Innovative U.S. companies face major challenges overseas, including intrusive antitrust regulation, the prospect of huge antitrust fines, and potential procedural unfairness. Perhaps an even bigger barrier to business-led American economic dynamism, however, is the existence of “anticompetitive market distortions” fostered by government action, here and abroad. The new Trump Administration may wish to target these ACMDs as part of an economic growth strategy.
The Nature of Anticompetitive Market Distortions
ACMDs are discussed in a report presented to Congress by the Growth Commission, “an independent [non-partisan] organization of international economists producing new research and dynamic economic modelling which identifies policies which can increase income per person.” The Commission discussed ACMDs in its November 2024 Memo to Congress, setting forth economic policy advice for the President-Elect:
“ACMDs involve government actions that empower certain private interests to obtain or retain artificial competitive advantages over their rivals be they foreign or domestic. In particular, ACMDs may flow from government regulations that eliminate or lessen competition, regulations that apply differently to different firms, and regulations that exempt certain favored firms from coverage. The United States and other nations are all prone to having ACMDs, which often are adopted due to the lobbying efforts of self-interested ACMD beneficiaries.”
In short, ACMDs create an uneven playing field by treating rival firms unequally, distorting competition both domestically and in international commerce.
Two major international economic organizations, the Organization for Economic Cooperation and Development and the World Bank, have urged governments to get rid of ACMDs.
Nevertheless, ACMDs are very hard to dislodge. Most ACMDs fall outside the scope of national antitrust and international trade laws, are not dealt with under multilateral trade agreements, and enjoy government backing. They also typically “fly under the public radar screen.”
ACMDs create major economic harm. By undermining competition on the merits they lead to major misallocations of resources and slow economic growth.
Research carried out over the last decade underscores the extent of the economic harm caused by ACMDs. Shanker Singham, Professor Srinivasa Rangan, and other scholars published an econometric model (released in 2016 and updated in 2023) to estimate the loss of economic welfare caused by ACMDs. The model found in 2016 that eliminating all ACMDs in India would raise India’s gross domestic product by a factor of 4. A 2019 study by the Centre for Economics and Business Research found that ACMDs reduced global output by around 14 percent.
Research continues on reduced economic growth and output due to ACMDs. The bottom line is that the actual losses are huge.
What The New Administration May Wish to Consider
The incoming Trump Administration has indicated that it places a high priority on regulatory reform to help spur U.S. economic growth. A prime focus of these efforts will be the Department of Government Efficiency, which will provide advice on deregulation and reducing the size of the federal government.
The new Trump Administration may wish to establish a process for identifying ACMDs in the regulatory review process so that they can be avoided in new rules and, whenever feasible, eliminated from preexisting rules. In addition, the new Administration might consider incorporating newly developed economic techniques for estimating the costs of ACMDs into its regulatory review process. If staff resources are limited, the most significant ACMDs might be targeted. Highlighting the high costs of specific ACMDs might help build public support for these reform efforts.
To deal with the problem of foreign ACMDs (a particularly serious issue in China), the Trump Administration could weigh entering into multilateral negotiations with a “coalition of willing nations.” The resulting agreements would be designed to establish commitments to dismantle the restrictions.
To give these commitments “teeth,” signatory nations might be authorized to impose tariffs calibrated to the value of particular distortions that favor affected imports (tariffication). In the case of large distortions that are hard to measure, alternative measures, such as bans on public procurements, could prove appropriate. Other remedies could be devised to curb ACMDs that favor domestic industries and thereby limit a harmed nation’s exports.
A 2021 United Kingdom Trade and Agriculture Commission Report explores in some detail ways to “operationalize” ACMD sanctions that could inform international negotiations. In addition to tariffication, it discusses a variety of remedies that could create incentives for scaling back, if not totally eliminating, ACMDs. This and other recent research could prove most useful to the new Administration if it decides to focus on the ACMD problem.
In sum, the incoming Administration may wish to seriously consider new measures to combat ACMDs, as it rolls out domestic regulatory reform and international trade initiatives. Such measures might substantially contribute to enhanced American economic growth.