Multinationals need to be put on a leash
The Group of 20 key economies must intervene to level the playing field Special to Gulf News
that operate globally. Moreover, the G20 cannot simply trust that global competition will correct on its own the tendency toward increased market concentration. As Andrew Bernard has shown for the US and Thierry Mayer and Gianmarco Ottaviano have demonstrated for Europe, international trade favours large superstar firms.
Indeed, globalisation may provide advantages to the largest and most productive firms in each industry, causing them to expand — and forcing smaller and less productive firms to exit. As a result, industries become increasingly dominated by superstar firms with a low share of labour in value added.
The US is a case in point. It is host to many of today’s superstar firms, and yet US antitrust regulators have not been able to restrain those firms’ market power. As the G20 looks for ways to address the problem of market concentration, it should take lessons from the US experience, and look for ways to improve upon the US’s failures.
Rather than starting from scratch, we will need to build on national-level competition authorities’ institutional knowledge, and include experienced personnel in the process. The European Competition Network can serve as a blueprint for a G20level network.
The objective of a world competition network is to build an effective legal framework to enforce competition law against companies engaging in cross-border business practices that restrict competition. The network may coordinate investigations and enforcement decisions and develop new guidelines for how to monitor market power and collusive practices in a digital economy.
In the past, the G20 has focused on ensuring that multinational firms are not able to take advantage of jurisdictional differences to avoid paying taxes. But the G20 now needs to expand its scope, by recognising that digital technologies are creating market outcomes that, if unchecked by a new World Competition Network, will continue to favour multinational firms at the expense of workers.
The writer is Chair of International Economics at the University of Munich