WORLD TRADE
ORGANIZATIONWT/WGTCP/W/143
2 August 2000
(00-3170)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM TRINIDAD AND TOBAGO
The following communication, dated 12 June 2000, has been received from the Permanent
Mission of Trinidad and Tobago with the request that it be circulated to Members.
_______________
Developing and Implementing a Competition Regime:
Challenges Faced by Small Open Economies
I. INTRODUCTION
The Government of Trinidad and Tobago is committed to developing a competition regime to
support its extensive liberalization programme, and is currently drafting a law.  At the same time, the
community of states to which it belongs, th e Caribbean Community (CARICOM), has recently
formalized a competition regime for the member states, embodied in Protocol VIII amending the
Treaty of Chaguaramas by which CARICOM was set up.  There is therefore a will in the region to
legislate and implement competition law.  Yet, the on ly country in this community of states that has
any experience or expertise in the field is Jamaica, where a limited competition law was enacted in
1993.  The region is faced with many difficulties as it proceeds to implement competition law.
This paper highlights the peculiarities, problems and concerns of small open economies when
introducing a competition regime.  The paper first outlines the main objective and elements of the
CARICOM Competition Policy, and then focuses on the task of implementation.  It evaluates possiblebenefits and costs for a small open economy of having a competition regime, and poses some
suggestions for possible solutions.
II. THE CARICOM COMPETITION POLICY
The development of a competition regime in CARICOM is part of the larger policy
framework of the creation of a CARICOM Single Market and Economy (CSME).  The CSME is the
logical goal of the integration movement that started in the English-speaking Caribbean, but now
embraces Suriname and Haiti.  The creation of the CSME at this time is also a very important
response by the region to its increasing marginalization in the globalizing world-economy.  Through
the creation and implementation of the CSME, it is hoped that firms will grow as they take advantage
of the expanded market, and become more competitive internationally.
The basic goal of the competition policy regime is to ensure that the benefits expected from
the establishment of the CSME are not frustrated by anti-competitive conduct.  The regime coversWT/WGTCP/W/143
Page 2
horizontal and vertical anti-competitive acts, and abuse of dominance.  It does not require regulation
of mergers and acquisitions.  A Regional Competit ion Commission is to be created and members of
the CSME are required to enact harmonized competition laws and to set up national competition
authorities.  The Caribbean Court of Justice will be the Court of Appeal against decisions of the
Commission.  Details of the CARICOM Competition Policy are available on the CARICOM website(http://www.caricom.org ) under Protocol VIII.
III. IMPLEMENTATION CHALLENGES
1. Trinidad and Tobago, and the region as a whole, face a daunting challenge in
implementing the competition regime.  These challenges include the development of
skilled human resources and a culture of competition, and finding the financial
resources needed to administer and implement the competition law.
2. The actors in the market have little or no knowledge of competition law and its
impact on their interests.  Competition Authorities rely on consumers and competitors
to keep a watchful eye for possible anti-competitive behaviour that can adversely
affect their interests, and report these to the Authority.  This culture of competition
will have to be inculcated into the marketplace through an intensive educationprocess.
3. Training of lawyers, economists, judges, trade experts and others will be needed to
staff Competition Authorities, and the CARICOM Competition Commission, and to
service the private sector.  At present, only Jamaica has a small cadre of lawyers andeconomists with competence in competition law.  Even with training, these
Authorities would lack experience in the initial years, and a learning curve period
would be expected with the accompanying difficulties.
Financial resources will be needed to fulfil the education and training programmes required
by 1 & 2 above, to house and equip the Competition Authorities, and to meet operating costs.  While
fines may contribute in some measure to meeting costs eventually, start up and running costs will
have to be found and maintained.  CARICOM economies are stretched financially as it is, with
options closing as the rules of trade adjust to the needs of the globalized economy.
IV. PECULARITIES OF SMALL OPEN ECONOMIES
CARICOM economies are still mainly monoculture producers, export-oriented and import
dependent.  This is the case with Trinidad and Tobago with petroleum and petroleum-related
products, Jamaica with bauxite and the Windward Islands with bananas.  These major income earners
are subject to the vagaries of the world economy, being commodity price takers.  Most countries are
highly dependent on tourism as the major employer and income generator.
A defining feature of these economies is the domination of the major productive sectors by
multinational corporations, the exception being the small banana producers of the Windward Islands;hence the socio-economic importance of this sector.  Local producers are largely micro-firms by
international standards, and family firms in many cases.  Small island economies do not have as large
a non-tradable sector as larger economies, the sector consisting mainly of bulky products.
Trinidad and Tobago has a very open trading system, being well advanced in the process of
deregulation and liberalization.  Most local products face competition from imports on terms of faircompetition, i.e., having no regulatory, standards or licensing barriers to entry.  This has had the effect
of disciplining local firms and enhancing their competitiveness.  The trade, investment and foreignWT/WGTCP/W/143
Page 3
exchange regimes are open, so even where there are few foreign competitors in product markets, the
threat of entry has a disciplinary effect on local firms.
While there are varying levels of openness of economies within CARICOM, this must be
understood in the context of the presence of micr o-economies within the Community, and the need to
protect high employment sectors in the interest of socio-economic security.  Even so, relative to othereconomies, these economies are largely open to competition through imports and foreign investment,
but dominated by multinational corporations.  These factors make the economies susceptible to the
negative effects of anti-competitive behaviour of foreign firms, whether resident or through imports.
Smallness of size means that there is a scarcity of skilled human resources and financial
resources to be able to service the ever-increasing demands of participating meaningfully in the global
society. CARICOM countries find it extremely diffic ult to participate in the many meetings and
negotiating fora in which they must be simultaneously present.  In many cases, a single or handful oftechnocrats service all trade issues.
This scarcity of human and financial resources is a significant factor which needs to be
considered when establishing a competition regime.  There would be serious constraints in the smaller
territories of CARICOM to develop and staff competition authorities in every territory.  Jamaica has a
dedicated Fair Trading Commission, and Trinidad and Tobago proposes to set up an independent
Commission like Jamaica.  Such may also be th e case with Barbados and other larger economies in
CARICOM.  However, it may be necessary for micro-economies in CARICOM to consider setting up
competition units within Ministries, rather than dedicated competition agencies.
V. BENEFITS OF A COMPETITION REGIME IN SMALL OPEN ECONOMIES
There is no doubt that a competition regime could yield many benefits for small open
economies.  While the level of openness to international trade may provide sufficient disciplinary
effects on local firms, there may still be some anti-competitive conducts that merit scrutiny,
particularly in the non-tradable sector.  Ensuring th at competition is fair in this sector clearly redounds
to the benefit of small firms and new entrants to product markets, and to consumers.
Exposure to foreign anti-competitive acts with cross-border effects increases in small open
economies.  High dependence on imports leaves CARICOM countries highly exposed to the negative
effects of export cartels.  Large multinational corporations dominate these economies, and abuse of
dominance can be pervasive.  An open foreign investment regime with no balancing controls on the
behaviour of MNCs can benefit from a competition regime.
Within the context of the CSME, a competition policy regime would quicken the pace of
market integration by deterring the private sector from dividing the market and barring entry of
nationals from other member states.
VI. CONCERNS
There are some concerns which need to be explored further:
1. With the increased opening of the economies, could welfare-creating effects of
competition leak out of the economy if new entrants are foreign firms and they
displace local incumbents?  Because of the smallness of the economy, displacementeffects could be widespread and there could be social repercussions.  This concern
applies within the CSME with respect to the micro-economies, and in the wider
context of extra-regional and international trade.WT/WGTCP/W/143
Page 4
2. Will smaller economies be able to effectively discipline large MNCs, given the power
asymmetry?  In many cases, the GDP of the country is a fraction of the annual
income of the MNC.  A competition law becomes meaningless if it can only in theory
stop abuses of dominance.  New and creative ways of helping developing countries,
and smaller economies in particular, to benefit from a competition regime withrespect to cross border issues need to be developed, and this is a challenge in which
the WGTCP can assist.
3. Is merger regulation of relevance to smaller economies?  Openness means that local
firms have to compete at international standards in the domestic market.  The
majority of firms are micro-firms so there is a need to achieve critical mass for
developing economies of scale.  It is to be noted that there is no merger controlregulation included in the CARICOM Competition Policy.  However, Trinidad and
Tobago proposes to introduce merger control regulation.
It may be that smaller economies need to introduce competition law on a phased
basis, to make administering and implementation manageable, and to make the lawcompatible with the level of development.  In older regimes, merger control
regulation was introduced after they had had time to gain experience in dealing with
cartels and abuse of dominance.
VII. COOPERATION ISSUES
The Government of Trinidad and Tobago supports the need for cooperation on competition
issues, particularly because our openness makes us vulnerable to cross-border effects.  Bilateral
cooperation with its major trading partners would provide the depth of modalities for cooperation
needed in dealing with case specific issues, and provide a framework for developing trust and thus
deepening exchanges.
At present, CARICOM is also negotiating at the Hemispheric level in the Free Trade Area of
the Americas, and cooperation is an important aspect of the proposed FTAA.  Such an agreement
would provide a framework for the region to develop a greater understanding of each member's laws
and its application, and the development of jurisprudence.  Moreover, it may provide easier
application of the law in cases of cross border effects.
Cooperation at the multilateral level can also be  an important modality for facilitating the
application of competition law in the domestic market, particularly as it relates to cross-border effects,
or the abuse of dominance of foreign resident firms.  For developing countries, the field ofcompetition policy is so new that not only an intensive education process is necessary, but also
in-depth study is needed of the issues and adequ acy, in the context of our economies, of the given
thinking and instruments for cooperation.
The existing models of cooperation agreements are premised upon the exchange between
Competition Authorities with equal strength and experience, and a history of informal exchanges.This would not be the case between new competition agencies in developing economies, and the
competition authorities in industrial countries.  Careful thought and creative ways have to be found to
make it possible for developing countries, and small economies in particular, to yield the benefits of
cooperation through new modalities that would address their needs.
If smaller economies were to gain from having a competition regime and cooperation
agreement, it would be necessary for the more ex perienced and powerful countries to go beyond the
exchange of information and assist in cases that affect those economies through positive comity.  It
may be necessary to extend that thinking to the possibility of developed countries lending assistanceWT/WGTCP/W/143
Page 5
and expertise to guide investigations involving large MNCs, and to take action against export cartels
in their domestic markets.  Otherwise, for smaller economies, the benefits of competition policy in
international trade would not be realized.
VIII.  PROPOSALS
Technical Assistance Needs
CARICOM countries would need technical and financial assistance to develop a cadre of
skilled human resource to administer and implement its competition law.  Such assistance could take
the following forms:
1. Scholarships for academic/professional training.
2. Internships at Competition Authorities to gain experience.
3. Visiting staff from experienced agencies to guide and assist, particularly in
procedural matters in the early years of new competition agencies.
4. Resource persons/financial assistance for training workshops targeted at specific
groups, such as lawyers, economists, and judges.
5. Assistance in facilitating workshops for producer and consumer groups.6. Guidance to develop an information data-base system in new competition agencies.
Continuing work of the WGTCP
The work of the WGTCP is important for developing countries since it contributes to the
education process.  It provides a framework for the exchange of information on national experiences,
and this broadens the scope of understanding in developing countries and contributes to their ownefforts at developing competition regimes.  This is particularly so in economies in transition.  Further,
through this forum, developing countries can make known the serious constraints which they face in
administering and implementing competition law, and thereby contribute to the process of developing
new thinking that accommodates those needs.
It would be useful for developing countries if the WGTCP examines the relevance of the
UNCTAD Set of Multilaterally Agreed Equitable and Rules for the Control of Restrictive Business
Practices.  This may contribute to developing guidelines in a possible multilaterally agreedcompetition policy framework.  This is particularly important to small open economies since the
major benefit to be derived from competition policy is the disciplining of anti-competitive behaviour
by MNCs.
Further, the WGTCP could contribute through its research by exploring issues of importance
to smaller economies such as:
1. The experience of industrialized economies in phasing-in aspects of competition law
and a framework for a managed approach to the introduction of competition law in
developing countries.
2. The issue of cooperation initiatives that go beyond current agreements and underlying
principles, and modalities which could deal more effectively with cross-border anti-WT/WGTCP/W/143
Page 6
competitive conduct with effects in small economies, given asymmetric power
relations.
3. Is there an issue of excessive market entry in weaker economies? What was the
experience of weaker economies in the EC, for instance? Could special anddifferential treatment be necessary in important socio-economic sectors in small and
micro economies?
Such information would be useful to better our understanding of the way forward, and assist
in making the CARICOM competition regime more effective.
__________