WTO study on competition policy to continue

by Chakravarthi Raghavan

GENEVA: The "educative work", now in progress at the World Trade Organization (WTO), on Trade and Competition Policy is to continue in the new year, according to a recommendation to the General Council meeting in the first week of December (on 4 December).

But the continuance of the educative work in 1999 is to be without prejudice to any future decision that might be taken by the General Council including in the context of its existing work programme. As mandated by the Geneva Ministerial Declaration (in para 9) of May 1998, the General Council has now undertaken a preparatory process to make recommendations to the Ministerial Conference in 1999. One of the items identified, and due to be considered by an informal General Council meet early in 1999, is "recommendations concerning other possible future work on the basis of the work programme initiated at Singapore".

The EC wants to use this to launch negotiations on investment rules, as part of a comprehensive round of negotiations to be launched in 2000.


The compromise decision on continuing the competition study process, which leaves the door open for putting the subject into a comprehensive negotiating basket in any future round of negotiations, was reached at the Working Group on the Interaction between Trade and Competition Policy (WGTC) on 4 December evening.

The compromise became possible after the US gave up efforts to narrow the mandate and knock out any consideration of anti-competitive effects of use of trade policy instruments like "anti-dumping".

The US, with support from the EC and Mexico, all prominent users of this instrument, had sought to knock out these questions emphasizing the anti-competitive trade measures of countries - issues that had been raised and identified by a range of members (including Japan and Hong Kong) when the Working Group was set up in 1997.

Instead, the US had advocated focus on the so-called traditional views of competition policy, namely the anti- competitive behaviour of private parties, and concentration instead on cooperation in "competition policy" and relevance of WTO principles of national treatment (equal treatment for domestic and foreign enterprises), transparency, and most- favoured-nation treatment.

At one stage, it looked as if the US might withhold consensus, pointing to the problems and difficulties it would pose because of the views of the US Congress and the US domestic constituencies (business and labour) which advocate the use of anti-dumping law.

But some developing countries have linked up the WTO's work programme in this area, and the future of the study process, to that on investment issues.

The issue of competition policy had in fact been originally raised at the Marrakesh meeting by developing countries - who argued during the Uruguay Round and at its end, that many of their performance requirements on foreign investors were in response to the range of anti-competitive activities of transnational corporations, in the whole range of parent- subsidiary relationships, downstream and upstream activities and marketing and so on, and hence that any disciplines on investment policy and conditions have to be matched by disciplines on TNCs.

They insisted, and made it a part of the Uruguay Round Agreement on Trade-Related Investment Measures (TRIMs), that any review and consideration of new disciplines in this area relating to performance requirements as well as in the services area, would need to be buttressed by international trade rules against anti-competitive behaviour of private corporations.

This issue of restrictive business practices of corporations had been raised at the time of the Havana Charter discussions and negotiations. Subsequently, when the Havana Charter was aborted, the issue was raised by Brazil at the UN Economic and Social Council (ECOSOC). It came up later on the agenda of the UN Conference on Trade and Development, and after a UN Conference, resulted in a voluntary set of guidelines (commonly called "The Set") and figured at the periodic review conferences where developing countries sought to put some teeth into them but were frustrated by the industrialized countries which did not want to restrict their TNCs.

The US, which at one time raised the issue at the GATT, did not pursue it (though recently, it sought to agitate the issue against Japan over the Kodak-Fuji dispute about the photo-film market). The US has largely believed in its ability to hit anti-competitive practices harmful to the US - its consumers on the domestic markets, and more recently its exporters on foreign markets - through unilateral actions.

There have been some grudging moves by the US and the EC for mutual cooperation on competition issues and behaviours of particular competitors. But neither wants to extend it to the developing world.

At Marrakesh, where the EC had brought up the investment issue again, several developing countries brought up the competition policy issue. But like other issues raised at Marrakesh, it has had some mixed reactions from developing countries.

The EC, which had been pushing the investment rules issue, brought up the competition policy issue (before Singapore), envisaging only some kind of transparency and obligation of countries to put in place competition laws, and vague obligations of cooperation with other countries. However, a number of developing countries and Japan argued at the outset of the work of the investment and competition group that in a world of "globalization" of trade, it made little sense to focus only on one aspect, and the issue of use by governments of such trade policy instruments as anti-dumping and their anti-competitive effects should also be addressed in the study process.

No nearer to conclusions

Neither of the two study groups seems at this point any nearer to drawing up conclusions and recommendations by consensus.

In terms of drawing up a report and making recommendations on the future work, a number of developing countries insisted that either both the working groups set up in consequence of the Singapore mandate - on trade and investment and trade and competition policy - continue their work on the basis of the original mandate and issues raised by Members, or both would die.

After a week of informal talks and consultations, the final compromise text adopted by the WGTC on 4 December and recommended to the General Council meeting said:

"The Working Group shall continue the educative work that it has been undertaking pursuant to paragraph 20 of the Singapore Ministerial Declaration. In the light of the limited number of meetings that the Group will be able to hold in 1999, the Working Group, while continuing at each meeting to base its work on the study of issues raised by Members relating to the interaction between trade and competition policy, including anti-competitive practices, would benefit from a focused discussion on: (i) the relevance of fundamental WTO principles of national treatment, transparency, and most-favoured-nation treatment to competition policy and vice versa; (ii) approaches to promoting cooperation and communication among Members, including in the field of technical cooperation; and (iii) the contribution of competition policy to achieving the objectives of the WTO, including the promotion of international trade. The Working Group will continue to ensure that the development dimension and the relationship with investment are fully taken into account. It is understood that this decision is without prejudice to any future decision that might be taken by the General Council, including in the context of its existing work programme." (Third World Economics No. 199, 16-31 December 1998)

Chakravarthi Raghavan is the Chief Editor of the South-North Development Monitor (SUNS) from which the above article first appeared.