Law and Economics of Industry Policy: Disciplines from Trade and Competition Law

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 zastava_srbijaPravnoekonomski pogled na industrijsku politiku

Lecturer: Professor Yane Svetiev (Bocconi University, Milan, Italy)
Hours of lectures: 6

The course will provide an overview of

  • the economic reasons for governments to pursue industry policy and the problems associated with effective industry policy implementation;
  • the legal disciplines that constrain the conduct of national industry policy inserted in regional trade agreements, such as the European Union (EU), the Stabilisation and Association Agreements (SAA) and the Central European Free Trade Agreement (CEFTA).

As such, this will be an interdisciplinary course that will explore to what extent regional trade agreements relevant to the countries of the Western Balkans constrain their ability to implement the kind of economic policy that has traditionally been seen as important for achieving the goals of economic development.  The course will therefore provide knowledge and skills that will be relevant beyond the immediate context of the nations that are on the path to membership of the EU to developing countries contemplating the conclusion of bilateral or regional trade agreements including both trade and competition law disciplines.

The first part of the course will explore the meaning of industry policy and the economic reasons for implementing industry policy. We will also examine examples of the ways in which countries have used industry policy, both with and without success, to achieve goals of industrialisation and economic development.  Such examples could include the former socialist economies of Eastern Europe, as well as the peculiar case of the former Yugoslavia, but also the prominent cases of the developmental state in East Asia (Japan, South Korea) and more recent transition economies such as China and Vietnam.  Our focus will be on how the development economics thinking has changed over time about the importance and viability of state industry policy to achieve both import substitution and export promotion.  We will also examine how the practice of industry policy has been influenced by both changing economic thinking and the different degree of international economic integration.  The key question that we will address is whether economic integration puts a limit on industry policy or whether it makes industry policy an even more important aspect of government economic policy.  In this context, particular emphasis will be placed on one of the key Copenhagen criteria for accession to the EU: the ability to withstand the competitive pressures of the internal market.

The second part of the course will focus on the legal disciplines included in regional agreements (such as SAA and CEFTA) mimicking those in the EU Treaties that have a significant effect on the conduct of industry policy.  In particular, we will see how trade (or free movement) law affects import substitution policy and examine whether any import limiting strategies remain possible for signatories to such agreements.  On that specific topic, we will study some types of industry policy that have been specifically addressed in the caselaw of the Court of Justice of the EU.  The key economic policy question for signatories is whether the restrictions on import substitution policy are likely to be offset by the opening up of new markets?  Furthermore, are businesses from a signatory country likely to be able to take advantage of new market opportunities in the absence of any local industry policy that gives them the capacity to do so?

The final part of the course will examine the practice of export promoting industry policy, including the prominent examples of countries that have used such policies to capture international markets as a key strategy for achieving economic development.  Such strategies have ranged from providing market information and marketing assistance, to the use of industry associations to increase local production and distribution capabilities to all-out export cartels, quite aparat from the provision of direct subsidies to exporting firms.  In this part of the course, the students will use some of the skills already developed in the courses on trade (free movement) and competition law.  In particular, the SAA and CEFTA provisions prohibit (i) all Agreements between undertakings, decisions by associations of undertakings and concerted practices between undertakings which have as their object or effect the prevention, restriction or distortion of competition; (ii) abuse by one or more undertakings of a dominant position in the territories of the Community or a SEE country as a whole or in a substantial part thereof; (iii) any State aid which distorts or threatens to distort competition by favouring certain undertakings or certain products. In addition, mirroring the equivalent EU Treaty provisions, SEE countries are required to progressively adjust any state monopolies of a commercial character in a way that eliminates discriminatory conditions.  Students will be asked to analyse some typical export promotion or local infrastructure policies and whether they may be found to violate such disciplines.