The author was the Canadian ambassador to the WTO. In this piece, available here, which is the opening speech to a conference on ‘Competition and globalization in developing economies’, he argues that trade liberalisation must be accompanied by sound economic regulation that enables trade and investment to occur. Robust and effective competition law and regulation is a key element of this enabling environment, and a potential contributor to sustainable development as well.
The trade and competition communities have been supporting each other’s goals, and applying similar approaches, for some time. Building on this base, there are actions that will lead to the better integration of trade and competition perspectives, while avoiding being drawn into grand debates about new forms of global governance, as has happened in the past.
In a first section, the paper provides an overview of the international trade regime.
From its post-war beginnings as an “interim” agreement called the General Agreement on Tariffs and Trade (‘GATT’) through the establishment of the World Trade Organization, the international trade regime has been remarkably successful in addressing a range of impediments to trade. This success has been most evident in the area of border measures, through commitments to eliminate quantitative restrictions on imports and exports, and successive rounds of negotiated tariff rate reductions. More recent measures have led to constrains to the abuse of non-tariff measures, ensured a minimum level of protection and enforcement of IP rights, contributed to important progress in the liberalisation of services markets and led to the signing of plurilateral government procurement rules that promote open, fair, and transparent conditions of competition in procurement markets.
However, recent developments remind us that, for trade to serve as the accelerator for growth, open trade policies must be accompanied by sound domestic regulation that creates and maintains an enabling environment for business to grow. In sum, good trade policies must be accompanied by sound economic regulation to enable trade and investment.
Section two identifies the role of competition law in the international trade architecture, particularly as regards developing economies.
Robust competition regimes are an important part of the regulatory environment, since competition policy strives to level the playing field for all participants in a market economy. Developing countries have a particularly acute need for improvements in economic efficiency and promoting consumer welfare, tenets that are at the core of competition policy. Formalising these priorities through the adoption of a competition law can act as a powerful check on the elite privileges and cronyism that frustrate the economic prospects of many.
People in developing countries are particularly vulnerable to cartels and monopolistic practices; accordingly, competition policy has an important role to play in creating the conditions that allow for economic competition to flourish and its concomitant benefits to diffuse. Development assistance, and national development plans, should properly encompass the strengthening of competition laws and policies, and the capacity to administer them, as a central element of a sustainable growth strategy.
Section three discusses the interaction of trade and competition policies.
The competition and trade law communities largely work independently of each other. Admittedly, there are important differences between the two disciplines: trade law constrains governments, while competition law constrains commercial actors and empowers governments to intervene. However, they share much (and increasing) common ground. Both regimes are predicated on the theory that free and fair competition optimises the use of resources and yields the best economic welfare results. Both seek to ensure that commercial actors benefit from a level playing field. Further, the areas of intersection between the two have been increasing in recent years.
Telecommunications are the only area that WTO negotiators have agreed to include specific competition provisions. These are contained in the GATS Telecommunications Annex and Reference Paper, which require WTO Members to maintain measures that prevent suppliers from engaging in anti-competitive conduct and provide opportunities to connect to networks controlled by major suppliers. This provides an example of a hybrid international trade and competition instrument, and invites reflection on whether it would be fruitful to consider similar approaches in other areas, for example, transport or energy.
Government procurement is another area where trade disciplines contribute to disciplining anti-competitive conduct, even if WTO procurement obligations only apply to the WTO Members that have agreed to be bound by them.
An area of increasing relevance for trade policy is the discretion of competition authorities. In recent years, business voices have complained that antitrust enforcement has become a tool of industrial policy, and arguments have been made to the effect that the WTO’s non-discrimination provisions should be applied to competition investigation and enforcement – an approach that the author seems to consider undesirable.
SOEs are another area of joint concern. Concerns about state support for firms operating in the private sector are nothing new, but both the scale of the issue and the acuteness of the concerns generated have increased dramatically in recent years with the development of State capitalism. The provision to SOEs of, for example, state-backed financial support, tax preferences, regulatory privileges and immunities, and favourable government purchasing arrangements pose profound challenges to the concepts of free and fair competition that lie at the heart of both trade and competition policy. Competition officials worry that the privileged position of SOEs may negatively affect competition and its attendant benefits for consumers; and trade officials worry that these privileges skew conditions of competition by according more favourable treatment to state-backed firms than that which is accorded to private sector firms. This intersection has led to the increased sophistication of competition chapters in international trade agreements, particularly as regards competitive neutrality.
Section three also contains a discussion of efforts to ensure coherence between trade and competition policies, while section four looks into areas of future work.
Formal efforts at the WTO to explore possibilities for bringing competition squarely within the Organization’s competence were considered briefly in the 1950s to address so-called “restrictive business practices,” and were re-started in earnest shortly after the completion of the Uruguay Round. The 1996 Singapore Ministerial Conference established a Working Group on the Interaction between Trade and Competition Policy, chaired by the Chair of the OECD Competition Committee (the same person who is the chair of that Committee today, by the way). Over roughly seven years, the Working Group conducted a wide-ranging examination of the relationship between competition policy and trade, and of the effects of this relationship on development and global prosperity.
Although its work did not generate sufficient momentum to launch negotiations on a WTO framework on competition policy, it did yield a broad convergence of views on the importance of core components of good competition policy, including adherence to non-discrimination, transparency, and procedural fairness in competition law enforcement procedures. While this work did not lead to the signing of any international treaty, the OECD has served as a hub for developing approaches to international co-operation in the area of competition. The International Competition Network (ICN) has emerged as a very important venue for competition authorities to address competition concerns with their counterparts. And regional trade agreements (RTAs) have also made a contribution to this convergence.
In view of the shared objectives of the trade and competition regimes of creating a level playing field for businesses and consumers, it is fair to ask if the relationship between the two should be more formalised at the international level. At present, the author considers this unlikely, but identifies a number of areas where governments and business could benefit from a willingness on the part of each community to consider the perspective and wisdom of the other. These include export cartels, the extra-jurisdictional effects of IP rights, and how trade and competition rules should interact in regulated industries such as communications or transport.
Section V then considers the development dimension.
Traditionally, the focus of the trade and development field has been on market access for developing country goods. Nevertheless, access to markets, and to a fair share of the benefits, can be frustrated by anti-competitive behaviour at home and abroad. Greater focus on competition law capacity in developing countries, and on co-operation with other authorities to tackle offshore conduct in a manner that reduces the risk of unilateral, extraterritorial application of laws, is called for.
This is a very nice overview of the overlaps between competition and trade law, more than making up in clarity what it (understandably) lacks in depth. For example, I would have liked to see more on the intersection of SOEs and competition law, which is a truly complex topic – touching on matters of comity, state compulsion and jurisdiction within competition law alone, before we extend our gaze towards trade policy and foreign relations more generally. However, it is quite nice merely to see the problem nicely set out across various dimensions.
Another virtue of the paper is to unearth how much the work of international competition bodies owe to trade policies, and how much of the work on international cooperation is indebted and intertwined with wider trade policy issues. This should be obvious – one needs to think only of the origins and primary role of the European Commission – but is often overlooked, if not outright ignored.