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Competition and Globalisation

Competition and Globalisation
When competition among firms is global, it can be fiercer.

The dismantling of international trade barriers and exponential technological development have culminated into increased interconnectedness and integration of the economies of the world, causing markets to integrate. Globalisation presents a great opportunity for countries to tap on, but equally, brings challenges in terms of market competition.  

Globalisation reduces geographic boundaries of markets in which firms operate and markets are no longer restricted to one specific geographic area or country. Globalisation has brought along a worldwide market both for firms and consumers who can have access to products of different countries. Firms can, with globalisation, access foreign markets easily or easily set up manufacturing plants in other countries. Through the easy flow of goods and services, local firms face increased competition from imports and consumers can, through the advent of technology, buy online from various countries and this also represents increased competition to local firms.

Technological advance

In the same vein, competition also contributes to globalisation. Through the process of competition, companies aim to capture more consumers and in so doing, grow in size and enter new markets. The process of competition also put pressure on companies to lower costs and in so doing they try to find cheaper sources of supply, going global. Some even delocalise for lower costs of production and other competitive advantages. 

One the main drivers of globalisation has been technology and this technological advance is in itself to an appreciable extent a result of companies competing to produce the best technological product/service at the lowest price.

When competition among firms is global, it can be fiercer. There is therefore a simultaneous requirement to ensure that competition happens on a level playing field and that markets are shielded from anticompetitive practices happening both at the domestic and international front. Competition agencies stand as watchdog to ensure that the competition process is protected at all times, irrespective of whether an anticompetitive conduct is happening within its borders or across its borders but intended to be implemented within its borders or simply where the effects of the conduct are being felt in its markets.

Competition agencies have also to work towards creating and safeguarding the competitive process for all enterprises irrespective of their sizes. Competition agencies have to ensure that local firms which might be holding market power do not unduly abuse of this power to hinder competition from foreign firms, for instance by creating artificial barriers to entry. Similarly, competition agencies have to ensure multinational companies do not abuse their market power to drive out smaller, usually local, players.

Competition agencies are no exception to globalisation. With globalisation, cooperation has become vital among competition agencies to counteract the cross-border nature of anti-competitive conducts. Cooperation is required because it creates increased clout for better enforcement of respective competition laws via information sharing, joint enforcement actions and convergence on appropriate remedies.

At the regional level, the COMESA Competition Commission is working to safeguard competition within the COMESA common market. Indeed, faced with the integration of markets, it is important for smaller markets like Mauritius to be part of regional blocks to have better leverage with respect to powerful global players, more so where the latter are not physically in Mauritius.

Globalisation therefore brings increased competition among firms which translates into increased innovation, choice of goods and services, better quality and lower prices which lead to an increase in consumer welfare. It is an important driver of growth and development and is intertwined with the process of competition. Competition agencies therefore has an important role ensuring that on the one hand, there is no anticompetitive conduct which hinder the integration of markets and on the other hand, safeguard local players from potential anticompetitive conduct of powerful multinationals.

This article forms part of a series of stories of the Competitive Commission.