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 April 2004

Issues to be addressed rWhy is competition policy important for development: insights from the WTO Working Group rChallenges involved in establishing a competition regime rMeeting the challenges: the roles of civil society and international cooperation rWhat would be involved in a WTO agreement on competition policy? rDeveloping countries’ concerns in this area rThe options before the WTO post-Cancun

Why is competition policy important for development: insights from the WTO Working Group (1) rKey element of the institutional framework for a healthy market-based economy rEnsures that firms compete fairly, in ways that benefit society rProvides lower prices and more choices for consumers/user industries rMaximizes opportunities for new entrepreneurs

Why is competition policy important for development: insights from the WTO Working Group (2) Note separate contributions of: rCompetition law enforcement – deters private anti- competitive practices rCompetition 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) rInvolvement 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 rWorld 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%).* rExcess profits often transferred back to developed countries * study available on the Internet at:

Challenges involved in creating an effective competition regime rEnactment of relevant legislation including substantive provisions and enforcement powers rEstablishment of the competition agency: training of agency staff and obtaining necessary resources rPublic education as to importance of the law and its key provisions rInvestigation/prosecution of initial cases rProgressive deepening of enforcement and advocacy work

Ways to meet the challenges rObtaining appropriate help from international organizations/bilateral donors rDeveloping links with civil society and educational institutions (CUTS/7-Up approach a good example) rDeveloping/participating in appropriate cooperation mechanisms rRegional rMultilateral?

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 access  undermine 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 rLaw would have to reflect “core principles” of transparency, non-discrimination and procedural fairness r“Modalities for voluntary co-operation”, e.g. with respect to the exchange of national experience by competition authorities and aspects of enforcement rEnhanced commitment to technical assistance, in cooperation with other international organizations

Key concerns of developing countries with respect to a possible WTO agreement rDirect costs of establishing/operating a competition agency rBut are these really so high? (CUTS experience suggests not) rPerceived intrusion on developing countries’ “policy space”/development options rBut note role of exceptions/exemptions, also that framework is directed at private anti-competitive practices, not government measures rIs 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). rBreakdown 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)