Competition Law is concerned with the protection of consumers’ interests and the protection of free competition in the markets, by prohibiting acts that are considered to impede competition and by promoting and advocating a competitive environment.
The regime for the promotion of competition and restrictive business practices in the Colombian legal system is mainly contained in Law 155 of 1959, Decree 2153 of 1992 and Law 1340 of 2009. These rules prohibit all conducts that imply restrictions or limitations by market participants to the constitutional right to free competition, also contemplating the procedures to determine the commission of infringements and the corresponding sanctions.
There are two aspects to a government’s competition policy: on the one hand, there are positions such as economic liberalization, where borders are opened and business activity is deregulated and stimulated; and on the other hand, there are rules that prevent anti-competitive practices with minimal government intervention.
Protectionism is a trade policy established by a government to protect domestic industry from foreign competition by applying tariffs or any other type of import restrictions.
Thus, protectionism implies international trade with impediments, as opposed to a free trade or free market situation. In free market situations it is possible that the national industry could be harmed, since it could be cheaper for a country to buy abroad (import a product) than to produce it internally. This has the risk that the domestic production of that good will eventually disappear (and in turn, the jobs related to this industry). To prevent this from happening, protectionist measures can be implemented. However, protectionist measures can harm competition by making domestic products more expensive and sometimes even of poorer quality.
Consumers in the protectionist country usually lose out in the first place. Following protectionist measures, they will pay a higher price than foreign competitors could offer if their products were not hindered. Foreign manufacturers also lose out, as their ability to place their products on the protected market is restricted and made more expensive.
Characteristics of industrial policy
The third section, “How decisions are made and implemented in the European Union,” describes the institutions at the heart of the EU decision-making process and how their decisions are translated into action.
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The organization that would become the EU was created in the aftermath of World War II. Its first steps were to foster economic cooperation with the idea that trade produces an interdependence between countries that reduces the potential for conflict. The result was the European Economic Community, created in 1958 with the initial goal of increasing economic cooperation among six countries: Belgium, France, Germany, Italy, Luxembourg and the Netherlands.
Continuing with our series of Economic Concepts, in today’s section we are going to explain what protectionism consists of. To do so, we start from the idea that in situations of free competition such as the current one, international trade could harm the interests of certain countries, since it could be cheaper for a country to buy a product abroad than to produce it domestically. In such cases, domestic production of that good risks disappearing.
In such cases, governments may intervene in the functioning of the market by limiting the entry of foreign products in order to protect their own domestic industry. This type of action is known as protectionism.
In the following sections we will explain the main reasons that could justify protectionist economic policies and the measures most commonly used to curb imports of products from other countries.
Reasons that justify protectionism Normally, international trade relations tend to promote free competition between countries and this is usually beneficial for all parties involved. However, protectionism may sometimes be justified for the following reasons:
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