Columbia International Affairs Online: Working Papers

CIAO DATE: 11/2012

Freeing the Global Market: How to Boost the Economy by Curbing Regulatory Distortions

Shanker A. Singham

October 2012

Council on Foreign Relations


The U.S. economy faces major challenges competing internationally. One of the most worrisome is the growing use in China and other advanced developing countries of anticompetitive market distortions (ACMDs)—including regulatory protection that privileges specific companies—which put foreign competitors at a disadvantage. ACMDs are government actions that give certain business interests artificial competitive advantages over their rivals, be they foreign or domestic, to the detriment of consumer welfare. These market distortions are especially damaging to the industries in which the United States enjoys the greatest comparative advantages, but they are also harmful to the long-term prosperity of developing economies and cost the global economy trillions of dollars. To combat ACMDs, the conventional trade policy approach of focusing on the removal of narrow market access barriers is inadequate. Trade negotiations traditionally involve countries removing domestic barriers protecting import-sensitive industries in exchange for greater access abroad for successful export industries. Opposing trade ministries are the only parties at the negotiating table. Yet this approach does not build competitive markets and drive through regulatory reform. Instead, the United States and other countries should initiate new international negotiations that bring to the table those who advocate for exporters (typically trade ministries) and those who advocate for domestic consumers and competing firms (typically competition agencies). Such negotiations would have the goal of maximizing consumer welfare, using competition to deliver more and better goods and services at lower prices.