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)