Page 35 - Azerbaijan State University of Economics

THE ROLE OF COMPETITION ADVOCACY IN TRANSITION AND DEVELOPING ECONOMIES

often politically popular in the early years of new market economies,

which makes it difficult for the competition authority to advocate trade
liberalization. Indeed, there may be some valid policy reasons, including

social concerns, for temporary tariff and nontariff trade barriers in an
emerging market economy. In this context the competition advocate may

urge that protectionist measures be strictly related to restructuring pro-

grams and that they be temporary.
The role of the competition advocate in the formulation of trade

policy is often one of educator - informing policymakers and consumers
of the true costs of trade barriers. For example, in most countries the

agricultural sector enjoys significant political power and has succeeded

in erecting trade barriers that protect locally produced agricultural
products. Such measures are grounded in an important social policy – the

preservation of agricultural jobs – but often result in significant costs to
consumers. Such costs are likely to be relatively greater in transition and

developing economies, where citizens spend on average a greater
proportion of their income on food than in more developed countries.

Experts in the competition agency can make reasonable estimates of the

costs to consumers of such measures, which then can be compared with
expected benefits. If the costs are disproportionate compared with the

benefits, as they are likely to be, the agency can suggest that the social
policies embodied in the trade barriers be addressed in a more efficient

manner - for example, through direct government subsidies to
individuals who lose their jobs as imports increase.

It must be borne in mind that promotion of competition is a long-

term process. The competition agency will not always be successful in
its efforts to promote trade liberalization, but it should not be

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