Competition policy in the WTO: an introduction to the issues

1

• 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

2
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?

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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
  well without appropriate rules and institutions)

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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

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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

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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.pd
  f

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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

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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?

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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)