Anti-Trust and Competition Policies

How the Asbestos Litigation is Undermining US Competitiveness, Destroying Jobs and Short-Changing Victims.

In 1925, then President Calvin Coolidge famously said that "the business of America is business." Now, over 90 years later, the business of America is increasingly conducted in courthouses among trial lawyers and insurance executives. The asbestos litigation has already caused nearly 80 corporate bankruptcies in the US, and has impacted the earnings and operations of hundreds of other firms. The US tort system has become an anchor dragging down America's economic growth at a time when the competitive challenges from a globalized economy are stronger than ever.

In its current form, the asbestos litigation is no longer about justice; it is no longer about helping injured workers or ensuring that the correct incentives are in place to prevent greedy companies from injuring their customers of employees. Rather, it is about the US legal system shaking down corporate America to pad the paychecks of lawyers on both sides. Indeed, the interests of American workers, consumers and companies are being cast aside as lawyers rush to file new claims before the next major corporation files bankruptcy and the spigot of easy money is closed behind a wall of bankruptcy protection. The lessons of the asbestos litigation should be very clear: the regulatory system failed to protect workers in the first place, and then the tort system compounded that failure by allowing unimpaired victims to file claims, and targeting companies that had little or nothing to do with the underlying injuries caused by asbestos exposure.

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Deutsche Post 2006: An Updated Critique of Domestic Monopoly Fueling Global Growth, by Robert Cohen, reviews Deutsche Post's expansion since the 2004 Economic Strategy Institute study that analyzed the firm's privatization. In that study, we concluded: "The potential threat is that U.S. firms will face competitors from Europe or other nations that will use their monopoly positions in domestic markets to cross-subsidize their operations in the United States and around the globe."

This examination only reinforces our original analysis that Deutsche Post, and its wholly-owned subsidiary DHL, will exploit its domestic monopoly to compete unfairly with U.S. and other international express delivery firms that have obeyed the rules of competitive markets.

The Economic Strategy Institute has published a new research report on the upcoming privatization of Japan Post. Dr. Robert Cohen analyzes the the details of the privatization and issues a trenchant warning highlighting the dangers to the competitive landscape in the international express delivery market.

On its face, Japan's plans to privatize Japan Post appear to be laudable. New publicly held corporations will take over key functions of the government-owned post office and its current delivery, banking and insurance interests. The resulting postal, transportation, finance and insurance operating entities will adopt private sector management practices and compete internationally. It is hoped that Japanese capital markets and its postal and transportation industries will become more efficient and profitable. Indeed, in theory, the privatization of Japan Post entails many praiseworthy steps towards ensuring Japan's economic recovery continues.

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This ESI study adds to a growing body of evidence that points to widespread market distortions in global steel markets. In order to deal with the adverse consequences of cross-border cartels, closed markets, and subsidies, the U.S. industry and its workers have turned to U.S. trade laws. Yet these laws are currently facing an assault from the very governments that maintain non-competitive market structures in their home countries. As long as those structures exist, the U.S. steel industry will remain vulnerable to severe supply shocks resulting from the poor economic performance of other countries. Until there is clear progress toward eliminating market distortions, it makes sense for the United States to resist efforts to weaken U.S. trade laws.

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The world steel market is perhaps the most distorted industrial market in the world. To achieve economic and political objectives, many countries have pursued industrial policies aimed at nurturing a steel industry with trade protection and subsidies.

In contrast, the United States steel industry has generally not been the recipient of such special treatment. The U.S. economy is open and subsidies have been very limited, especially when compared to those of other major industrial countries. In the 1970s and 1980s, the U.S. steel industry had serious competitive problems, but $50 billion in new investment has built an industry with some of the highest productivity levels and lowest costs in the world.

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The U.S. consumer electronics industry was once a world leader, but despite strong growth in U.S. and global consumption of consumer electronics, the U.S. industry is now a shadow of its former self. Why is the United States such a minor player in consumer electronics when factor endowments imply a stronger presence? A major reason is that the United States government inadequately enforced its laws against dumping - the sale of goods at less than their price in the home market.

Today, domestic critics are aiming to weaken those same antidumping measures. Likewise, Japan and other frequent targets of U.S. unfair trade laws also are seeking to negotiate limits on those laws during the next round of multilateral trade talks. For those reasons, the story of the U.S. consumer electronics industry remains particularly relevant. The fall of that industry usefully illustrates the impact that market distortions can have on other U.S. industries if unfair trade laws are substantially weakened.

Robert Cohen examines the liberalization of Germany's Deutsche Post and its implications for the global express delivery industry. Deutsche Post has launched a major effort to become an integrated global express delivery firm through a large number of acquisitions, including international market leader DHL and Airborne Express. Recent financial analysis suggests that Deutsche Post is likely to command the resources to accelerate its move into international markets largely because of its continuing monopoly over regulated mail delivery in Germany and its de facto monopoly over many parts of the liberalized mail market.

Cohen charts the competitive pressures these moves will put on other global express delivery firms, and lays out a number of steps policy makers can take to prevent Deutsche Post from unfairly capitalizing on its home market monopoly.

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