Competition policy, development and the multilateral trading system:
state of play and developing countries’ concerns
Robert D. Anderson
Counsellor, WTO Secretariat*
CUTS meeting on the 7-Up Project (Mark II)
Hanoi
23-24 April 2004
Issues to be addressed
Why is competition policy important for development: insights from the WTO Working Group
Challenges involved in establishing a competition regime
Meeting the challenges: the roles of civil society and international cooperation
What would be involved in a WTO agreement on competition policy?
Developing countries’ concerns in this area
The options before the WTO post-Cancun
Why is competition policy important for development: insights from the WTO
Working Group (1)
Key element of the institutional framework for a healthy market-based economy
Ensures that firms compete fairly, in ways that benefit society
Provides lower prices and more choices for consumers/user industries
Maximizes opportunities for new entrepreneurs
Why is competition policy important for development: insights from the WTO
Working Group (2)
Note separate contributions of: Competition law enforcement – deters private anti-
competitive practices Competition advocacy role of competition agencies –
public education, addressing government-imposed barriers to competition and supporting implementation of sound rules in related areas (bankruptcy, corporate governance, regulation of essential facilities)
Involvement of competition authority in privatization processes is also vital
Some hard data: the impact of international cartels on developing countries
Many examples of international cartels have been disclosed: in vitamins, lysine, citric acid, graphite electrodes, bromine, cement, heavy electrical equipment, other industries
World Bank study (Levenstein and Suslow): U.S. $ 81 billion in developing countries’ imports affected by international cartels in 1997; average price impact of 20-30%).*
Excess profits often transferred back to developed countries* study available on the Internet at:
http://www-unix.oit.umass.edu/~maggiel/WDR2001.pdf
Challenges involved in creating an effective competition regime
Enactment of relevant legislation including substantive provisions and enforcement powers
Establishment of the competition agency: training of agency staff and obtaining necessary resources
Public education as to importance of the law and its key provisions
Investigation/prosecution of initial casesProgressive deepening of enforcement and
advocacy work
Ways to meet the challenges
Obtaining appropriate help from international organizations/bilateral donors
Developing links with civil society and educational institutions (CUTS/7-Up approach a good example)
Developing/participating in appropriate cooperation mechanismsRegionalMultilateral?
Why is competition policy on the WTO agenda?
Growing incidence of anti-competitive practices with transnational dimensions, e.g. international cartels
Ability of such practices to: impede market accessundermine the intended benefits of trade
liberalization (e.g., expanded supply, lower prices)
Perceived relevance to reform of certain WTO provisions
What would be involved in a WTO agreement on competition policy?
Requirement to adopt a competition law embodying provisions against hard-core cartels
Law would have to reflect “core principles” of transparency, non-discrimination and procedural fairness
“Modalities for voluntary co-operation”, e.g. with respect to the exchange of national experience by competition authorities and aspects of enforcement
Enhanced commitment to technical assistance, in cooperation with other international organizations
Key concerns of developing countries with respect to a possible WTO agreement
Direct costs of establishing/operating a competition agencyBut are these really so high? (CUTS experience
suggests not) Perceived intrusion on developing countries’ “policy
space”/development optionsBut note role of exceptions/exemptions, also that
framework is directed at private anti-competitive practices, not government measures
Is the balance of benefits in favour of developing countries, or are stronger forms of cooperation needed?
What happened at Cancun?
Negotiations opposed by most (not all) developing countries, for mix of tactical and more fundamental reasons
Demand for further clarificatory work on specific issues by some countries
EU offer to drop Investment and Competition Policy (subsequently withdrawn).
Breakdown of the Ministerial
Current status of the work/options before the organization
Chairman of General Council is conducting consultations on various DDA issues
EU offer, at Cancun, to drop Investment and Competition Policy is “no longer on the table”.
EU has raised the idea of a plurilateral (“opt-in/opt-out”) approach, outside the Single Undertaking.
Another possibility: just send the issue back to the Working Group for further clarification and educational work (and TA)