Latest developments on the working group on trade and competition

Sao Paulo, April 24 2003

Dr. F.J.L. SOUTYCounsel for Multilateral Affairs, Competition Council,

Paris

Professor, University of La Rochelle

Two parts

Part One: On international cooperation in the field of competition policy

Part two: On Competition policy items to be discussed at the WTO

Part One

On international cooperation in the field of competition policy

Internat’l Coop° can help Compet° Authorities regain part of their operational Sovereignty

Scope: - Bilateral (EU/USA, USA/Canada, Aust/NZ)

- Regional (EC, Mercosur, Caricom, Andean Pact)

-Plurilateral (OECD)

- Multilateral (UNCTAD, WTO) Levels:

-Consultations

-Exchange of confidential or non-confidential informations

-Positive and Negative Comity

-Joint Investigations Types: - «optional» (i.e. bilateral)

- «commitments» (i.e. WTO)

= All types of agreements have advantages and limitations

The limitations of optional cooperation agreements I

For cooperation to be balanced, cooperating countries must have relatively similar levels of development and ewual trade flows. Hence few bilateral agreements between developed and developing countries of between large and small economies

In an optional agreement, countries can refuse to cooperate in specific cases if their trade interest diverge. Little cooperation on competition cases can create serious Trade frictions (Boeing/MDD; GE/Honeywell)

Regional agreements such as Mercosur, Caricom, Comesa have not yet led to any significant cooperation

The limitations of optional cooperation agreements II

Practically no cases of transatlantic cartel agreements have been dismantled thanks to voluntary cooperation agreements between the US and the EU Authorities;

Very few cases of successful positive Comity requests between the US and the EU (See ICEPAC Report);

Most of the cooperation takes place informally and in cases in which there is no significant trade issue (Mergers)

Part two

On Competition policy items to be discussed at the WTO

Competition-related Provisions in Existing WTO Agreements I

GATS, Article VIII: Members to ensure that state monopolies do not act in a manner inconsistent with their obligations/specific commitments

TRIPS, Art 8 & 40: Authority to take measures against abuses of IPR/ AC licensing practices

Basic Telecom Negociations, Reference paper on Regulatory principles: Commitment to adopt appropriate measures to prevent A/C practices by major suppliers

Agreement on Safeguards, article 11.3: Members not to encourage/support the adoption of non-governmental measures equivalent to voluntary export restraints, orderly marketing arrangements or other governmental arrangements prohibited under art. 11.1

Competition-related Provisions in Existing WTO Agreements II

General Procurement Agreement: raises the level of Members to strengthen the openness, transparency and predictability of procurement systems (thereby raising the risks of international collusion and cartellization)

Agreement on Safeguards, article 11.3: Members not to encourage/support the adoption of non-governmental measures equivalent to voluntary export restraints, orderly marketing arrangements or other governmental arrangements prohibited under art. 11.1

Consultation Arrangements, 1960 Resolution under GATT and GATS: Recognition that business practices that restrict competition in international trade may hamper the expansion of world trade and economic development

Implications for competition at the WTO ?

Competition is NOT a new issue at the WTO However, it has been unsufficiently and not

systematically developed in the General Interest:

- Major sectoral areas are not covered

- Hard core cartels are not covered

- No provision on cooperation

- the need for a coherent case law cannot be met

Interesting comment on Competition at the WTO

«WTO Agreements as they exist today are not efficient in dealing with issues private restraints of international trade which may be as detrimental to the free international trading system as governemental barriers. As liberalization of trade progresses through trade negociations and Govern-ment trade barriers are lowered and eliminated, the WTO has to deal with issues of restrictive business practices of private enterprises which restrain trade and counteract the effects of liberalization achieved through trade negocia-tions. In the long run, therefore, the WTO system will not be complete without the inclusion of competition policy within its framework in one form or another and this is indeed the lesson of the Japanese Photographic Film Case»

Prof. Mitsuo MATSUSHITA, April 2002

What are the possible elements to be negociated in a WTO Compet° Agreement?

Commitment by WTO Members to a set of core principles, comprising transparency, non-discrimination and procedural fairness in the

enforcement of Compet° Law and Policy; Commitments to the taking of measures against HCC; Modalities for cooperation, of a voluntary nature, with res-pect to national

legislation, the exchange of national experience by compet° authorities and aspects of enforcement;

Enhanced support for technical assistance and instituion-building relating to compet° policy in the framework of the WTO but in cooperation with other interested Organizations and National Governments;

A standing WTO Committee on Comp° Policy to provide a Forum for exchanges of nat? experiences/peer review promote voluntary convergence in Member’s policies etc.

And now, discussion is

open!