Trade Laws, Antitrust Laws, and the Process of Economic Integration

By Reif, Timothy M.; Bacher, Gary E. | Law and Policy in International Business, Summer 1996 | Go to article overview

Trade Laws, Antitrust Laws, and the Process of Economic Integration


Reif, Timothy M., Bacher, Gary E., Law and Policy in International Business


I. COMMENT THESIS

In a recent article,Judge Diane Wood, commenting on the evolution of international trade rules since World War II, culminating most recently in the Uruguay Round trade agreements, correctly noted:

As [government rules relating to trade] have been addressed, however, it

has become apparent that private restrictions can also have an important

effect on the openness of the international trading system. And one

natural place to look for rules relating to private restraints of trade is

the antitrust laws, which are designed to assure that markets operate

competitively.(1)

The thesis of this comment is twofold. First, efforts to advance harmonization or "convergence" of national rules regulating competition can reach their full potential only if two sets of preconditions--economic/commercial and political--exist to support such harmonization or convergence. Second, governments can and should take concrete steps to help create these preconditions.

In effect, there are three dimensions to integrating rules relating to domestic commercial competition with trade rules. The first dimension is economic: there must be effective commercial competition within and across borders. The second dimension is political: the existence of such competition must create strong political constituencies to support regulatory integration. Finally, there is the legal dimension: effective rules must be negotiated. In our view, the economic/ commercial dynamics will largely determine the degree of political support for certain types of trade/antitrust remedy integration, which in turn will have a major impact on the legal/negotiating dynamics.

In other words, if markets are effectively segmented for economic/ commercial reasons, there will be both sound commercial reasons and a political imperative to maintain adequate trade remedies for activities--including, but not limited to, price discrimination without open markets and effective competition. On the other hand, if markets are effectively integrated and competitive such that businesses are unable, through practices like international price discrimination, to obtain national advantages, then the economic and political preconditions for an effective negotiation over integrating trade and competition policy rules will have been laid.

II. ROLE OF THE SUBSTANTIVE HARMONIZATION AGENDA

The next question is how prescriptions for legal integration fit into the three-dimensional framework outlined above. In their paper, Harmonization of Competition Policies in a Regional Economic Integration, Richard Cunningham and Anthony LaRocca provide a useful analytic framework for advancing legal integration, specifically for evaluating specific areas of antitrust law and enforcement practices that (1) have a greater impact on trade flows and therefore would make good candidates for convergence or harmonization in the context of regional integration; or (2) have a greater potential for convergence or harmonization in that context, given the nature of the activities involved. In general, we are in agreement with their analytic framework.

However, we think there needs to be a greater accounting of the current system of trade and competition policy rules to assess how ripe that system is for change. In particular, before countries can begin to discuss convergence of competition policy, there are four issues that must be explored.

First, the current system is set up to reflect real differences in the way national economic systems function or are regulated, including fundamental differences concerning the objectives of competition policy. So long as these differences exist, there will be hard and fast limits to the extent of possible convergence, let alone harmonization. In particular, procedural and limited agreements to coordinate enforcement measures may succeed, whereas efforts to converge substantive law standards are likely to stumble. …

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