Competition policy in the WTO: an introduction to the issues

Competition policy in the WTO: an introduction to the issues

Robert D. Anderson

Counsellor, WTO Secretariat

WTO Public Symposium on Multilateralism at a Crossroads

CUTS panel on a Multilateral Competition Framework:

Where and How?

Geneva 26 May 2004

Issues to be addressed

 Will not take a position on the pros and cons of a multilateral framework on competition policy (will leave this for others to debate)

 Rather, will focus on some key underlying issues:

What is competition policy?

Why is it important for developing countries?

What might be contained in a possible multilateral framework on competition policy?

What are the main concerns of developing countries with respect to a possible multilateral framework in this area and how might they be addressed?

What is competition policy?

Policy/law dealing with anti-competitive practices of firms (e.g., cartels, abuse of a

dominant position, anti-competitive mergers)

Also known as "antitrust”, "anti-monopoly” or fair trade policy or law

Attempts to ensure that markets function

efficiently, competitively and in the interests of consumers/user industries

Not the same as “laissez-faire” (rather, is based

on a recognition that markets do not function

Why competition policy is important for development (1): domestic aspects

Tackling domestic cartels/monopolies that raise business input costs (e.g. energy and

distribution sectors), also prevention of bid rigging

Ensuring that privatization/deregulation genuinely contribute to increased

efficiency/consumer welfare

Promotion of necessary

restructuring/opportunities for new

entrepreneurs

Competition policy and development (2): international aspects

Impact of international cartels on developing countries

Apparent relationship between cartels and

predatory conduct against developing country suppliers

Ensuring that FDI actually works to the benefit

of host economies

Some hard data: the impact of

international cartels on developing countries

Many examples of international cartels have been disclosed recently: in vitamins, lysine, citric acid, graphite electrodes, bromine, cement, numerous 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%).*

* study available on the Internet at:

http://www-unix.oit.umass.edu/~maggiel/WDR2001.pdf

What might be the main elements of a possible WTO agreement on competition policy?

(based on recent proposals by the EU/other proponents)

Requirement to adopt a competition law

embodying provisions against hard-core cartels

Core principles (transparency, non-

discrimination and procedural fairness) for the field of competition law

“Modalities for voluntary co-operation”, e.g.

with respect to the exchange of national experience by competition authorities and aspects of enforcement

Commitment to enhanced technical assistance

What are the main concerns of developing countries and how might they be addressed (1)?

Curtailment of development options/erosion of

“policy space”

But note: the current proposals are directed at private anti-competitive practices, not

government measures that limit competition or serve other industrial policy objectives

To the extent that the concern remains, could it be satisfactorily addressed through an

unfettered right to exclude strategic sectors

or other over-ride mechanisms?

What are the main concerns of developing countries and how might they be addressed (2)?

Resource costs of implementing a competition regime

But CUTS/other analysis suggests these may be small in relation to the potential benefits

Perceived lack of negotiating capacity (but note

the role of technical assistance/capacity building

here)