Competition Policy in the Context of Economy-Wide Reform

DRAFT * The views expressed in this paper are personal and should not be attributed to the World Bank. 1 Introduction A major policy issue for many developing countries is to foster further integration into the world economy. This note discusses the role competition policy can play in the context of efforts to promote the restructuring the economy, focusing in particular on the relationship with industrial and trade policy and on the potential role of international agreements and cooperation (both multilateral and regional). The paper is structured as follows. Section I defines terms and discusses the relationship between trade, competition and industrial policies. Section II provides an overview of the " basics " of competition policy, drawing some implications for " best practice " from crosscountry experience. Section III discusses the role a competition authority can play in the process of economic transformation, emphasizing its potential as an instrument to promote transparency and assist policymakers and civil society in assessing the effects of government policy. Section IV discusses one particularly important dimension of the interface between trade and competition policyensuring that the competitive effects of instruments of contingent protection of the type allowed by the WTO are considered by policymakers. Section V briefly reviews options for international cooperation in the area of competition policy. Section VI concludes. An appendix provides a illustration of the types of indicators that might be compiled to monitor developments in the " state of competition " in the economy, using data for Slovakia for concreteness.