## From Fragmentation to Cooperation: Boosting Competition and Shared Prosperity _IMF News, December 6, 2021_ ## Source details **Canonical URL:** [From Fragmentation to Cooperation: Boosting Competition and Shared Prosperity](https://www.imf.org/en/news/articles/2021/12/06/sp120621-keynote-address-at-the-oecd-global-forum-on-competition) ## Other formats - [Markdown version](/en/news/articles/2021/12/06/sp120621-keynote-address-at-the-oecd-global-forum-on-competition/index.md) - [Structured JSON version](/en/news/articles/2021/12/06/sp120621-keynote-address-at-the-oecd-global-forum-on-competition/index.json) - [Bundle manifest](/en/news/articles/2021/12/06/sp120621-keynote-address-at-the-oecd-global-forum-on-competition/bundle-manifest.json) ## Bibliographic details - Published: December 6, 2021 --- ### Introduction and framing - Keynote Address by Managing Director Kristalina Georgieva at the OECD Global Forum on Competition (December 6, 2021). - Forum marking 20 years of promoting rules-based competition; competition linked to innovation, jobs, productivity growth, and living standards. - Competition has direct relevance for the IMF’s work because the state of competition affects macroeconomic and financial stability. - Concern: global trends are “dampening, not deepening, competition,” driven by rising market power and forces of fragmentation in trade and geopolitics. - Central question: how to move beyond growing fragmentation to a cooperative approach that boosts competition and shared prosperity. ### Macroeconomic harms from excessive market power and policy levers Findings - Over the past twenty years, rising market power has hurt investment and output and weakened labor shares. - The IMF estimates that rising market power accounts for at least 10 percent of the decline in the share of income going to workers in advanced economies. - Firms with excessive market power often hold huge cash piles, making them less responsive to market rates and fiscal stimulus, which can blunt monetary and fiscal policy effectiveness. - Crisis-related market concentration could lower capital investment and innovation and could reduce the level of GDP in advanced economies by 1 percent in the medium term. Policy levers and examples - Strengthen merger control (examples: Germany and Austria reviewing acquisitions of small players based on deal price). - Conduct market investigations to identify and act on issues early (examples: Australia and the United Kingdom). - Make labor markets more competitive: prevent “no‑poaching” pacts and stop non‑compete clauses for lower‑skilled workers in sectors such as retail and fast‑food. - Improve data portability and interoperability rules to increase digital economy vibrancy (analogy: phone number portability in the E.U. and U.S. bolstered mobile carrier competition). - Legislative and regulatory attention: the proposed E.U. Digital Markets Act and the American Innovation and Choice Online Act are stimulating useful discussion. - Adequate budgets for enforcement are critical. - Note: addressing market power and its harms is a long-term endeavor requiring perseverance by competition policymakers. ### Three global trends that threaten competition — risks and policy options Trend 1 — Technological decoupling - Risk description: - Growing “digital Berlin Wall” from import/export restrictions and reduced scientific cooperation. - A split (e.g., a U.S., E.U., and China “decouple”) would make it harder for firms to compete, entrench dominant tech players, reduce incentives to innovate, and fracture global tech standards and interoperability. - Low- and middle-income countries may be forced to “choose sides,” facing higher prices, worse service, and diminished development prospects. - Quantified scenario: - Depending on the scenario, decoupling could see global GDP losses in the order of 3 to 6 percent over the next decade or so. - Policy options: - Close collaboration among competition, trade, national security, and cybersecurity agencies; include intellectual property and data privacy policymakers. - Use OECD and other multilateral fora to disseminate best practices and enhance cross-border coordination. - Coordinate enforcement so that addressing anti-competitive behavior by a large domestic firm is not undermined by equally powerful foreign competitors remaining untouched. Trend 2 — Trade restrictions - Findings: - Reducing foreign competition through trade restrictions strains supply chains, raises consumer prices, reduces innovation, and diminishes growth potential. - In 2019, the IMF estimated that tariffs either created or raised in the previous two years had reduced global GDP by 0.4 percent. - Many pre-pandemic restrictions largely remain in place and continue to hold back global output. - Pandemic-era dynamics: - While early crisis responses included problematic trade policies, the pandemic did not result in full-blown protectionism in food, drugs, and medical supplies. - Restrictions contributed to massive vaccine inequity, making the global recovery more uneven and fragile and increasing exposure to new variants (e.g., Omicron). - Policy priorities: - Ease pandemic-era restrictions and re-invigorate the broader trade agenda. - Support WTO-led efforts on trade-distorting subsidies, industrial tariffs, tradable services, investment, and e-commerce. - Build on recent progress such as the WTO Joint Initiative on Services Domestic Regulation. Trend 3 — Climate policy fragmentation and competition effects - Risks: - Asymmetric or uncoordinated climate policies (large variations in carbon prices) can distort competition and risk “carbon leakage” where production relocates to jurisdictions with weaker mitigation. - Border carbon adjustments, if poorly designed or uncoordinated, could disrupt climate cooperation and provoke trade retaliation. - Policy proposal and principles: - Design policies that send the right price signals on climate while not undermining competition, trade, and investment. - Work on equivalency of different carbon pricing approaches with partners, including through OECD collaboration. - The IMF has proposed an international carbon price floor among large emitters that is described as efficient, practical, and flexible: it would allow regulations as well as explicit pricing, and differentiation among countries based on level of development. - Goals of the proposal: ensure adequate reductions in global emissions, promote fairness, and support more evenhanded competition across industries and countries. ### Conclusion and call to action - Fairness and evenhanded competition matter at both global and domestic levels. - The IMF’s global and country-level perspective highlights how policies interact domestically and globally. - Stronger cooperation is needed—between the IMF and OECD, between countries, and between national competition agencies and macro policy officials—to overcome fragmentation and protect competition. - Closing call: “Together, let’s spread the message far and wide—if you care about innovation, jobs, and broadly-shared prosperity, you must care about better competition policies!” *From Fragmentation to Cooperation: Boosting Competition and Shared Prosperity — Keynote Address by Managing Director Kristalina Georgieva at the OECD Global Forum on Competition (December 6, 2021).* --- ## References - [https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva](https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva) - [United Kingdom and the IMF](http://www.imf.org/external/country/GBR/index.htm) - [Speeches](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2021/12/06/sp120621-keynote-address-at-the-oecd-global-forum-on-competition_