WTO competition rules is just Global "welfare" for TNCs

by Martin Khor

Geneva 23 April -- The multilateral rules on competition policy, based on "principles" of non-discrimination, national treatment and transparency, being promoted at the WTO by some policy-makers, academics and trade officials of some major industrialized countries seem to be aimed at increasing access to overseas markets for their transnational corporations.

This became clear at two recent meetings in Geneva -- a meeting of the WTO's Working Group on the interaction between trade and competition policy (19-20 April) and a symposium (17 April) on competition policy and the multilateral trade system organised by the secretariats of the WTO, UNCTAD and the World Bank.

As with the WTO organized symposium on Trade and Development, the symposium on competition policy too had presentations dominated by the exponents of TNCs and the theories about competition based on "contestability" of markets, and a far cry from the anti- competitive behaviour of TNCs and their impediments to development, frequently raised by developing countries.

Both at the symposium, and at the Working Group on Trade and Competition policy, there was vigorous advocacy for application of what are termed "WTO principles" of non-discrimination, national treatment and transparency, with each of them used as code words to give foreign corporations, whether as suppliers through exports or by local investments and franchising, equal, if not better, treatment than that to local enterprises.

Pressures to accept this view about corporations and competition will build up in the next few months as the WTO's members states intensify their negotiations to prepare for the WTO's Ministerial Confet of competition law", including guarantees that ensure its reasonable, objective ad impartial administration.

The paper also says that all firms, domestic or foreign, should have effective means to seek redress against anti-competitive practices. This includes the right to bring complaints before competition authorities and the right of action before the courts.

This implies that a WTO competition agreement, whilst not aiming for a harmonised enforcement system, should consider which are the basic rights of private parties which should be guaranteed, taking into account differences in national enforcement proceedings.

In a section on the contribution of competition law to ensuring non-discrimination and transparency in trade, the paper says it is vital for a foreign firm that its ability to compete on an equal footing is not undermined by measures taken by governments or business.

From the WTO perspective, a particular concern relates to anti- competitive practices which raise barriers to entry into a market or are aimed at export trade. Such practices deny foreign producers effective equality of competitive opportunities. The paper also provides many examples of anti-competitive practices of firms that affect trade.

A final section (Section IV) of the paper argues for a WTO agreement on competition rules, which would "establish a basic framework of rules relating to the adoption and enforcement of domestic competition law, and provisions on cooperation among WTO members." The commitments assumed under the multilateral framework will be incorporated in the domestic competition law of WTO members.

The paper puts forward elements to be considered within WTO as regards "core principles and rules on competition law and its enforcement."

The key objective, says the EC, is "to promote the adoption of a comprehensive competition law, backed up by an effective enforcement structure, based on principles such as transparency and non-discrimination."

In a response to the EC paper, the representative from India during the working group meeting said a great deal of effort had gone into the EU paper but unfortunately the EU submission had presupposed what can only be described as premature conclusions.

"It is our feeling that the EU wants to ab initio conclude that there is a necessity of having a multilateral framework of rules on competition within the WTO. This in our view is inappropriate and we may be in danger of jumping the gun by looking at certain conclusions without yet having arrived at them.

"We are involved in an exploratory and educative process and are still a long way off from where we could gauge the need for such multilateral rules. It would be unfortunate to pre-empt the discussions... The development dimension is only now gradually percolating into the discussions. It would be unfortunate if this process is halted by premature talk of developing multilateral rules."

While agreeing with the EC that non-discrimination (including MFN and National Treatment) was the corner-stone of the multilateral system and there was a close connection between the WTO non- discrimination principle and basic objectives of competition, India said it did not believe that it was only an effective competition law-regime which was essential to combat anti- competitive practices. There were a number of existing WTO provisions, including those relating to anti-dumping, which similarly denied to foreign producers effective equality of opportunities, thereby undermining WTO market-opening commitments.

Thus while it was important to examine how domestic competition policy regimes further the objectives of non-discrimination and national treatment, it was also necessary to examine those trade instruments that have anti-competitive ramifications and foreclose access to markets, thus denying effective equality of competitive opportunities.

India also did not subscribe to the views in section IV of the EC paper (on a WTO multilateral framework). While Members should be encouraged to gradually introduce competition law, "it is not at all necessary to have a basic framework of multilateral rules to ensure WTO objectives are achieved."

Whilst it agreed with the EC that it should be ensured that developing countries benefit from international cooperation and capacity building on competition law, "we feel that one does not need multilateral rules to address them."

"We therefore reject the hypothesis that these issues, so critical from the development dimension perspective, can be addressed by developing multilateral rules on trade and competition," India added.

Whilst the EC thinks that transitional periods and flexibility in the rules should be an integral part of a multilateral framework on competition, "we do not think this would allay the concerns that most developing countries have. In a scenario where a very large number of countries do not as yet have national competition laws, to even talk of core principles or common objectives for a multilateral framework is meaningless."

India agreed with the view of Brazil that even in the development of national competition policy regimes, there is a need to consider (i) the different levels of development; (ii) the different cultural context in which these regimes will be implemented; (iii) the difference in availability of resources for this purpose: and (iv) the different levels of institutional development.

"It is clear that these issues are much too complex and not as easily amenable to a multilateral solution, as has been made out to be."  (SUNS4422)

Martin Khor is the Director of Third World Network.

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