Maximizing consumer welfare in Latin America

28 December 2015

‚ÄčThis year's meeting of the Working Group on Trade and Competition of Latin America underscored the importance of competition policy to ensure that consumers draw the maximum benefits from trade.

Competition policy is an excellent complement to trade policy in bringing about inclusive development.

This is because the benefits consumers draw from trade are maximized when large-and competitive-markets are in place.

Intra-regional trade stimulates innovation and fair competition, leading to the availability of a wider range of high quality products at more competitive prices.

Regional integration agreements in Latin America have reduced tariff rates for goods traded within the region, yet intra-regional trade remains one of the world's lowest. It currently stands at 18% compared to 63% in the European Union. 

The complementary roles of trade and competition for consumer welfare was the main topic of discussion at the Fifth Annual Meeting of the Working Group on Trade and Competition of Latin America and the Caribbean, hosted by UNCTAD and the Latin American Economic System (SELA).

Over 60 representatives from national and international competition authorities from the region attended the meeting, held in Manta, Ecuador, from 2 to 3 December 2015.

At the Opening Ceremony, Xavier Lasso, Ecuador's Deputy Minister of Foreign Affairs emphasized that "now is the time for Latin American and Caribbean countries to bring about real change through the integration of competition and trade policies."

Ambassador Pascal Décosterd of Switzerland stressed that, by integrating competition and trade policies, "UNCTAD, and especially its COMPAL Programme, plays a strategic role in promoting policy coherence on trade and competition in the region and beyond".

The meeting highlighted the need for trade and competition authorities to work together towards a more integrated and harmonious model of economic and social development.

UNCTAD asserted that for trade agreements to be effective and have a positive impact on consumer welfare will require a competition law that prevents international cartels from forming and keeps dominant firms from abusing their market power.

During the two-day meeting, participants examined the regulation of competition within the framework of regional integration agreements and identified avenues for benchmarking best practices. In the case of the European Union, for example, competition law is the cornerstone for economic integration, and currently all the free trade agreements signed by the EU contain provisions on competition law.

Now that tariffs are at a record low, other measures are attracting policy makers' attention such as non-tariff measures/bureaucratic barriers. These are relevant issues for both trade and competition authorities.

The meeting looked at how the current regulation of intellectual property affects competition enforcement-an issue that is especially relevant when designing policies for the production of pharmaceutical products.

Participants drew attention to the issue of companies using intellectual property rights to delay the arrival of generic medicines to the markets of poor countries, where less-costly alternatives to brand medicines are desperately needed to improve the general population's access to medication.

Discussions also focused on the challenge that the region's large informal sector poses for both competition and trade policies. The informal sector may cause fiscal, security, health, and unfair competition issues.

Participants agreed that only a coordinated approach can ensure that the process of formalizing informal business is smooth and positive. A few countries, including Jamaica and Paraguay, explained how certain social and administrative measures can facilitate the integration of the informal sector into the formal economy.

UNCTAD, SELA and Ecuador have co-organized the Working Group on Trade and Competition since 2011. It is the only forum in the world that jointly addresses the issues of trade and competition.