03/04/03 UNCTAD Competition 1

Relevance of WTO core trade principles and S&D for developing countries / Principios básicos del comercio de la OMC y el Trato

Especial y Diferenciado: aspectos relevantes para los países en desarrollo.

James H. Mathis

Amsterdam Law School

University of Amsterdam, NL

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Overview

– I. Relevance of core principles to developing countries

– II. Elements of a developmental- friendly multilateral framework.

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WTO & private conduct

– WTO is between States - not firms– WTO compels NO domestic regimes

(TRIPS excepted)– No requirement to have competitive market

for either domestic or foreign firms. – WTO Members not required to address

cartels or monopolies, except state owned

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Part I: WTO rules- law or no law ?

• a) importation / exportation rules apply whether or not a country has a competition law:

• b) if a country has a competition law, then rules on imported apply:– Importation / exportation rules PLUS – rules on imported (goods or services)

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GATT treatment of importation as compared to imported goods

Import Country (imported) Border (importation / exportation)

Article XI – no (restrictions)other than duties –

upon importationand exportation

Art. II. tariff bindings –(para. 4) undermining

Art. I (MFN) duties andformalities upon importationand exportation

MFN applies tointernal laws

Art. III – National Treatment –

No less favourable treatment:- like imported/domestic goods- for laws, regs, requirements- affecting sale / distribution- de jure and de facto

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Importation rules - GATT XI

• No prohibitions or restrictions other than duties… maintained

• on the importation … or exportation or sale for export

• on any product destined for the territory of any other contracting party.

• ??: When is a restriction private and when is it public?

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Article XI - State responsibility tests

– 1. “but / for” test - otherwise firms would not form an import / export restriction.

– 2. “inducements” test (Japan - Semi)

– 3. “co-operation test” (administrative guidance) Kodak / Fuji

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Article XI - cartel interaction - attribution Argentina - Bovine Hides

• government can implement a measure by “interaction” with a private cartel.

• Need to prove the existence of the cartel • ? whether government needed to know of

actual cartel practices or at least, • established that the actions attributed to the

government by rules of state responsibility

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Importation rules for services

in the GATS.

• Quotas are lawful under GATS until market access commitment.

• No GATS comparable to GATT article XI. (no preference for duties)

• On GATS market access all importation measures eliminated except scheduled.

• ? GATS provision on export restraints?

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Related GATS Provisions

• GATS Article VIII (compare GATT Article XVII for state monopolies. Titled Monopolies and Exclusive Service Suppliers. Member shall ensure that a monopoly supplier of a service does not act contrary to MFN or commitments

• GATS Article IX. Business Practices - Members obliged to consult to eliminate certain business practices that, “may restrain competition and restrict trade in services.” GATT has no comparable Article.

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WTO Rules regarding imported Goods/Services

– When a country HAS a competition law

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GATT National TreatmentArticle III

• imposes “equality of competitive conditions” for all imported goods as compared to “like” domestic products.

- Applies to any domestic law, regulation or requirement;

- that affects the sale, offer for sale, distribution of imported goods

- no less favourable treatment standard (no protection for like domestic production)

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GATS (services) National Treatment. Article XVII

• imposes “equality of competitive conditions” for foreign services and providers.

• ONLY after a market access commitment as been made (positive list)

• subject to reservations (Negative list).

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WTO national treatment rules de jure / de facto

• National Treatment applies to competition law and policies, both de jure and de facto

• De jure: origin difference in the text

• De Facto: facially neutral law has (less favourable) effect upon “like” imported goods, services / providers in application.

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GATS de facto national treatment

• “Formally identical treatment violates national treatment if it modifies the conditions of competition in favour of domestic goods, services or providers.”

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De facto NT as to exemptions/ exclusions

-Exemption/exclusion stated in national law is a part of the law - -Does the exclusion treat DCS products or services? (ex: coffee / tea) •Is the exclusion addressed to a cartel or monopoly that controls imports or exports ?•Can foreign provider form similar restrictive arrangements?

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Compare EC proposal and national treatment- 1

• First, a broadening of national treatment to apply to firms on the basis of nationality - (horizontal MFC) – not conditioned upon “trade-related”

aspects as to goods, services or providers– similar to GATS Art. XVII as to foreign

providers, but GATS NT after market access commitment is made

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EC proposal and national treatment -2

- Second, a narrowing to apply only to de jure cases -– “disparate effects” by individual decisions

would not be actionable– would eliminate complaints on de facto

discrimination as to exemptions/ exclusions – scope of de jure to question as to secondary

legislation and notices.

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Relation of MCF national treatment to existing provisions

GATT III-imported goods- general-de facto

GATS XVII-foreign services /

providers-specific- de facto

WTOInvestment-investortreatment /post admit.-specific-de facto

MCF national treatment. - nationality of firms in respect of de jure(facial) competition law. Treatment not as to imported goods or services.

TRIPS national treatment Art. 3, ‘Each member shall accord to nationalsof other Members…’. Treatment not as to imported goods or services.

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Treatment of exemptions/exclusions in the EC Proposal

• All exclusions are permitted at the outset with notice and transparency

• this includes developed as well as developing country exclusions

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EC proposal, prohibition and co-operation aspects.

• Stated prohibition against certain international hard core cartels.– See OECD recommendations

• Appears as a “trade related “ prohibition as a Member obligation

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Prohibition / co-operation implications

• prohibition not on monopolies (exports)

• to treat by domestic enforcement of competition laws. Effects upon local markets (inbound)

• export restrictions (outbound) treated by voluntary co-operation. There is no MFN for positive comity co-operation

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II. Elements of a developmental friendly multilateral framework

• What is special and differential (S&D) treatment in the competition policy context?

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Traditional S&D elements

• longer timelines for implementation

• best efforts provisions (consultation)

• better access by preference (GSP) , i.e., non-reciprocity in obligations

• lesser market opening by tariffs for infant industry purposes (GATT XVIII)

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S&D as to national treatment

• There is no general S&D principle

• and no S&D principle applies to national treatment, or to exceptions.

• National treatment in competition law context viewed as restricting industrial/ employment policies, infant industry development, S&M, affirmative action

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Balance of domestic enforcement v. co-operation issues

• There is an “import” and an “export” side to the competition issue

• Co-operation to view as implementing a “prohibition” on hard core cartels.

• Quid pro quo for domestic enforcement is binding action on export restrictions.

• S&D could require more than quid pro quo. (d’ing ctry export cartels)

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Question as to participation...

– Some argue for no participation at all, - pending offers agriculture / textiles,

– Some suggest dangers of “laying out”. Result in a “take it or leave it” framework without better co-operation, S&D.

– Many new laws or no law. Experience at national and regional levels first

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Some suggested alternatives

- Code of voluntary conduct and variations - binding / nonbinding (scheduling?) (HKC)- Stronger (quid pro quo) on export

treatment, effect for the UN Set (India)- Trade – related approach, import and

export restrictions unlawful trade practices. (Thailand)

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Trade-related international competition provisions

• Sherman Act (US) - Affecting trade and commerce among the states - M and C

• Havana Charter ITO - Business practices affecting international trade - M and C

• EC Treaty - ‘which may affect trade” M and C• UNCTAD Set - Undermining benefits of trade

liberalisation. M and C

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Unfair trade practices approach

• NO requirement for a law - principles apply to laws in any case.

• Trade commitments affected by RBPs (GATT II.4 example). state to state, imports and exports. States may apply unfair trade laws

• Non-bound trade related - consultation no DSU (see GATS Art. IX)

• non-trade related (anti-competitive) non binding

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Where national treatment applies: What is S&D for national treatment?

– The non-efficiency objectives are not all development oriented. Does a Framework recognises other objectives ?

• regional integration• small and medium • domestic market participation • cultural/ethnic affirmative action • distressed area development• infant industry context/ industrial policy• responsive consolidation

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National Treatment S&Dthree approaches

– All exclusions permitted, developed and developing.

– Scheduling voluntary national treatment (as in the GATS), developed and developing

– negotiated exemption approach. The framework states the exemption criteria as to non-efficiency objectives.

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Negotiated Exemption Approach

• Framework pramble- states non-efficiency objectives

• Negotiated exemption paragraph provides negotiated criteria to apply non-efficiency objectives

• Pre-violation. Burden remains on complainant to show abuse / misapplication

• Article 81(3) example for exemptions

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Conclusion - Doha to Cancun

• For Cancon - meaning of “explicit consensus”

• Institutional provisions for the modality discussion - When are modalities “negotiated”

• Substantive modalities. How broad is the Doha text? Is a horizontal framework on general anti-competitive practices already committed?