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OECD Secretary-General

Opening of the 2015 Global Forum on Competition

 

Remarks by Angel Gurría,

Secretary-General, OECD

OECD, Paris, 29 October 2015

(As prepared for delivery)

 

 

Ambassadors, Ladies and Gentlemen:

 

I am delighted to open this Global Forum on Competition, which every year brings together competition authorities from all over the world. In today’s world of persistent low growth, high unemployment, rising inequality, and eroding trust, this meeting serves as an opportunity to explore how competition policy can enhance productivity, promote job creation and stimulate much-needed inclusive growth.

 

Few could be better placed to support us in this endeavour than our guests of honour, Guy Ryder, Director General of the International Labour Organisation and Mario Monti, former Prime Minister of Italy, former European Commissioner for Competition and now Senator. They are two pillarsof international policymaking, whose experience and insight at the highest level will help us define the links and drivers between competition policy and job creation in this morning’s sessions.

 

Our Chair today is Professor Frédéric Jenny, who, of course, needs no introduction to this audience!

 

 

The outlook remains uncertain

 

Competition remains high on the global agenda, as the Forum meets again this year in an uncertain economic context. Global growth is still sub-par, most likely to  fall to around 3% in 2015 – the weakest growth since 2009 and well below pre-crisis averages. In per capita terms, this will be the 5th consecutive year of declining global growth rates. Updated projections will be published in OECD’s Economic Outlook in just over a week. But I can say that forecasts are likely to show a downgrade in next year’s global growth compared to our June Outlook.

 

Unemployment in the OECD is falling, but still too high at almost 7%. That’s 42 million unemployed, 7.5 million fewer than in January 2013, but still 7 million more than before the crisis.

 

When I meet heads of government and finance ministers, they almost always want to talk about jobs, and competition policy plays an important role as a driver of employment. This is a key message of the Forum, and which you will address in the next session: Does Competition kill or createjobs?

 

 

Competition and employment: does competition kill or create jobs? 

 

Policymakers are often confronted with a common misconception: that more competition necessarily leads to outsourcing and job losses. This erroneous belief can push governments, the media and the public to exert undue pressure on competition agencies, so that they take into account employment and other “public interest” issues in their work.

 

Yet there is extensive evidence that more competition creates jobs. Removing barriers to boost competition leads to increased productivity, lower prices, and higher real wages. Rigid product market regulations prevent some countries from making such productivity gains, and thus from stimulating employment growth. A recent study, which looks at 80 countries around the world, finds that “stricter product market regulation is associated with a higher unemployment rate among the total labour force, as well as among female and young workers". This is why the OECD is working at the moment to help governments remove anti-competitive product market regulations, notably in Greece, in Mexico and in Romania.

 

The empirical findings are unequivocal: the ultimate impact of increased competition is more job creation. Ongoing research by the OECD shows that the massive liberalisation of network industries such as electricity, gas, transport and communications across OECD countries over the last forty years has raised employment in downstream industries by around 2.5%.

 

Of course, this is not to deny that there can be temporary jobs lost within the network industries as they are liberalised. The point is that rapid job creation in downstream industries has more than compensated for these losses. In the whole of the OECD area, these reforms have created more than 7 million jobs in the tradable sectors. In the UK, for instance, product market reforms alone in the 1990s and early 2000s are estimated to have contributed to increasing employment rates by between 2 and 4 percentage points.

 

More competition in the market place reduces mark-ups and, consequently, prices. Lower prices benefit consumers and stimulate the demand for products which expands output and in turn increases the demand for labour. Furthermore, as lower prices affect profit margins, firms must invest more in physical capital, research and development and in the re-skilling of their labour force, in order to remain competitive.

 

Product market reform should not stand alone. Active labour market policies remain vital to complement and reinforce the impact. Reducing market entry barriers in parallel to labour market reform will mitigate the wages losses arising from labour market reform alone, through the positive effect on real wages.

 

Policymakers and voters everywhere need to understand that competition-boosting product market reform is a powerful tool to help prepare the ground for labour reforms.


 

Enabling innovators to enter, compete and grow

 

Another crucial area of focus for competition policy which the Forum will address this afternoon is how to handle ‘disruptive innovation’ in competition law enforcement. We know that innovation drives productivity growth and is highly beneficial for competition and consumers. We also know that many of the most effective and transformative innovations are those that disrupt existing businesses. But for every successful idea there are also many failures. We need to make sure our economies enable entrepreneurs to experiment with more radical innovations and business models,  allow for success to be rewarded and avoid over-penalising failure.

 

Governments have a crucial role to play: designing and adapting their regulatory systems to enable innovators to enter, compete and grow. Competition authorities have an equally important role: making sure that large firms do not abuse market power to fend off potential entrants, drive competitors out, or buy them out to protect rents.

 

This can be a tricky area because you will often be dealing with products and markets that are new and changing fast. It boils down to making judgments about the future. This is an area in which the Global Forum is particularly well placed to support progress, since you will all have different examples and experiences to share. I urge you to be bold, open-minded and collaborative as you reflect together on how the right competition law enforcement can nurture innovation.  

 

Ladies and Gentlemen: You have before you a rich agenda covering a range of challenges, from enabling employment-stimulating policies, to tackling the old enemy: cartels, especially of the recurring sort. With our OECD experts, you will also be taking an in-depth look at competition laws and institutions in Kazakhstan. Many delegates from Kazakhstan are assembled here and I hope you will find these discussions and our recommendations to be a useful guide for reform.  

 

All countries represented here stand to gain from the expertise of our distinguished panellists and participants. I am always impressed by the long list of written and oral contributions voluntarily provided by participants in this Forum. Your commitment to debate, to sharing experiences across borders, to evidence-based decisions, helps deliver better competition policies for better lives. I wish you a lively and fruitful Forum, and I look forward to hearing how we can work together to protect competition, promote innovation, enhance productivity and put the global economy on a more sustainable and inclusive growth path.

 

Thank you.

 

 

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