Regulatory Practices and Their Effect on Market Access in a Globalizing Economy
Christchurch, New Zealand
April 30/May 1, 1999
Submission of the United States
The United States has, in recent decades, opted for competitive markets rather than regulatory intervention in a broad range of economic sectors. In markets that remain subject to some form of regulation, the United States has also tried to accommodate competitive concerns. This submission describes the U.S. experience with regard to the relationship between regulatory practices and competition. The paper then goes on to consider the impact of regulation on market access issues.
Relationships between Regulatory Policies and
Antitrust Law and Policy in the United States
Over the past several decades, the United States has developed a steadily increasing and broadly-based national commitment toward competitive markets and away from a regulatory approach to economic issues. Whether it is in the airline, surface transportation, energy, or telecommunications sectors, our policy preference for competition has prevailed time and again.
To the same effect, we have repeatedly opened our markets to foreign firms, often leading to renewed competitive vigor in industries that had previously been characterized by monopolistic or oligopolistic lethargy.
These policy choices have produced excellent results for U.S. consumers (which, of course, include both individuals and businesses). According to a recent economic study of the effects of deregulation, "the economic benefits from deregulation or regulatory reform have exceeded economists' predictions. The record shows that deregulation has generally led to lower prices, expanded output, and improved choices of service quality." More particularly, this study estimates that during the first ten years of deregulation, real prices decreased 27-57% in the natural gas industry, 40-47% in long-distance telephone service, 29% in domestic airline transportation, 28-58% in trucking, and 44% in railroad freight transportation. These results generally have been replicated in other economies where significant deregulation has occurred. As a recent OECD study explains, "[r]egulatory reform that enhances competition and reduces costs can boost efficiency, bring down prices, stimulate innovation, and help improve the ability of economies to adapt to change and remain competitive."
And drops in real prices are only a part of the story of the successes of economic deregulation in U.S. markets. For example:
- At one time, railroads were among the most heavily regulated of U.S. economic sectors, with the Interstate Commerce Commission (ICC) determining minimum and maximum rates, ordering certain kinds of price discrimination and forbidding others. Railroads were not permitted to compete with other transport modes by lowering prices or by improving service quality and raising prices, with the result that rail's share of freight transport was cut in half between 1929 and 1975, and the railroad sector was unable to earn returns sufficient to cover its cost of capital. Deregulation removed most of the restrictions on pricing and in particular permitted long-term contracting with rate discounts, with the result that rail tonnage continues to grow and profitability has improved dramatically.
- Formerly, the motor freight sector was also heavily regulated, with interstate carriers forced to apply to the ICC for permission to serve particular markets, travel particular routes, and charge particular rates, and with the burden on carriers seeking to enter particular markets to show that current service to the market was inadequate. The result was an inefficient motor freight industry, with high rates and suboptimum service (though still enough advantages to take market share away from the railroads.) Now that the United States has implemented essentially complete deregulation regarding entry and much more flexibility regarding pricing, this sector also has seen a dramatic improvement in service quality and profitability even as its real prices have fallen.
- Like trucking markets, U.S. airline markets were subject to strict entry controls and pricing regulations. The result here was wasteful competition in service quality -- simply a form of "rent seeking" -- as airlines earning profits on the supracompetitive, regulated prices competed them away by offering amenities to prospective travelers. Economic deregulation allowed for fare discounting and entry by smaller competitors, and competition now takes the form of both price and service competition, depending upon customer preferences, while the Department of Justice (DOJ) and Department of Transportation (DOT) continue to guard against both anticompetitive mergers and predatory behavior by entrenched incumbents.
- The U.S. telecommunications sector was at one time a giant near-monopoly, with AT&T providing most local service, most equipment, including household telephones (through its Western Electric subsidiary), and all long-distance service. In this case it was principally antitrust litigation rather than legislation that took account of evolving technological realities and created competition in equipment, long-distance service and the provision of internal telecommunications systems for large enterprises. With further technological development and the enactment of the Telecommunications Act of 1996, there is reason to expect even more competition in the telecommunications sector in the future.
Overview of U.S. Policy
The vast majority of the U.S. economy has either never been extensively regulated, or has been largely or entirely deregulated over the past 25 years. This not only has resulted in substantial benefits to U.S. consumers (as noted above) but has opened markets to foreign competition. Unlike competition-based frameworks, domestic regulatory regimes sometimes raise barriers to entry by both domestic and foreign firms, and in the latter case may impinge on market access opportunities. Thus, the relative lack of economic regulation in the U.S. economy has enhanced trade flows.
Significant regulatory mechanisms exist in a relatively small number of U.S. economic sectors. The relationships between U.S. regulatory policies in these sectors, on the one hand, and U.S. antitrust law and policy, on the other, have been and are varied and complex. There is a large literature that explains the legal, economic, and other policy aspects of these still-evolving relationships. In the United States, as in most other countries, the antitrust laws apply to private firm conduct unless a particular economic sector or particular type of business conduct has been exempted. Accordingly, as the deregulatory process has advanced in the United States, the scope of application of the antitrust laws has increased. A variety of antitrust treatment exists in those sectors that continue to be regulated. This is so because regulatory regimes and attendant antitrust exemptions have been created, not all at once, but from time to time over the 108-year history of the U.S. antitrust laws, because some of these regulatory exemptions are explicit and some implicit, and because -- given the strong U.S. commitment to competition -- the scope of such exemptions ordinarily covers only some of the conduct of firms subject to the exemptions. This submission will provide examples of particular regulatory schemes and their relationship to the antitrust laws.
Regulatory schemes in the United States, as elsewhere, traditionally have had objectives beyond (or other than) protecting competition, although current regulatory initiatives place far more emphasis on promoting competition and the free play of market forces than in the past. Industry-specific regulation is the responsibility of separate specialized agencies, such as the Federal Communications Commission or the Federal Energy Regulatory Commission. While, as noted, private firms are generally subject to antitrust law, they may also be subject to industry-specific regulatory requirements. Firms are not exempted from the antitrust laws merely because they are regulated, and compliance with both the antitrust laws and applicable regulatory requirements is often both possible and required. Indeed, there are very few, if any, commercial sectors of the U.S. economy from which antitrust disciplines are completely excluded.
In some situations, Congress has determined that antitrust law should be displaced by regulation, and thus has provided an explicit antitrust immunity. Even where there is no explicit exclusion of antitrust disciplines, there may be an implied exemption where necessary to preserve the integrity of a regulatory scheme. U.S. courts draw implied immunities narrowly, however, and find them only where required to avoid disruption of a comprehensive regulation scheme enacted by Congress. In certain cases, courts may also determine that a regulatory agency has "primary jurisdiction" over a particular issue and should be given an opportunity to deal with the issue before the court does so; this doctrine postpones, but does not supplant, court review of the antitrust claim. Finally, possible conflicts between antitrust enforcement at the federal level and regulation at the subfederal level are addressed by the "state action" doctrine, which provides that the federal antitrust laws do not apply to situations where a state government clearly articulates an affirmative policy to displace competition in a particular sector, and actively supervises the implementation of its policy by the persons subject to it. This doctrine does not, however, displace the antitrust laws where a subfederal agency merely tolerates, but does not actually authorize and supervise, conduct inconsistent with the federal antitrust laws.
Where, and to the extent that, antitrust exemptions exist, it follows that the U.S. antitrust agencies -- the Antitrust Division of DOJ and the Federal Trade Commission (FTC) -- do not have a law enforcement role to play. They may, however, have statutorily-provided roles in advising the relevant regulatory agencies on competition policy issues. As discussed below, even in the absence of an explicit statutory role, DOJ and FTC have long devoted substantial resources to competition advocacy, seeking to persuade regulatory bodies to seek procompetitive outcomes in regulatory proceedings.
Examples of Relationships between the Antitrust Laws and Regulatory Regimes
In order to facilitate discussion, we provide several examples of statutory and administrative relationships between the U.S. antitrust laws and regulatory regimes. These examples cover a wide range of relationships, including sectors (or parts of sectors) where regulation completely displaces antitrust law to sectors (or parts of sectors) where regulators and antitrust agencies each have significant enforcement authority. In the interest of brevity and focussed discussion, we have not described all regulated sectors, nor the entirety of the regulatory responsibility of those regulatory agencies, such as the Federal Communications Commission, that we do discuss. Rather, we have chosen some examples that demonstrate the range of the interplay between antitrust, competition policy, and regulatory policy in the United States.
For many years, intercity motor carriers of passengers (i.e., busses) were heavily regulated by the ICC. The FTC, among others, strongly urged Congress to deregulate the industry, and in l982 Congress did so to a significant degree. However, the ICC -- and now the Surface Transportation Board (STB) -- retains some regulatory oversight over the industry. Although entry into the bus industry can now be characterized as open, the STB retains jurisdiction to grant authority to operate to an applicant upon a showing of fitness. These applications are seldom challenged, and since 1982 the bus industry has experienced substantial growth in the number of carriers, primarily in the areas of charter and tour or special operations. Regular route bus service, in contrast, has experienced a decline in service as a result of competition from other modes of public transportation.
The STB retains authority to approve, disapprove, or approve with conditions mergers of motor passenger carriers, based on a public interest standard. In cases where the antitrust agencies believe a bus merger may be anticompetitive, they are statutorily authorized to file comments or recommendations with the STB, but the STB retains full authority to decide whether to approve the transaction.
The statutory scheme for review of telecommunications mergers is quite different from that for bus mergers. The Telecommunications Act of 1996 expanded the coverage of the antitrust laws by removing the ability the Federal Communcations Commission (FCC) previously possessed to exempt mergers of local telephone companies from antitrust review, thus furthering the U.S. policy of promoting local telecommunications competition. Any potential problems raised by this overlapping jurisdiction over proposed mergers have been eased by the longstanding and close working relationship between DOJ and the FCC; the two agencies work together to analyze the issues, consistent with applicable confidentiality requirements. DOJ provides the FCC with its competitive analysis, and the FCC may, if it chooses, condition its grant of approval on the relief obtained by DOJ through court order.
Although both DOJ and the FCC have a role in reviewing the competitive impact of proposed telecom mergers, the two agencies have distinct statutory responsibilities and missions that are reflected in substantive and procedural differences in their respective reviews. The FCC applies a "public interest" test under the Communications Act -- which includes, but is not limited to, competition concerns -- while DOJ applies the "may substantially lessen competition" test of section 7 of the Clayton Act. As a result of these and other differences, there may be -- but are not often -- proposed mergers that are not challenged by DOJ but that are prohibited or conditioned by the FCC. Given the agencies' somewhat different responsibilities, DOJ and the FCC have worked hard to ensure predictable results in particular merger transactions.
Electrical Power Mergers
The U.S. federal antitrust agencies and the Federal Energy Regulatory Commission (FERC) also have overlapping jurisdiction with respect to mergers among electric utilities. The antitrust agencies can sue to block an electrical power merger approved by FERC, and FERC can refuse to approve a merger that DOJ and FTC have not challenged.
FERC reviews mergers under a broad "public interest" standard. As in the case of the FCC statutory standard, this differs from the "may substantially lessen competition" antitrust standard of the Clayton Act. More specifically, while FERC must take into account competition considerations among other factors when considering a merger, it "is not bound to use antitrust principles when they may be inconsistent with [FERC's] regulatory goals. . . . [FERC's] analysis must sensitively recognize and reflect the distinct economic and legal setting of the regulated industry to which it applies." Reflecting increased attention to competitive concerns, however, in 1996, FERC issued a policy statement intended to ensure that mergers do not impede the development of fully competitive wholesale electrical generation markets; at that time, it announced that it would, consistent with its statutory mandate, analyze mergers under the DOJ/FTC Horizontal Merger Guidelines.
The DOT is the economic regulator in the air transport sector, applying varying degrees of economic regulation depending on whether the service is domestic or international. The U.S. domestic airline industry is largely deregulated -- and thus subject to the antitrust laws -- although DOT retains authority to regulate some aspects of domestic airline operations (including fitness, ownership, and advertising). DOT's regulatory authority over international aviation is more extensive. As a general matter, competition has forced U.S. airlines to become much more efficient, prices have decreased in real terms, and most consumers have more airline service available to them. Increasingly, as the United States and other countries negotiate "open skies" agreements, airline deregulation is becoming international in scope.
Responsibility for dealing with competitive concerns in the domestic air passenger sector is divided between DOJ and DOT. DOT has explicit authority to prohibit unfair and deceptive practices and unfair methods of competition -- statutory language identical to that in section 5 of the FTC Act. Concurrently, DOJ has statutory authority to enforce U.S. antitrust laws with respect to the airline industry, including (since 1989) mergers and acquisitions between U.S. airlines, and DOJ has taken enforcement action on several occasions. DOT, however, has the statutory responsibility for approving agreements among airlines that affect international air transportation, using a public interest standard, and to confer antitrust immunity upon such agreements. In such cases -- the proposed American Airlines/British Airways transaction is a good example -- DOJ often brings its antitrust expertise to bear in comments and recommendations to DOT. In this context of mixed regulatory and antitrust jurisdiction, DOJ and DOT necessarily have developed a strong, ongoing relationship at both formal and informal levels.
The interplay between the antitrust laws and bank regulatory statutes with respect to review of bank mergers also merits discussion. The four bank regulatory agencies have authority to approve or deny applications for mergers made by financial institutions under their respective jurisdictions. With regard to some such mergers, DOJ provides a statutorily required advisory report on competitive issues. DOJ has 30 days after regulatory approval to challenge any bank merger in court; if it does not do so, the transaction receives antitrust immunity.
While, as noted, the bank agencies consider competitive concerns in their merger decisions, they must also consider the public interest in meeting the "convenience and needs" of the community to be served, a standard which may lead to agency approvals of anticompetitive mergers. With respect to competition concerns, the bank statutes require that the bank agencies and DOJ apply the same standards, and DOJ and two of the agencies have published a joint document that outlines the bank merger review process. In a particular case, however, the bank regulatory agencies and DOJ may not necessarily use the same product or geographic markets, which may lead to different results at DOJ and the bank agencies. In addition -- reflecting the regulatory standard of review -- there is a special defense in bank merger cases brought by DOJ under the antitrust laws that allows an anticompetitive merger if the banks can show that the merger's anticompetitive effects will be clearly outweighed by the merged entity's ability to meet the "convenience and needs" of the community to be served. This defense has been successful in only one case. Once again, as a matter of law and practicality, this mixed regulatory and antitrust jurisdiction requires the banking agencies and DOJ to work closely together.
Where business conduct is clearly exempted from the antitrust laws, the U.S. antitrust agencies obviously have no law enforcement role to play. During the past 25 years, however, DOJ and FTC have played important roles in facilitating competition and assisting deregulatory efforts through competition advocacy in many different regulatory contexts. In its program of competition advocacy, DOJ seeks to further four goals: 1) to eliminate unnecessary and costly existing regulation; 2) to inhibit the growth of unnecessary new regulation; 3) to minimize the competitive distortions caused where regulation is necessary by advocating the least anticompetitive form of regulation consistent with the valid regulatory objectives; and 4) to ensure that regulation is properly designed to accomplish legitimate regulatory objectives. Similarly, the goal of the FTC's advocacy program is to prevent or lessen injury to consumers and competition that may be caused by government activities that interfere with the proper functioning of the marketplace, by advising appropriate government and self-regulatory bodies about the potential effects, both positive and negative, of proposed legislation, rules, or industry guides or codes.
DOJ and FTC engage in competition advocacy as members of task forces or interagency committees that formulate the Administration's policy on a number of economic issues. For example, both DOJ and FTC have participated in an interagency working group on electricity issues. FTC also is empowered to gather information and issues reports. Studies about regulatory issues by FTC staff have applied staff expertise about the operation of competitive markets to examine the economic consequences of regulation (and deregulation).
Some statutes provide avenues for competition advocacy by authorizing DOJ or FTC to participate in industry-specific regulatory proceedings or by requiring regulatory agencies to seek advice from the antitrust agencies on competition matters. For example, section 271 of the Telecommunications Act of 1996 requires the FCC to consult with DOJ regarding proposed entry by Bell Operating Companies into long distance services, and to accord "substantial weight" to DOJ's competitive evaluation. Even where there is no explicit authorization, regulatory agencies regularly request DOJ and FTC views on competition issues in regulatory matters.
Finally, U.S. antitrust agencies, like other federal and state agencies and private persons, may file comments in regulatory proceedings before federal and state regulatory agencies, offering their expert advice and views. These comments are filed with a wide variety of agencies on a wide range of regulatory issues. For example, in recent years DOJ and FTC have frequently filed comments with the FCC on such issues as the deregulation of AT&T's long distance telephone service and the extent of "effective competition" in cable television markets. Other comments have discussed issues pertaining to price and rate regulations affecting markets as diverse as liquor distribution and marine pilotage, and have opposed continued antitrust immunity for motor carrier rate bureau agreements. Entry questions have been addressed in such contexts as the allocation of airport landing and take-off privileges, rules for securities rating agencies, real estate closings, certified public accounting, local multipoint telephone and video distribution services, and automobile sales. The antitrust agencies' comments have evaluated the regulation of output through prime time access rules for television, "must carry" rules for certain satellite and open video system television retransmissions, and restriction of collision damage waivers for automobile rentals. Limitations on forms of professional practice have been topics of comments pertaining to optometrists' and veterinarians' commercial relationships with nonprofessionals, and to linkages between cemeteries and funeral establishments. As this nonexhaustive list demonstrates, such competition advocacy constitutes an important part of the antitrust agencies' goal of facilitating competitive environments in all aspects of the U.S. economy.
Impact of Regulatory Practices on Market Access Issues
From the trade perspective, the issue of regulatory reform has taken on much greater significance in recent years due largely to two, interrelated factors: globalization and international progress in reducing border barriers to market access. The initial focus of concern for trade policy experts tended to be on anti-competitive business practices tolerated or sanctioned by national governments and their effects on inhibiting access to foreign markets. However, some also assert that enterprise practices which distort or restrain international trade have become more evident as multilateral rules to address governmental barriers have been extended and elaborated. Moreover, with the growing integration of the world economy, many anti-competitive practices appear to have increasing trans-border dimensions and effects. Thus, the appreciation of the issue has come to encompass the potential for both private anti-competitive practices and related government actions (or inaction) to serve as barriers to international trade. Some dimensions of the issue include the role of state-owned monopolies, exclusive rights and regulatory policies.
In short, we can observe a gradual evolution in trade policy toward a broader understanding of the potential impediments to market access. This evolution looks beyond border barriers such as tariffs in order to secure other meaningful improvements in market access conditions, by turning attention to the range of barriers that affect conditions of competition in the market and that may restrict the ability of foreign firms to effectively operate in a given market. This broader notion of market access encompasses the degree of openness of a given market to competition from foreign firms, either through exports or investment. Thus, it looks not only to the "border" barriers to trade and establishment barriers for investors, but also to the nature of the conditions of competition faced by goods, services, service providers and investors once in the market in question.
The international business community also has highlighted the need to view trade, competition and investment issues as part of a broader market access concept. Increasingly, the business community has indicated that it sees a growing overlap between the traditional trade concepts of market access, investment policies and restrictions on foreign investment, and the ability to compete effectively once access and/or establishment is facilitated. In this regard, the 1996 Program of Action for the International Chamber of Commerce (ICC) states that "[i]t is no longer sufficient to focus on ‘trade' barriers as the primary impediment to doing business across frontiers. Instead, the focus must increasingly shift to a wider conception of market access -- to the international rules for doing business on a global basis."
This broader market access focus has given rise to a significant expansion of trade policy disciplines regarding barriers other than border tariffs. For example, GATT/WTO rules in areas such as standards, customs valuation, import licensing and government procurement have been in existence for nearly two decades, while rules on services, trade-related investment measures and intellectual property are relatively new.
While there may be widespread recognition of this broader perspective of market access, there are significant divergences of view among policy makers and within business and academic communities as to where this recognition should lead in terms of policy approaches. One fairly balanced conclusion, however, is that "the benefits that accrue from international trade liberalization will not be fully realized unless effective competition prevails in the domestic markets of trading nations, and fostering effective competition in domestic markets becomes more difficult and costly, if not impossible, unless international trade and investment is liberalized. Neither trade policy nor competition policy are individually sufficient to ensure effective market contestability and global economic efficiency."
Government-sponsored measures can also restrict domestic competition and impede market access by foreign competitors. One obvious example is state-owned monopolies and state trading enterprises, and any special rights or privileges which may be accorded to them by government. Government industrial policies also can be used to restrain market access by foreign competitors and even to pick "winners and losers" among domestic competitors. Less obviously, domestic regulatory schemes can create unnecessary burdens on competition and undermine the competitive process. This can happen when regulatory policy indirectly promotes monopolies and oligopolies, favors some domestic competitors over other domestic (and foreign) competitors, and fails to keep up with new technologies and becomes an inflexible restraint on change -- leading to entry and market access barriers and removing the need for companies to innovate and become efficient, and often concerning itself more with the health of incumbent firms than with competition (whether domestic or foreign) in the industry.
This intersection between competition restrictions and market access has made it necessary, in some cases, to address competition issues when pursuing trade liberalization. For example, it was clear to negotiators of the WTO Agreement on Basic Telecommunications Services that market access commitments without concomitant assurances of non-discriminatory access to distribution networks and other essential facilities maintained by previous monopoly suppliers would likely fail to yield the anticipated benefits of liberalizing trade. A further example is the inclusion of GATS Article VIII, which addresses abuse of monopoly or exclusive service supplier position that may restrain competition and thereby restrict trade in services. Finally, there is encouragement in the GATS "Understanding on Commitments on Financial Services" to the removal or limitation of a range of facially non-discriminatory measures affecting, for example, the range of services a given entity may provide, territorial limits on establishment/expansion of operations, and "other measures that...affect adversely the ability of financial service suppliers of any other Member to operate, compete or enter the Member's market."
Furthermore, the trade policy community has focused on the need to ensure that restraints on competition do not undercut the value of trade or investment liberalization once in place. In addition to being the subject of the recent dispute over access to the Japanese market for photographic film, this concern is evidenced in cases involving Article II of the GATT which indicate that the integrity of market access commitments needs to be secured against certain restrictive practices inside the border which are a function of market structure, such as exploitation of monopoly power.
In many cases, restraints on competition or market access arising from such governmental interventions or regulatory control are not subject to action by antitrust authorities or the courts pursuant to antitrust statutes. During processes of privatization or deregulation, however, competition policy can provide essential safeguards to ensure that private restraints do not replace government regulation as a means of limiting competition. An effectively functioning competition policy is needed to ensure that incumbent firms, having learned to work with regulators and each other to shape the rules of the game in the previous state-entity or regulatory environment, do not collude after deregulation to deter entry and maintain non-competitive prices. Moreover, an effective competition policy also needs to ensure that regulators do not tolerate private anti-competitive practices through either government inaction or acquiescence in issuing unwarranted industry-supported standards or regulations. In this capacity, competition policy also helps ensure improved market access conditions for foreign firms.
Some government-sponsored practices may be directed principally against foreign suppliers. In such cases, the issues are much the same as those described above, with the added dimension of discrimination. Thus, discriminatory regulatory structures, restrictions applying to foreign direct investment that do not equally apply to domestic investors in like circumstances, certain arbitrary standards and certain government procurement practices might all be examples of this type of issue. In each of these cases, the restrictions in question would make it more difficult for foreign firms to establish and/or compete effectively in the domestic market, posing a problem of market access from the trade perspective.
Again, should deregulation or liberalization of the government-sponsored restriction occur in these situations, the effective application of competition policy would also help safeguard the expected benefits from such liberalization policies, including those stemming from improved conditions of market access for foreign goods or services.
Possible Remedies for Market Access Problems and Their Implications
From the competition policy perspective, not all practices that restrict business choices represent a net loss to consumer welfare. Beyond those relatively few cases where restraints are clearly welfare-inhibiting (e.g., price-fixing and bid-rigging) and the practices are per se illegal, competition analysis employs a fact-specific, "rule of reason" approach, which attempts to weigh the potential losses of commercially restrictive practices against any potential efficiency gains that might result. Thus, in a given case, analysis might suggest that a contractual arrangement between a manufacturer and distributor creates sufficient efficiency gains (in terms of reduced organizational costs, provision of better services to consumers, etc.) to more than offset the potential risk of limiting competition by rival producers.
In a cross-border context, this relative weighing of gains versus losses undertaken by the domestic antitrust authority might be perceived differently by trade (and/or competition) policy officials in the foreign market. Reasons for this vary, and there is a thought-provoking discussion of this situation in Section III.3 of the Trade and Competition Policy chapter of the 1997 WTO Annual Report. Here, the author concludes that "the mere fact that a national competition policy decision negatively affects a foreign country does not in itself make it unwarranted from a world efficiency point of view. In order for the competition policy to be undesirable in this sense, it must involve a distortion, that is the negative consequences for foreign interests must exceed the benefits to domestic agents."
Trade policy officials will be concerned whenever there are restrictions, public or private, that meaningfully impede access to foreign markets. Moreover, these need not be discriminatory restrictions, as government or private barriers applying to all potential entrants in the case of either a domestic or an international market also would be viewed from a trade policy perspective as a potential or actual barrier to market access.
Where antitrust remedies do not address the restrictions in question, trade policy officials in the exporting or investing country will typically have a much greater interest in being involved in defining approaches to ensure that commercial conditions do not effectively inhibit market access. Given the fact that regulatory reform and the removal of market access barriers generally have pro-competitive effects that reinforce the functions of competition law and policy, there would appear to be a strong natural convergence of interest between trade officials and competition policy officials in the target market to advocate for such reform and/or liberalization. It is clear that reducing or removing barriers to foreign competition has the strong potential for stimulating competition in the domestic market and thus increasing welfare. This would be in addition to the global allocative efficiency benefits that derive from economies exploiting their comparative advantages through trade.
This would appear to be an area in which trade policy officials would have to play the major role both in bringing attention to the issues and devising possible approaches for addressing the practices that are restricting access from abroad. Here again, however, there may be some convergence of interests between trade officials of the exporting or investing country and host country competition policy officials in seeing the practices liberalized.
A government implements competition policy through policies intended to affect the environment for economic competition among firms. Economies with a history of commitment to vigorous antitrust enforcement and pro-competitive regulatory policies demonstrate that sound competition policy enforcement and minimally intrusive regulation do in fact protect the competitive process. This in turn stimulates innovation, promotes prosperity, increases efficiency, and contributes to advancements in further trade liberalization.
The relationships between regulation, regulators, antitrust law, and antitrust enforcement agencies in the United States are varied and often complex. The details, however, of the U.S. structure -- often the product of particular historical and economic circumstances -- should not obscure the most important point: in the United States over the past 25 years, there has been a consistent commitment by Congress, the antitrust agencies, and the regulatory agencies themselves to build and preserve a "competition culture," in which competition forms the central organizing theme of our economy.
Further, the phenomenon of globalized investment, production and commerce offers interesting new challenges to experts and policy makers within both communities. It is clear, however, that the varied and complex nature of these issues defies a simplistic or ready made solution. We must, therefore, be both methodical and attentive to valid policy and sectoral distinctions as we further refine our understanding of these issues.