - is part of a larger effort in the group to analyze issues on the agenda of the WTO.

Suggested Citation

Hoekman, Bernard and Hoekman, Bernard and Saggi, Kamal, Trading Market Access for Competition Policy Enforcement (December 2004). Available at SSRN: https://ssrn.com/abstract=636608

Bernard Hoekman (Contact Author)

Robert Schuman Centre for Advanced Studies ( email )

Fiesole, Tuscany
Italy

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Kamal Saggi

Southern Methodist University (SMU) - Department of Economics ( email )

Dallas, TX 75275
United States
214-768-3274 (Phone)
214-768-1821 (Fax)

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