Caution advised on starting competition negotiations at the WTO

Competing viewpoints on competition policy were expressed at the WTO symposium. While an EC official “stubbornly” preached the virtues of a WTO competition framework, the Indian representative, among others, suggested that the WTO was not the best vehicle for using competition policy to promote development.

by Cecilia Oh

GENEVA: Members of the World Trade Organization were cautioned on 17 June by several speakers at the WTO-organized public symposium on “Challenges Ahead on the Road to Cancun” against a decision to start negotiations at the Cancun Ministerial Conference on a WTO competition agreement.

Mauro Petriccione, a trade official of the European Commission, in putting forward the case for negotiations, started by saying that he would try to answer the question: “Why are we (the EC) so stubborn in proposing a competition framework in the WTO?” He was followed by Rajesh Aggarwal of the Indian Mission to the WTO, who began by commenting that just as Petriccione was stubbornly insisting on a competition framework, he was as stubbornly insisting on caution against introducing one in the WTO.

Besides the two trade officials, the session on “Trade and Competition:  Looking ahead to Cancun” also heard the Director General of Consumers International, Julian Edwards, advocating caution in commencing negotiations on competition in the WTO.

James Howard, director of the International Confederation of Free Trade Unions (ICFTU), voiced the opposition of the global unions to having a competition agreement in the WTO.

Another discussant, Calvin Goldman of the International Chamber of Commerce, told the panel session that the ICC members could not reach consensus on whether the WTO should negotiate a competition agreement.

EC view

Petriccione claimed that the EC’s objective was to foster the growth of competition policy around the world, and that this would be best carried out in the WTO. “Competition policy is an essential component of economic governance. Whilst it is not a panacea, it helps governments to have a better framework,” he said.

He dismissed allegations that the EC’s proposals on competition policy belied a market-access objective. At the same time, Petriccione also saw nothing wrong in having proposals that would ensure enjoyment of the market-access gains negotiated elsewhere! “Is it a good thing that the market-access gains we negotiate are frustrated by the ‘behaviour’ of companies?” he asked.

He said that the EC was undertaking a lot of work on a bilateral basis, in terms of cooperation agreements with developed countries. With developing countries, the objectives were both cooperation and technical assistance. He said that competition policy was a key part of bilateral agreements that the EC negotiated with developing countries, and in the current economic partnership agreement (EPA) negotiations with the ACP (African, Caribbean and Pacific) countries, capacity-building was an important part of bilateral assistance.

In this context, the WTO was only the lower rung of a ladder, he said. “The WTO is where binding rules are set, to create the basic framework, so as to enable all Members to equip themselves with a competition regime that is sound. Then, it develops in an autonomous fashion at the national level,” he said.

On the possible decisions at Cancun, he said that while the competition working group in the WTO had done a great deal of work - the level of detail of which has surpassed work done since the Singapore Ministerial - the reason for this was the fact that Members were preparing for the possibility of negotiations being decided at Cancun.

He said it was true that the agreement at Doha was that negotiations would not proceed without an explicit consensus, but if the EC could not achieve a consensus, “then it will take a big chunk out of the desirability of the agenda for competition policy”. He admitted that a number of developing countries remain unconvinced, but he was of the view that their arguments and concerns could be addressed.

Developing-country concerns

Aggarwal of the Indian Mission said, “We need to distinguish between the need for competition policy at the domestic level and the need for a multilateral agreement on competition policy.”

Aggarwal added that he was aware of the importance of competition policy and its significance for development policy. However, he had difficulties with the EC’s proposal in using the WTO as a forum to propagate competition policy and its benefits for development. “India is saying that these should be left to the countries themselves to decide,” he said. Citing the case of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS, about which there is increasingly adverse public perception of its impacts on development), Aggarwal suggested that the WTO was not the best vehicle to attempt using competition policy to promote development.

On the substantive issues, he said that the non-discrimination principle, which the proponents were seeking to introduce in a competition agreement, had raised concerns for developing countries. These concerns remained and are related to whether its application will raise the question of whether competition policy or development policy will take precedence. It would also raise the concern that the WTO may end up deciding on this issue.

Aggarwal pointed out that the principle of non-discrimination has not been a point of issue in competition policy so far, so why should it now be made legally binding? As far as he was aware, non-discrimination has never been at dispute in competition policy cases, he said.

In addition, it would also be possible for legal arguments to be crafted using the non-discrimination principle to overcome or nullify development policies. This, he said, was an issue of concern for developing countries in respect of the proposal to incorporate the non-discrimination principle in competition policy.

Aggarwal also pointed out that the non-discrimination principle would apply across the board, with respect to other aspects of competition policy, not just to hardcore cartels (which are on the agenda of the WTO working group on competition). Therefore, in cases where developing countries would like to formulate legislation on mergers and acquisitions, for example, such legislation would have to be informed by the non-discrimination principle.

On hardcore cartels, he said it was fair enough that the proponents highlighted their deleterious effects. But the question is, what could developing countries expect to gain from an agreement to ban such cartels?  “There seems to be no intention to ban export cartels, which are extremely harmful to developing countries. If there is such an exclusion (from the ban), what is the benefit to developing countries?” asked Aggarwal.

On the question of voluntary cooperation, Aggarwal pointed out that the WTO context would make the benefits of such cooperation questionable. “Power asymmetries in the WTO will mean that voluntary cooperation effectively becomes a mandatory requirement for developing countries to comply, whereas a voluntary requirement as applied to developed countries may not amount to anything much,” he said.

Consumer interests

Edwards of Consumers International (CI) said it was essential to encourage governments to implement competition policies and law at the national level and to promote international cooperation in order to ensure consumer interests are protected. However, he said, it did not mean that there should now be negotiations on a competition agreement at the WTO.

Commenting on the process leading up to the Cancun Ministerial Conference, Edwards said that the competition issue was not part of the single undertaking. Whilst CI would like to see progress on competition-policy discussions, to insist that it be part of the single undertaking would likely slow things down, he said.

“Forcing the unwilling to negotiate is a guarantee for an unsatisfactory outcome,” he said, referring to the opposition of some WTO developing-country Members to starting negotiations on a competition agreement.

Edwards said that CI was therefore of the view that the discussion process should continue in the WTO, whether in the existing working group or in another body, to work out the details of what might constitute an appropriate multilateral framework for competition.

“This can be done without undertaking commitments,” said Edwards.  He added that such a process might also help allay some of the skepticism about the European Union’s intentions in pushing for a competition agreement in the WTO. He was referring to the suspicion that the EU’s longer-term intentions were to extend the remit of a multilateral framework beyond that of hardcore cartels, as is currently proposed.

Speaking on behalf of the International Chamber of Commerce, Goldman, chair of the ICC task force on Competition and Trade, said that the ICC had been working on the competition and trade issue since the Singapore Ministerial Conference.

He explained  that the ICC’s perspective was  that  it did  not  want  the real opportunities for growth afforded by open trade and  investment to be impeded by either public or private restraints,  one  of  which  was  the  operation of cartels. Cartels distort the level playing field for business to operate. “And we want governments to have the right tools to prosecute such cartels,” he said.

However, he said, the ICC membership did not have consensus on the question of whether there should be a competition agreement in the WTO.  “We have not agreed on a common position. In fact, ICC members could not reach a consensus,” he said. He added that there was agreement within the ICC membership that each national delegation would be free to make its own representations to their respective governments on this issue.

Goldman said that the ICC had prepared a detailed paper that was submitted to the WTO Secretariat, outlining its views on the issues to be considered, if and when there was a mandate for negotiations. But he advised caution in proceeding on the issues.

On the subject of core principles, such as the requirement for transparency, non-discrimination and procedural fairness, Goldman said that while these were fundamental requirements, they were not simple to apply. He also said that there was no agreed definition of hardcore cartels.

Intervening from the floor, Howard of the ICFTU said that his organization did not believe that there should be negotiations on competition. He said that application of the national-treatment principle in competition policy will amount to market access. “It is difficult to see how it would be used other than as a market-access tool.” (SUNS5366)