Export cartels
Name(s):
Excessive damage to national interests due to export cartels
Nature
Export cartels are arrangements between competing firms relating primarily or exclusively to export activity. Cartels relating exclusively to exports are sometimes called pure export cartels, as distinct from mixed export cartels which entail ancillary restraints on domestic competition for exports of the parties concerned - for example, where domestic export merchants are restrained by an export cartel of domestic manufacturers in their dealings with foreign customers. Mixed export cartels have to be distinguished from mixed cartels which control competition on the domestic market not as an ancillary measure of export cartel activity but as a primary measure to control domestic competition; but these cartels may to a greater or lesser extent be involved with exports. To ascertain the full scope of the cartellization of exports by developed market-economy countries not only export cartels in the strict sense, whether pure or mixed, have to be considered, but also domestic cartels whose members export to other countries.
A further distinction is that between national and international export cartels, the second type comprising firms from several countries. The operations of export cartels may consist of the complete pooling of the export business of the parties in a central agency, thus excluding any competition between them on export markets; or it may result in the exclusion, entirely or partly, of such competition by agreement on export prices, by the establishment of export quotas, by the allocation of export markets, or by the submission of fixed bids for tender.
Incidence
In all developed market-economy countries where laws have been enacted to restrict or prohibit domestic cartel activity, the activities of export cartels are less strictly controlled than those of domestic cartels. In those countries where legislation in principle prohibits cartels (Canada, France, Germany, Japan, Norway, USA, and the EEC/EU and ECSC), or where the legality of cartels is dependent upon registration (Austria, UK), export cartels are either specially exempted (Germany, Japan, USA) or are exempted by definition or by an explicit provision outside the scope of the law. Only four of these countries (Germany, Japan, UK, USA) require the notification of export cartels to competent national authorities. The extent to which the activities of export cartels are exempted and the extent to which details of their activities are published vary considerably in these countries.
In the three developed market-economy countries which publish data on export cartels (Germany, Japan and the USA), there are about 300 export cartels. The number in the UK is over 50. Firms in other developed market-economy countries participate in some of the international cartels registered in Germany and the UK.
[Developing countries] Export cartels of firms in developed market-economy countries may in theory affect the export interests of developing countries in three ways. (a) They can discriminate against developing countries, in terms of price or otherwise, in the sale of such products, or they can refuse to sell production equipment, vital raw materials or intermediate goods which the developing countries need for their export industries. (b) Adverse effects may occur when exporters from developing countries are confronted in their export markets with powerful export cartels of firms in developed market-economy countries. These firms may apply monopolistic practices, such as predatory prices, to exclude developing countries' exporters. (c) Export cartels of firms in developed market-economy countries may be detrimental to the export interests of developing countries where such cartels allocate export markets and where this allocation includes subsidiaries of the parties located in developing countries.
The question of whether particular export cartels have any of these effects can only be answered on the basis of information concerning: the nature of the product involved (that is, whether it is used as an input for exporting industries in developing countries); the supply situation, including the existence of substitute products and other competitive suppliers outside the cartel; and, finally, the actual operation of the cartel, such as what restrictions, prices, and terms of trade are applied to covered exports.
Thus, an export cartel of developed market-economy country manufacturers in respect of an input used in exporting industries of developing countries, may decide not to supply the cartellized product in question at all, or to supply it only to particular industries or countries, or only at less favourable prices, terms of payment, quantities and/or qualities than those quoted to buyers on the home market of the members or in other developed market-economy countries. Such a refusal to supply and other discriminatory treatments are likely to have adverse effects on the export interests of developing countries. The possibly adverse impact of the activities of export cartels on the balance of payments of the developing countries, especially through high import prices, is also recognized.
Type
(D) Detailed problems