Competition policy in the WTO: an introduction to the issues Robert D. Anderson

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?

3. 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)

4. 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

5. 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

6. 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

7. 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

8. 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?

9. 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)