Hard Core Cartels and Developing Economies

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Hard Core Cartels and Developing Economies

• Simon J. Evenett
• World Trade Institute
• Bern, Switzerland

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Cartels detected in the 1990s

• Prevalence 39 cartels
• Diverse membership 31 economies (including 8
  developing economies).
• Duration 24 cartels lasted at least 4 years.
• Overcharges on imports are not just the only
  adverse effect on developing economies.
• Exports are reduced too.
• Technology transfer slowed down also.

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The international vitamins cartel

• Worldwide cartel, 1989-1999
• US Federal authorities took action in 1999
• US fines exceeded 900 million EU fines of a
  similar magnitude
• What effects on developing countries?

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Vitamins cartel targeted nations without active
cartel enforcement
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Overcharges on vitamins imports 1990-1999

• Singapore 245.22m
• Hong Kong 178.48m
• Thailand 78.45m
• China 77.61m
• Indonesia 45.32m
• Philippines 29.94m
• India 25.71m
• Malaysia 22.41m

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Attacking cartels Lessons from the 1990s

• Cartels are conspiracies prosecution requires
  evidence of inter-firm agreements.
• Tough sanctions are important, and so are
  leniency or amnesty programmes.
• But what is the case for an international
  agreement?
• Cartel members meet and hide evidence abroad
  often in jurisdictions with no enforcement.
• Non-enforcement creates harms trading partners
• Enforcement actions against cartels reveals
  information that is of value to other trading
  partners.