COMPETITION POLICY AND INDUSTRIAL POLICY

1
COMPETITION POLICY AND INDUSTRIAL POLICY

• RASHAD CASSIM
• Trade and Industrial Policy Strategies (TIPS)

2
Competition Policy and Economic Development

• Growth Dependent on Increasing Efficiency and
  Productivity
• Does not Guarantee Equality
• Efficiency
• Education
• Infrastructure investment
• Trade liberalisation
• Contestable Markets (competition policy)

3
Growth Challenges in South Africa

• Competition Policy in the Context of Economic
  Growth
• Growth Predicament in South Africa
• Sources of Low Growth and High Inequality
• Prices and Mark-ups in the Economy

4
Industrial Policy

• Messy Concept
• Text Book Definition
• Productivity effect
• Allocative effect
• Investment effect
• Market Failure
• Environment
• Education

5
Industrial Policy Heterodox Approach

• Does not differ in aims but instruments
• Targeting
• Subsidies
• Procurements
• Tariffs
• Price-distortions

6
Policy Instruments

• First Best?
• Product Markets
• Factor Markets
• Trade Facilitation
• Trade Policy
• Competition Policy

7
Tensions

• Conflict or tension revolved around
  inter-temporal problem in the long run you want
  competition but in the short run it may be
  politically feasible to compromise on
  contestability
• The analogy of Infant Industry protection
• Competition Policy to offset distortions (entry
  and exit) created by industrial policy

8
Competition Policy in a Closed/Open Economy

• A liberal trade and investment policy stance is
  the cheapest and most effective competition
  policy instrument available to a government.
• Limitations
• non-tradeable sector is distorted,
• distribution networks are a problem

9
Trade Policy/Competition Policy

• For Trade Policy to be an effective competition
  policy several conditions need to be met.
• Naturally Tariffs are at 0
• Services markets or non-tradeables are
  competitive both in national and international
  markets
• Natural transport costs in competitive markets
  are low.
• Conditions where natural monopolies do not exists
  or effective regulation is in place.

10
South Africas Trade Regime

• Moderately Protected small middle-income economy
• Tariffs high in parts of the economy
• Services markets highly distorted in telecom,
  transport and distribution.
• Liberalisation in goods and services important
  for competition policy.

11
Conclusion

• South Africas greatest industrial policy
  achievement the establishment of a working
  competition policy
• First best policy instruments is ideal and we
  must recognize this against the complexities of a
  highly politically charged society (short-run
  cost to the economy)
• More research needs to be done on the links
  between competition policy and distributional
  effects.