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

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

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Competition: A Trade Issue? Competition: A Trade Issue?

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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
• State-trading Enterprises granted special and monopolistic rights, which

can limit market access for foreign firms;

• International cartels, require cooperation to detect and break
• M&As, which can lead firms to acquire dominant positions

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.

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

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Multilateral History Multilateral History

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

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1995: Provisions in WTO Agreements

• GATS: “certain business practices of service suppliers may

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

State Trading Enterprises (Art. XVII)

• TRIPS: Allows for taking measures to address anti-competitive

abuses of IPRs, and addresses licensing practices.

• GPA: Aims to increase the number of competitors for

procurements, thereby reducing chances of RBPs like collusion, market allocation etc.

• TRIMS: Built-in agenda

Multilateral History Multilateral History

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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

Multilateral History Multilateral History

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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
• ther 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.

State of WGTCP State of WGTCP

Main Proposal

EU proposal seeks members’ commitment to:

○ Adopt a competition law, featuring the core principles of non- discrimination and transparency in competition enforcement ○ Take measures against hardcore cartels; ○ Development of modalities for voluntary cooperation on competition enforcement; ○ Support for strengthening competition institutions in developing countries; and ○ Establish a WTO Committee on Competition Policy, as the platform for administering the multilateral agreement

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Sticky issues

Larger WTO context: DCs focused on redressing imbalances of the Uruguay Round, rather than committing

• n new issues. Other priorities (Ag.), and feeling too

unexperienced to take binding commitments on competition. Cost of compliance: resource-scarce developing countries feared extra burden of meeting new multilateral obligations. Adaptation cost would exceed benefits. Policy Space: Concerns that non-discrimination principles may reduce policy space and prevent countries from protecting their industries from foreign competitors (ind. policy, investment screening, export cartels). Market Dominance: Fears that an MCA would allow TNCs to dominate in small economies, taking over national firms. DCs unable to effectively enforce competition.

State of WGTCP State of WGTCP

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Sticky issues

Commitment to Competition Law: Concerns over transplanting a one-size-fits-all foreign model, not suited to national specificities, experience and resources. Diversity

• f existing regimes, from different legal traditions.

Anti-dumping: often used as a “competition” tool to shield domestic firms from foreign competitors. Multilateral competition rules resisted by industrial lobbies, fearing 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. Dispute Resolution: Sovereignty concerns over WTO DSM’s having a say on national judicial decisions on complex individual cases (e.g. US). Developing countries also feared becoming vulnerable to trade sanctions in an area where they lacked experience. Closer to Cancun, some members suggested non-binding MCA provisions, establishing non-adversarial peer reviews instead of DSM. DCs however remained skeptical.

Today: Competition in FTAs Today: Competition in FTAs

○ Despite being no longer discussed at the WTO, competition policy has remained part of the international trade debate (UNCTAD, OECD, ICN, FTAs, RTAs) ○ Developing countries have been acquiring experience and adopting competition regimes (130+ today), many times in the context of RTAs (e.g. COMESA). ○ Today, ± 90% of FTAs have competition-related

• provisions. Same goes with South-South FTAs (Laprévote

et al., 2015). ○ These have contributed to shaping international relations

• n trade and competition matters, and often go beyond

the expected level of commitment at WGTCP.

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Typical Provisions

 Adopting or maintaining competition laws;  Principles: Non-discrimination, due process, and transparency in the application of competition law;  Practices: Defining anticompetitive practices, and measures to be taken against them; Regulating designated monopolies, state-owned enterprises, state aid and subsidies; Disciplining recourse to trade remedies (e.g. anti-dumping)  Exemptions: laying down competition-specific exemptions;  Cooperation and coordination mechanisms;  Dispute settlement in competition matters; Level of specificity varies greatly depending on parties

Today: Competition in FTAs Today: Competition in FTAs

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NAFTA MODEL DETAILS ON:

• Cooperation / coordination
• SoEs / designated monopolies
• Procedural fairness

BROAD ON:

• Definition of “anti-competitive

business conduct” EUROPEAN MODEL 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.

ANZCERTA MODEL

• Harmonizing competition regimes
• Removing trade defenses

Analysing 216 FTAs, Laprévote et al.,(2015) identified 3 main approaches.

Past WTO Work: Still Relevant? Past WTO Work: Still Relevant?

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Possible contradictions were identified between the MFN principle and the voluntary nature of cooperation.

WTO WORKING GROUP (WGTCP) FTA COMPETITION PROVISIONS

CORE PRINCIPLES

Transparency

 Members would be required to publish de jure information (laws, regulation, exceptions etc.).  Suggestions to add de facto information (enforcement priorities, case selection criteria) was resisted.  Concerns transparency obligations could be used to pressure for changing legislation, exemptions etc. Not competition-specific. Generally require the parties to promptly publish de jure information, e.g. laws, regulations, judicial decisions, administrative rulings.

CORE PRINCIPLES

Non- discrimination

 Concerns that National Treatment provisions could limit policy space for industrial policy, promoting national champions  Concerns that TNCs could dominate local firms.  Exception/exemptions would remain possible provided they are transparent  Parties secure policy space through detailed provisions on SoEs, designated monopolies, state aid, exceptions and exemptions.  Non-discrimination provisions rather broad

CORE PRINCIPLES

Procedural Fairness

 Members would adhere to basic elements, e.g. due process, accountability, right to appeal etc.  No consensus on its practical application in MCA, given the diversity of members’ legal systems  Very few FTAs include specific due process provisions on competition enforcement.  Found in TPP and some NAFTA-inspired FTAs where specific due process standards aim to ensure fair judicial proceedings.

Past WTO Work: Still Relevant? Past WTO Work: Still Relevant?

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WTO WORKING GROUP (WGTCP) FTA COMPETITION PROVISIONS

Practices Covered

 Proponents sought a clear prohibition of hardcore cartels in national legislation.  Harm acknowledged, but DCs would have preferred tackling abuse of dominant position instead  Exceptions/Exemptions would be allowed for all members if limited and transparent. DCs argued that this right should be limited to them as SDT.  Half of FTAs with competition aspects require parties to prohibit anti-competitive agreements  stronger focus on state aid and SoEs; abuse of dominant position (59%); M&As.  Exceptions/Exemptions address parties’ sensitivities regarding their SoEs and designated monopolies.

Cooperation

 Consensus that it is the most important tool against cross-border anti-competitive practices  Information exchange would be limited to non- confidential one. Otherwise would be counter- productive, particularly for leniency.  Would be voluntary, i.e. more a CB/TA tool  Majority have cooperation/coordination provisions, e.g. mutual legal and technical assistance, consultations etc.  Exchange of information remains non-confidential in

• nature. Comity provisions (negative/positive) are very

rare.  But FTAs are not the preferred platform for competition cooperation. Takes place under dedicated arrangements, e.g. Competition Enforcement Agreements (CEAs). 50% CEAs were signed by DCs, sometimes out of the authority’s dissatisfaction with the trade focus of existing FTA competition provisions.

Past WTO Work: Still Relevant? Past WTO Work: Still Relevant?

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WTO WORKING GROUP (WGTCP) FTA COMPETITION PROVISIONS

Capacity Building and TA

 Discussed ideas like assistance in drafting legislation, staff training, scholarships, internships, workshops etc.  Proposed voluntary Peer Reviews were also seen as CB/TA and not a compliance mechanism. CB/TA provisions are rare in FTAs. But: Developed country agencies are eager to build DCs capacities to become more effective enforcement partners. Many opportunities exist outside FTAs (UNCTAD, ICN, OECD etc.)

Special and Differential Treatment (SDT)

 DCs requested more than time-based provisions, e.g. (i) financial compensation for delivering enforcement assistance; (ii) right to allow export cartels; (iii) more exemptions/exceptions.  Need for flexibility heavily emphasized  Very few SDT provisions in FTA competition clauses (13%)  Mainly EU FTAs allowing time for setting up a competition law/agency.

Dispute Settlement

 Hotly debated: initial proposal seeking binding

• commitments. Many favoured a non-binding, « soft

law » approach excluding MCA from DSM.  DCs feared use of DSM vis-a-vis a commitment to competition law, others raised concerns over their judicial system’s sovereignty.  As an alternative to DSM, voluntary Peer Reviews were proposed by the Chair.  Competition provisions have to a large extent been expressly excluded from their FTA’s dispute settlement mechanism.  Some RTAs establish a supra-national authority able to enforce competition law on private entities (e.g. EU, COMESA, CARICOM).

Conclusions Conclusions

Policy space still key

Non-discrimination provisions remained rather broad, detailed provisions on exceptions, SoEs etc.

FTAs suggest new priorities

Besides cartels, more significant attention is now given to provisions on SoEs and abuse of dominant position.

FTAs signed by developing countries

Today 130+ countries have a competition regime, and many DCs signed FTAs with competition provisions. Although SDT provisions are rare, these provisions are often not binding.

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Continued preference for “soft convergence”

Most FTAs have preferred a “soft law” approach, as opposed to the “hard law” commitments initially proposed at the WTO. This has allowed developing countries to adopt elements of competition law at their own pace, while promoting experience-sharing to build competition enforcement capacities.

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