This paper is about the interactions between what is traditionally considered trade
policy and a narrow but important aspect of competition policy, namely merger policy.
We focus on links between merger policies and trade liberalization. We put special
emphasis on the topical issue of the role that international agreements such as the
GATT play when merger policies are nationally chosen. Of particular concern is the
possibility that liberalization of international trade will induce countries to increasingly
use competition policies to promote national interests at the expense of others.
We examine the incentives for a welfare maximizing government to make such a substitution.
Interpreting merger policy as a choice of degree of industrial concentration, we
investigate how the merger policy that is optimal from the point of view of an individual
country is affected by restrictions on the use of tariffs and export subsidies.