Trade, Transparency and Competition: FTAA and CER

This paper shows that asymmetric information, entry barriers and market power are the basic sources of anticompetitive behavior and argues that trade liberalization is a necessary but not sufficient condition to foster competition in the domestic market of small economies. This statement implies a challenge to the Free Trade Area of the Americas (FTAA) initiative, as 22 countries in the Western Hemisphere do not have competition policy institutions. After highlighting some aspects of the US antitrust experience over the last 25 years and indicating that anticompetitive behavior is not related to market size, the paper presents an analytical framework for dealing with transnational antitrust cases. Finally, it reviews the processes of economic reform in Australia and New Zealand to show that the Closer Economic Relations Agreement (CER) between these countries provides lessons that are useful for addressing the FTAA challenge. 1