Working Paper Number
The U.S. and E.U. have recently increased prosecution of international cartels; few developing countries have similar enforcement. If these cartels have significant effects on developing economies, the lack of antitrust enforcement is a problem. Geographically limited prosecutions may not provide sufficient disincentives to deter collusion that generates global rents. Prosecutions of international cartels by industrialized countries opens markets to developing country producers, but integration may be undermined if cartels create durable barriers to entry. Western governments are also susceptible to manipulation by cartel members asking for antidumping duties. Thus, developing countries may need their own antitrust enforcement. A recent ruling of the Second Circuit Court of Appeals creates the possibility that developing country consumers may be able to exact remedies in U.S. courts. Drawing on three detailed case studies and 42 recent prosecutions of international cartels, we discuss the effects on developing country producers, either as competitors or co-conspirators, and the effects on developing country consumers. Using trade data, we quantify the order of magnitude of the effect on developing country consumers. In 1997, the latest year for which we have trade data, developing countries imported $54.7 billion of goods from 19 industries with a price-fixing conspiracy during the 1990s. These imports represented 5.2% of total imports and 1.2% of GDP in developing countries.