Page 34 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE

strengthened or weakened according to the way in which these policies are

developed and applied. Competition advocacy in transition and developing
economies can be most important in the following policy areas:

• Trade liberalization.
• Economic regulation.

• State aids and environmental policy

• Operations of local government authorities.
• Privatization.

Trade liberalization
Trade policy has important implications for the development of

competitive markets. Domestic markets are relatively small in most

transition and developing economies and often characterized by
dominant firms. Economic, social, and political pressures pose obstacles

to opening up such markets by breaking up dominant domestic firms.
Imports, on the other hand, can bring about new competition relatively

quickly. Thus liberalized trade policies such as reducing tariffs,
investment controls, import restrictions and quotas, domestic production

or content requirements, and the like are among the most significant

measures that can be advocated by the competition agency.
Advocacy of trade liberalization is likely to be controversial.

Domestic producers may put up a strong resistance as they may be
unable to adapt quickly to new market conditions, and they may find

themselves vulnerable to competition from more efficient foreign
producers. Moreover, foreign investors in emerging markets may also

demand protection against competitive imports as a condition of their

investment. As a consequence, protectionism for domestic markets is

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