Remarks by Angel Gurría, OECD Secretary General, 28 February 2014, Paris, France
(As prepared for delivery)
Mr Chairman, Ladies and Gentlemen:
It is a great pleasure to participate in the Global Forum on Competition. This is a unique opportunity to bring together competition authorities from the developed and developing world to foster a rich and fruitful debate on how competition policy can enhance the performance of market economies, and contribute to improve overall well-being, and rebuild public trust.
Enhancing competition has been at the top of OECD priorities for decades. But it has become more and more important as our countries struggle to leave the crisis behind and build more resilient, dynamic and fair economies. Recent OECD studies show that reforms to enhance competition in product market regulation would by far deliver the largest output gains of any structural reform. Our calculations say that by 2060, these measures could raise aggregate output by about 9% in the OECD and by about 30% in large non-OECD countries.
In spite of the substantive amount of evidence of the many benefits of competition, promoting strong competition frameworks and policies is quite a challenge. Competition authorities have to face a plethora of obstacles and headwinds.
Addressing ‘policy barriers’ to competition
Anti-competitive practices have many roots. And governments can be the source of the problem: administrative burdens, regulations, and taxation practices can sometimes constrain and distort competition.
Just two weeks ago, at the European Union’s Competition Forum, I described our Base Erosion and Profit-Shifting initiative (BEPS). This seeks to avoid double non-taxation and ensure that profits are taxed in the countries in which economic activities take place. Aggressive - but legal - tax practices by multinationals shifting their tax liabilities to low-tax countries has done a lot of damage to government budgets and is another factor driving inequality.
But BEPS is also very much a competition issue. It fundamentally distorts the level playing field, leading to effective tax rates that are higher for companies operating within national borders. Competition should result in the most efficient firm gaining market share at the expense of the least efficient, but these artificial cost advantages distort that, weakening the vigour – and the benefits – of market competition.
Corruption hinders competition
Competition is also damaged by corruption, an issue that you discussed yesterday. Ending corruption is one of the greatest challenges facing the world today, as we strive to rebuild our economies and regain the trust of the population. Corruption makes fair competition impossible, stifles growth and development, and potentially diverts public funds to fundamentally flawed or inefficient projects.
The fight against corruption is a high priority for the OECD. We have an arsenal of weapons to help governments combat corruption. One of the strongest and most relevant to your work is the Anti-Bribery Convention. 41 countries are now Parties to the Convention. These countries have enacted legislations and laws to criminalise the act of bribing a foreign official. But this is not enough. Challenges remain in implementation, in engaging key countries. But the OECD is committed to expand the reach and impact of the Convention, to eradicate corruption and to help make markets fair and transparent.
We also have to the address the demand side of the problem; the public officials engaging in corruption. When companies or individuals are punished for bribing a foreign public official, the recipient must also be investigated and prosecuted. Our Principles for Enhancing Integrity in Public Procurement help governments promote transparency, good management, monitoring and accountability in these processes.
On the competition side, we have also done extensive work on how to fight bid-rigging in public procurement, including working with procurement officials, to design systems and processes that limit the opportunity for fraud. We are helping to reduce the risk of capture of politicians by promoting more stringent and transparent rules for financing of political campaigns. Ultimately, only more effective monitoring and sanctioning of corruption will have the desired effects.
Competition and the Pharmaceuticals Sector
In the pharmaceutical sector – today’s topic – competition policy is crucial; but is also an area of great complication and nuance. Regulatory interventions are needed to address the pharmaceutical industries’ unique characteristics, such as the lack of alternatives for many drugs, and the need for quality control. But competition is also crucial to ensure that consumers can benefit from high quality medications that they can access and afford.
Indeed, accessibility and affordability are paramount challenges. In high-income countries, this is becoming more concerning, as governments reduce their contribution to pharmaceutical expenses under tight fiscal constraints. And in low-income countries, pharmaceuticals’ spending represents the largest share of household health expenditure. Too often, a serious family illness is the major cause of household impoverishment. Additionally, studies show that retail prices of medicines are much higher in poorer countries.
In the OECD Competition Assessment Review of Greece, released this year, we found that liberalising prices and the distribution of over-the-counter medicines could result in an annual gain of €102 million in consumer benefits . I am very pleased to report that the Greek government is putting together draft legislation which contains many our proposals on this topic.
Ladies and Gentlemen,
In an increasingly globalised and interconnected world, competition authorities need to work together to ensure successful outcomes. The rising trend of cross-border mergers requires stronger international co-operation. This is why events like the Global Forum on Competition are so incredibly important!
At the OECD we are committed to improving international co-operation and developing common principles and tools. For example, we are re-drafting our flagship 1995 Recommendation on international co-operation, and I am pleased to report that many emerging economies are involved in this process.
I’d also like to take this moment to encourage you to think boldly about what can be done to foster further co-operation. How can we design a framework for international co-operation in competition policy that is fit for the 21st century? I know you have a full agenda of breakout sessions this afternoon, but let this be part of your “food for thought.”