The extension of international trade disciplines in

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The extension of international trade disciplines in the GATT has clearly increased competition. As trade barriers have dropped, the extent of effective competition in domestic traded-goods industries has risen. Indeed, Justice Department guidelines now take the ex- tent of international competition explicitly into account, as do the agencies in charge of competition policy in other nations. However, the extent to which existing competition policy can be harnessed to increase trade liberalization is less clear-cut. Many of the private barriers to entry fall in the area of nonprice vertical re- straints to trade, where there is appropriately no presumption of illegality. In many instances vertical restraints, such as exclusive dealing arrangements or ownership interests in distributors, can increase efficiency and ensure product and service quality, even as they act as barriers to new entry. Competition, and not entry op- portunities for individual firms, is protected under U.S. antitrust law, and in the absence of evidence of restraints on competition in the domestic market it may be difficult to win a case on the grounds that a new firm cannot gain entry. One area in which competition policy may have beneficial results is antidumping policy, the most prominent of U.S. policies against unfair trade. In the United States, duties are assessed on imports sold at ‘‘less than fair value,’’ in other words, at a price that is ei- ther less than the price at which the good is sold in the home mar- ket, less than the sales price in a third-country market, or less than the calculated cost of production. If dumping is found, and if the dumped goods are determined to cause injury to the domestic industry, duties are assessed to bring the price of the goods up to ‘‘fair value.’’ There are two rationales for antidumping laws. The first is that the sale of imported goods at less than fair value may be part of a strategy of predatory pricing, designed to force American com-
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247 petitors out of business. The second rationale, and one that directly addresses why only foreign firms are subject to antidumping proce- dures, is that dumping arises from an asymmetry in competitive conditions between the home market of the dumping firm and the market in which goods are sold. Restricted competition in the dumper’s home market creates a situation in which dumping is profitable, creates opportunities for the dumping firm that are not available to firms based in the more competitive market in which goods are dumped, and is therefore seen as unfair. Recent advances in trade theory suggest that such advantages may be possible, de- pending on the competitive characteristics of the industry. The value of a competition policy approach is that it may allow a more careful distinction between pricing practices that are unfair and those that simply reflect normal cyclical and market vari- ations. A well-developed body of antitrust law exists to deal with predatory pricing. The courts consider such factors as the size and
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  • Winter '15
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