Competition Policy Trade Policy at Work

Trade and Competition Policy: Has Past WTO Work Stood the Test of Time?

With the WTO Nairobi Ministerial Declaration potentially opening the door to possible new issues, some expect a possible come-back of some Singapore issues. While competition policy has not yet seen revived attention, it has become part of many trade agreements. Geneva delegates should be attentive to these developments and their potential multilateral implications. This study aims to help them get ready by reviewing past WTO debates on the matter, and assessing to what extent it remains relevant today.

Competition Policy and Law aims to ensure a level playing field among firms competing on the market, and prevent anti-competitive behaviour which can affect consumer welfare though higher prices as well as reduced choice, quality, and innovation. Such anti- competitive practices may include the abuse of market power by monopolies and dominant firms, horizontal business practices (e.g. price-fixing, bid-rigging, market allocation between competitors), vertical business practices between suppliers and distributors (e.g. exclusive dealing, refusal to deal, tied selling etc.), and mergers and acquisitions which harm competition. However, different countries apply different rules as to which practices are considered illegal and the standards for determining their legality.

Historically, competition and international trade laws have evolved separately. While international trade agreements have focused on removing barriers to the free flow of products across borders, competition policy has existed primarily at the national level to prevent the anti-competitive behaviour of firms affecting consumers and businesses on the domestic market.

In practice however, globalisation has given rise to a set of issues at the interface of trade and competition policy, which affect each other. For instance, trade rules like anti-dumping and Intellectual Property Rights (IPRs) may lead to anti-competitive situations, while national competition authorities may allow certain export cartels which distort international trade to the benefit of their national firms. A major concern is the selective enforcement of competition law by competition authorities, who may not prioritise cases where anti-competitive activities are operated by or to the benefit of their national firms.

Some of the main cross-border competition issues with linkages to international trade include: (i) Import cartels formed by domestic buyers, against which domestic competition enforcement is ineffective; (ii) State-trading Enterprises granted special and monopolistic rights, which can limit market access for foreign firms; (iii) Export cartels, perceived as a beggar- thy-neighbour policy when they are state-sponsored and exempted from competition law; (iv) International cartels, which national authorities struggle to detect and break given their international nature, can acquire and abuse significant market power globally; and (v) Mergers and Acquisitions, which can lead firms to acquire dominant positions, and whose regulation can fall under multiple jurisdictions as exemplified by the Gillette-Wilkinson merger which had to be cleared by 14 separate competition authorities.

The inability of national authorities to tackle anti- competitive practices affecting their market but originating from other countries, such as international cartels, sparked the debate about the need for policy convergence and cooperation among competition authorities, e.g. through multilateral competition rules.

Since 1948 and the aborted Havana Charter, international efforts to enhance convergence and cooperation between countries on cross-border competition issues have been undertaken at the bilateral, plurilateral, regional and multilateral levels. At the World Trade Organization (WTO), a working group was established at the first Ministerial Conference in 1996 to study the interaction between trade and competition policy, and explore the possibility of a multilateral competition agreement. After 7 years of debates however, faced with resistance from developing countries and the United States (US), the WTO membership decided not to launch negotiations on a multilateral agreement.

Today, in the absence of a multilaterally-binding competition framework, international cooperation is characterised by a combination of: (i) limited membership binding agreements, typically between countries in a same regional grouping or at similar development stages; (ii) wide membership voluntary frameworks, promoting “soft law” and exchange of experience among competition authorities worldwide, mainly under the auspices of the United Nations Conference on Trade and Development (UNCTAD) and the International Competition Network (ICN).

Renewed Momentum at the WTO In 2015, at the 10th WTO Ministerial Conference, trade ministers opened the door to considering the inclusion of “new issues”, which were so far not part of the Doha negotiations agenda. Some observers have speculated that some of these “new issues” may include those “Singapore issues” which already have a history at the WTO, such as Trade and Investment or Trade and Competition Policy.

The substantial exploratory work undertaken by the WTO Working Group on Trade and Competition Policy has remained untapped since 2004, and the understanding WTO members had started building has not been nurtured. In fact, WTO delegates who worked on these issues before 2003 are no longer in Geneva, and the weak institutional memory of many missions doesn’t enable current delegates to benefit from their predecessors’ experience. This is particularly true for developing countries.

Therefore, the vast majority of WTO members are not well prepared to engage in constructive, even exploratory, discussions on Trade and Competition Policy which has not been on their plate for almost 15 years. Today, they need to look back at where the WTO left its work on these issues, and assess to what extent this work is still relevant nowadays. In fact, world trade has changed significantly over the past decade; and Competition Policy is now covered in many trade agreements (and PTAs) signed by developing countries.

Study Objectives

This research study aims to raise awareness and understanding among WTO delegates – particularly from developing countries – about relevant aspects of past WTO work on Trade and Competition Policy to help them better prepare for possible upcoming debates on this issue at the WTO. It provides a historical recollection and state of relevant past WTO work, identifies which were the sticky issues at that time, and assess to what extent these concerns have remained sticky given the changing context.