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TWN Info Service on WTO Issues (June03/1)

Third World Network

Geneva 6 June 2003

 

Dear Friends and colleagues

 

NO CONSENSUS ON COMPETITION IN WTO, ACCORDING TO MANY DEVELOPING COUNTRIES

Several developing countries have told the WTO that there is a lack of convergence of views among WTO members on many issues under discussion on trade and competition.

This emerged at the meeting of the WTO Working Group on the Interaction between Trade and Competition Policy held on 26-27 May.

The lack of convergence is significant because the WTO Conference in Cancun in September will take a decision whether to launch negotiations for a competition agreement in WTO.  That decision can be taken only on the basis of an explicit consensus on the modalities of negotiations.

Below is a report of the meeting.  It was published in the SUNS (South-North Development Monitor) of 2 June 2003.

Please check the TWN website on www.twnside.org.sg for previous issues of TWN Info Service and other documents on WTO and other issues.

with best wishes

Martin Khor

Third World Network

 

 

 

DEVELOPING COUNTRIES STRESS LACK OF CONSENSUS ON COMPETITION ISSUE IN WTO

By Martin Khor

Third World Network, Geneva, 2 June 2003

 

The WTO Working Group on the Interaction between Trade and Competition Policy, at its last meeting (26-27 May) before the September 5th Ministerial meeting at Cancun has been told by several developing countries that they do not see a consensus among WTO members for proceeding with negotiations on a WTO agreement on competition policy.

The Cancun Ministerial meeting is mandated to take a decision by explicit consensus on the modalities of negotiations for a WTO agreement on Trade and Competition Policy.

The competition policy issue is one of the four Singapore issues on which the Cancun meeting has to take a decision on negotiations post-Cancun.  The three other Singapore issues are: investment, transparency in government procurement and trade facilitation.

The chairman of the Working Group, Professor Frederick Jenny of France, will prepare and submit on his own responsibility a factual report. Judged by his past recod, he is unlikely to stretch the report to promote the claims of existence of a consensus.

The Chairman of the General Council, Amb. Carlos Perez del Castillo, is due to hold consultations from 6 June on how the Singapore items are to figure on the Cancun agenda, and in terms of decisions that Ministers have to take under the Doha Ministerial Declaration.

At the Working Group meeting, representatives of an even larger number of developing countries than normal spoke up and said that there was no convergence of views on several issues and that therefore more time was required to further discuss and clarify these issues, and negotiations could not proceed.

The observations and comments of the major industrialized nations showed that there were differences and divisions even among the proponents of an agreement on competition policy at the WTO - on a number of questions on the contents of such an agreement, including on compliance mechanisms and whether the WTO’s Dispute Settlement process should apply.

The EU favours the application of the DSU, while Canada and the US have doubts and questions. The US favours a socalled peer review process which could be used to pressure some developing countries. At the same time, the US for example wants to restrict the scope of making available information about the  activities of its corporations and cartels, so that it could withhold information sought  by a developing country.

Several developing countries, including India, Malaysia, Egypt and Pakistan, said they still do not see the need for a WTO competition agreement, which would add more burdens and obligations on developing countries.  Moreover, they pointed out, many developing countries still do not have a competition law regime and thus were not ready for a WTO competition agreement.

Some of the developing countries said that while they recognize that hard core cartels are a problem, they are not convinced that a competition agreement in the WTO is the answer to this problem.  They reminded the Working Group that there is already a UN Set on Restrictive Business Practices which deals with competition policy, and which included the idea of a peer review.

Thailand said it saw large gaps between positions of members, and believed developing country concerns have not yet been satisfactorily addressed. It said that the compliance cost for an agreement would be nil for developed countries while high for many developing countries who have to pass laws and establish institutions on competition policy.

Malaysia also said there was no consensus for negotiations, adding that hard-core cartels are a developed country phenomenon that have burdened developing countries with excessive costs, but that it is not convinced a multilateral agreement on competition is the only way to deal with this problem.India said that if there was a negotiation for a competition agreement in WTO, this would put pressure on developing countries to establish institutions and laws on competition policy.  If a peer review process is required, this could be done in UNCTAD (where the Set on RBPs is located) instead of the WTO.

Tanzania, Indonesia, Pakistan, Egypt, India and Nigeria, among others, agreed that positions among Members on many issues that have been discussed on competition at the Working Group are still far apart, and they remain unconvinced about the benefits of a WTO competition agreement to developing countries.

In  a statement, Kenya said that complex questions that have arisen in the discussions so far have lacked satisfactory clarification and divergent views persist.  Further, the question of how a multilateral framework on competition policy will address development needs and concerns of developing countries has not been satisfactorily addressed.

“Given the fact that there has not been sufficient convergence on many of the issues to warrant a different level of discussion, the Group should continue working if necessary until such time when there is adequate understanding of these issues.”

According to Kenya, policy flexibility for developing countries (which is called for in the Doha Declaration) would involve preserving the right of a country to choose whether and when to have a competition law and the kind of competition policy to adopt. “In other words, countries should preserve the right to adopt a phased approach in terms of discussion, implementation and enforcement of a competition regime that supports its industrial policy.

“So far there has not been sufficient clarification whether proposals of the proponents will allow such flexibility to be preserved, or would restrict such flexibility in the interest of promoting market access for developed country enterprises and harmonization of competition regimes.”

Regarding the so-called core WTO principles of transparency, non-discrimination and procedural fairness, Kenya said these principles were developed in the context of trade policy and they were not intended as universal principles applicable to all issues including competition policy.  Sufficient clarification has not been provided relating to such appropriateness or desirability.

Kenya added that there is need to clarify how the national treatment principle will apply with regard to anti-competitive practices or mergers among small and medium scale producers in developing countries which are meant to achieve efficiency vis-a-vis mergers among big firms and multinationals in developed countries that promote anti-competitive practices.

“There is no doubt that the application of national treatment principle could easily spill over and distort other areas such as industrial policy, leading to distortions in development strategies of a country.  Further analysis is therefore needed.”

Malaysia stated that at this point of time, negotiations on competition is not part of the Doha work programme. Domestic competition policy and law may not be a priority for developing countries as there are more important socio-economic development issues of higher priority.  Developing countries should be given the time and flexibility to implement competition policies, said Malaysia.

“It is premature at this juncture to assume that all WTO members would eventually adopt a competition law.  The Working Group has yet to achieve any concrete decisions that can be said to be a consensus.  Malaysia does not want to find itself locked into an agreement on which we are not quite clear about and in which specific rules and disciplines can undermine efforts to build domestic industries to face globalization.”

The Working Group also discussed compliance mechanisms for a possible WTO Agreement on Competition Policy.  The United States, Japan and Australia tabled several new papers supporting the use of voluntary peer review mechanism, similar to the WTO Trade Policy Review Mechanism or the competition peer review process in the OECD.

The EC however proposed using a combination of peer review and the WTO dispute settlement process to achieve compliance. The EC said dispute settlement would not look into individual decisions of competition authorities but rather at the general compatibility of the competition laws and procedures with the WTO.

The US said it continued to question the role, if any, of the dispute settlement  in this area. Korea said that peer review is less than DSU but “more than nothing” in terms of seeking compliance. Canada said it did not see the value of dispute settlement in this area, and that what members need is a cooperative and non-confrontational approach to competition problems such as international cartels.

India reiterated its opposition to the application of the DSU coverage, and maintained that peer review in the WTO would be used to apply pressure on developing countries, adding that it would prefer such a review to take place in UNCTAD.

On special treatment for developing countries, the EC tabled a paper which stated that “the only substantive provision that we envisage would be an obligation for WTO members to enact in their domestic competition law a ban on hard core cartels”.

This is aside from the EC proposal to use the  principles of transparency, non-discrimination and procedural fairness in the enactment of competition laws. The EC also said that members should be given “individualised” time-periods to set up competition regimes in accordance with their level of development.

In a paper, Kuwait proposed  the exclusion in any WTO competition agreement of “not only intergovernmental agreements but also any restrictive business practices related to such agreements”. The paper also criticized “mega mergers” of oil companies such as Exxon and BP for raising the risk of abuse “by concentrating economic power within an industry”.

 


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