Export Cartels : A Developing Country Perspective

Export cartels are exempted from the competition (antitrust) laws of most countries, but this exemption has been controversial. In recent debates on the interaction between trade and competition policy in the context of a possible WTO agreement, some scholars and several WTO members have condemned such cartels, while others have argued that they allow efficiency gains that actually promote competition and trade. After summarising the contending views, and also the scanty theoretical literature on the subject, this paper reviews the treatment of export cartels in various jurisdictions. It goes on to compile the limited empirical evidence that is available on their prevalence, efficiency justifications, and effects on international trade. A detailed case study then recounts the efficiency claims made by one U.S. export association which ran foul of antitrust agencies in four different jurisdictions during the 1990s, and the reasons given by those agencies for rejecting them. Insights from economic theory are then applied to the various arguments for and against export cartels, suggesting criteria that could help to determine their validity and an importing country's best response. This implies that importing countries should evaluate foreign export cartels on a case-by-case basis under a rule of reason. However, most developing countries will be constrained by a lack of technical expertise and limited enforcement capacity. The paper therefore concludes by proposing a novel approach, based on parallels with anti-dumping procedures, that would reduce the evidentiary burden of prosecuting both multi-country international cartels as well as foreign export cartels based in a single country