Trade and Competition Policy Trade and Competition Policy Has Past - PowerPoint PPT Presentation

Trade and Competition Policy Trade and Competition Policy Has Past WTO Work Stood the Has Past WTO Work Stood the Test of Time? Test of Time? 1

Competition: A Trade Issue? Competition: A Trade Issue? Historically, competition and international trade laws have evolved separately. While FTAs focused on removing barriers to the free flow of products across borders, competition policy has existed primarily at the national level to ensure fair play on the domestic market. Globalisation brought about issues at the interface of both, e.g. ○ trade rules (anti-dumping, IPRs) may generate anti-competitive situations ○ Competition authorities may enforce selectively, not prioritizing cases where RBPs benefit their domestic firms to the detriment of foreign ones (e.g. export cartels). Cross-border competition issues with linkages to international trade include: Import and export cartels o State-trading Enterprises granted special and monopolistic rights, which o can limit market access for foreign firms; International cartels, require cooperation to detect and break o M&As, which can lead firms to acquire dominant positions o 2

Multilateral History Multilateral History 1948: The Havana Charter 50 countries plan to tackle Restrictive Business Practices (RBPs) affecting trade, e.g. monopolies. ITO rejected by US Congress, GATT ignores RBPs. 1958: GATT Group of Experts Appointed to study whether GATT should negotiate rules on RBPs. No consensus, but recognized harmful effects of RBPs on trade. 1980: The UN Set First-ever multilateral agreement addressing competition policy. Aims to ensure RBPs do not negate the benefits of trade for development. Developing countries supported binding rules on restrictive practices, repeatedly resisted by developed countries. 3 Trade and Competition Policy: Has Past WTO Work Stood the Test of Time?

Multilateral History Multilateral History 1995: Provisions in WTO Agreements GATS: “certain business practices of service suppliers may o restrain competition and thereby restrict trade in services” (Art. IX); monopoly suppliers in relation to national treatment (Art. VIII); promote cooperation in resolving competition policy concerns. Telecom Reference Paper establishes some anti- trust rules. GATT: Encourages consultations in reducing trade obstacles of o State Trading Enterprises (Art. XVII) TRIPS: Allows for taking measures to address anti-competitive o abuses of IPRs, and addresses licensing practices. GPA: Aims to increase the number of competitors for o procurements, thereby reducing chances of RBPs like collusion, market allocation etc. TRIMS: Built-in agenda o 4 Trade and Competition Policy: Has Past WTO Work Stood the Test of Time?

Multilateral History Multilateral History 1996-2004: WTO Working Group TRIMS built-in agenda: to consider complementary provisions on investment and competition within 5 years. Singapore 1996 ● Working Group on Trade and Competition Policy (WGTCP) created ● To identify areas for further consideration in WTO framework, i.e. assess scope for potential multilateral rules ● Scoping work discussed substantive issues (IPRs, state monopolies), and the relevance of WTO core principles in competition enforcement. The 2001 Doha Mandate ● Case for multilateral framework acknowledged, but no consensus for inclusion in DDA. Members to consider starting negotiations after next MC, subject to explicit consensus by all Members ● Till then, clarify: core principles, provisions on hardcore (i.e. formal) cartels, how to handle voluntary cooperation, capacity building, SNDT 5

Multilateral History Multilateral History 1996-2004: WTO Working Group High engagement post-Doha as WGTCP explored possible contours of MCA 2001-2003: Work towards Cancun ● EU main proponent of starting MCA negotiations, supported by Switzerland, Canada, Australia, Korea and others. Favouring a “hard law” approach, arguing multilateral rules best suited to tackle cartels everywhere. ● Others favoured a “soft law” approach respectful of members’ diversity, focusing on cooperation and excluding DSM. Included the US, Hong Kong, Malaysia, India, and Indonesia. ● Most developing countries generally opposed including competition and other Singapore issues for reasons of policy space, lack of experience, capacity contraints, and priorities in other negotiating areas. Standstill since 2004 ● After Cancun stalled, partly due to DCs’ rejection of Singapore issues, the General Council decided in July 2004 that no further work. WGTCP inactive since then. 6

State of WGTCP State of WGTCP Main Proposal Sticky issues EU proposal seeks members’ commitment to: Larger WTO context: DCs focused on redressing imbalances of the Uruguay Round, rather than committing ○ Adopt a competition law, featuring the core principles of non- on new issues. Other priorities (Ag.), and feeling too discrimination and transparency in competition enforcement unexperienced to take binding commitments on competition. ○ Take measures against hardcore cartels; Cost of compliance: resource-scarce developing countries ○ Development of modalities for voluntary cooperation on feared extra burden of meeting new multilateral obligations. competition enforcement; Adaptation cost would exceed benefits. ○ Support for strengthening competition institutions in developing Policy Space: Concerns that non-discrimination principles countries; and may reduce policy space and prevent countries from protecting their industries from foreign competitors (ind. ○ Establish a WTO Committee on Competition Policy, as the policy, investment screening, export cartels). platform for administering the multilateral agreement Market Dominance: Fears that an MCA would allow TNCs to dominate in small economies, taking over national firms. DCs unable to effectively enforce competition. 7

State of WGTCP State of WGTCP Sticky issues Dispute Resolution: Sovereignty concerns over WTO Commitment to Competition Law: Concerns over DSM’s having a say on national judicial decisions on transplanting a one-size-fits-all foreign model, not suited to complex individual cases (e.g. US). Developing countries national specificities, experience and resources. Diversity also feared becoming vulnerable to trade sanctions in an of existing regimes, from different legal traditions. area where they lacked experience. Anti-dumping: often used as a “competition” tool to shield Closer to Cancun, some members suggested non-binding domestic firms from foreign competitors. Multilateral MCA provisions, establishing non-adversarial peer reviews competition rules resisted by industrial lobbies, fearing instead of DSM. DCs however remained skeptical. stricter disciplines on the use of anti-dumping. Relevance of WTO: Given the nature of WTO, talks would focus on market access and protecting competitors rather than competition itself and consumer welfare. 8

Today: Competition in FTAs Today: Competition in FTAs Typical Provisions ○ Despite being no longer discussed at the WTO, competition policy has remained part of the international  Adopting or maintaining competition laws; trade debate (UNCTAD, OECD, ICN, FTAs, RTAs)  Principles: Non-discrimination, due process, and ○ Developing countries have been acquiring experience transparency in the application of competition law; and adopting competition regimes (130+ today), many  Practices: Defining anticompetitive practices, and times in the context of RTAs (e.g. COMESA). measures to be taken against them; Regulating designated monopolies, state-owned enterprises, state ○ Today, ± 90% of FTAs have competition-related aid and subsidies; Disciplining recourse to trade provisions. Same goes with South-South FTAs (Laprévote remedies (e.g. anti-dumping) et al., 2015).  Exemptions: laying down competition-specific exemptions; ○ These have contributed to shaping international relations on trade and competition matters, and often go beyond  Cooperation and coordination mechanisms; the expected level of commitment at WGTCP.  Dispute settlement in competition matters; Level of specificity varies greatly depending on parties 9

Today: Competition in FTAs Today: Competition in FTAs EUROPEAN MODEL Analysing 216 FTAs, Laprévote et al.,(2015) identified 3 main approaches. DETAILS ON: • Prohibiting specific anti-competitive practices • Regulating state aid and SoEs • Competition-specific exemptions (e.g. public services). BROAD ON: • Competition enforcement principles • Coordination / cooperation. NAFTA MODEL DETAILS ON: • Cooperation / coordination • SoEs / designated monopolies • Procedural fairness ANZCERTA MODEL • Harmonizing competition regimes BROAD ON: • Definition of “anti-competitive • Removing trade defenses business conduct” 10