Proposals for a Multilateral Framework on Competition Policy MFC

1
Proposals for a Multilateral Framework on
Competition Policy (MFC)

• Simon J. Evenett
• World Trade Institute
• University of Bern, Switzerland

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Objectives of this presentation

• To summarise the nature of the discussions on
  competition policy in the WTO since the Singapore
  Ministerial.
• Taking each issue in turn, to characterise and
  then analyse proposals for a MFC.
• Identify outstanding questions and role that Arab
  nations can play in this debate.

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Accompanying document

• I will refer extensively to the following
  document, which has been circulated at this
  meeting.
• J. Clarke and S. Evenett, A Multilateral
  Framework for Competition Policy? This can be
  downloaded from www.wti.org.

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Competition law and policy

• There is a distinction between competition law
  and policy the latter is broader than the
  former.
• Although competition policy has been discussed at
  the WTO, as we will see almost all proposals
  relate to competition law.

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From Singapore to Cancun

• Singapore Ministerial
• Doha Development Declaration
• Paragraph 23
• Paragraph 24
• Paragraph 25
• What is supposed to be decided in Cancun?

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The changing nature of the debate at the WTO

• Market Access ?Minimum Standards.
• Pre-1999 Competition policy matters were seen
  primarily in terms of their effects on market
  access.
• 1999 Main proponent of MFC (the EC) shifts
  position to advocate minimum standards of
  competition law and practice.

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Proposals for a MFC

• Who are the proponents?
• What do they want?

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Open proponents of a MFC

• EC
• Canada
• Australia
• Japan
• Korea
• Switzerland
• Note These countries need not agree on the
  components of a MFC

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Opponents and skeptics of a MFC

• Malaysia (consistent opponent)
• India (although its position appears to changing)
• Hong Kong, China (consistent opponent)
• United States (expected to become more vocal in
  opposition)
• Like Minded Group

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What do the proponents want?

• A ban on hard core cartels that is enforced
• A commitment to adhere to core principles in
  national competition law and practice
• Provisions to foster voluntary cooperation
• Progressive reinforcement of competition law and
  institutions in developing countries

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Big issues that proponents are not asking for

• Explicit commitments on market access.
• Multilateral commitments to enact and enforce any
  competition law other than cartel law.
• The creation of a supranational competition
  enforcement agency.

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Description of the proposals

• These are not my proposals they are the
  proposals of WTO members.
• Here I summarise the submissions made to the WTO
  by proponents.
• See the appendix of the circulated paper for a
  detailed account of each proposal.

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Hard core cartels

• See pages 34-36
• See submissions by, in particular,
• Korea (contains a useful overview of the issues)
• EC
• Thailand

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EC proposals on hard core cartels

• Wants a clear statement that hard core cartels
  are prohibited.
• Notes that definition of a hard core cartel will
  need to be negotiated as would exceptions etc.
• Wants a commitment by WTO members to have
  sufficiently strong deterrents to cartelisation.
• Wants framework for voluntary cooperation.

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Thai proposals on hard core cartels

• Wants mutual assistance in fighting cross-border
  cartels.
• Wants notification requirements on enforcement
  agencies.
• Wants mandatory consultation on investigations.
• Wants mandatory assistance to be given.
• Wants financial compensation for developing
  countries when they assist industrial countries.

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Differences in EC and Thai approaches

• Thai approach focuses on cross-border cartels EC
  proposals apply to domestic cartels too.
• EC wants voluntary cooperation and assistance
  Thais have taken a mandatory approach.
• Thais want asymmetric obligations on developing
  and industrialised countries (as do others, such
  as India).

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My commentary on the proposals on hard core
cartels

• 1990s have shown that both domestic and
  international cartels are a problem so Thai
  focus on the latter is misplaced.
• Mandatory sharing of information on cartel
  investigations is both unnecessary and
  counterproductive.
• The debate over asymmetric obligations is
  overdone.

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Core principles

• See pages 28-34.
• Main proponent is the EC.
• EC proposals call for
• Transparency in the enforcement and operation of
  competition law.
• Procedural fairness in the application of
  competition law.
• Non-discrimination in statement of competition
  law.
• Application of these principles to all
  competition laws a nation has on the statute
  books not just cartel law.

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Proposals on transparency

• Proposals for transparency
• in application of national law.
• of national laws vis-à-vis other WTO members.
• Flexibility in implementation.
• EC claims any well functioning competition
  enforcement body probably already meets this
  standard.

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Doubts and concerns on provisions on transparency

• No WTO member appears to challenge the notion
  that transparency is an undisputed virtue.
• But two concerns have been raised
• Can developing countries adhere to transparency
  standards in industrial countries?
• Can WTO notions of transparency that
  traditionally apply to laws also apply to
  individual enforcement decisions?
• My evaluation of these concerns.

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Procedural fairness

• EC, Canada, Korea, and Australia have all put
  forward different proposals that recognise the
  large differences in national legal traditions.
• Essentially, each advocates codifying the
  following four guarantees for private parties
• Rights of access to legal or enforcement process.
• Right to express their views in a fair manner.
• Right to be notified of a reasoned final
  decision.
• Right to appeal administrative decisions.

22
Non-discrimination

• EC proposal
• calls for national treatment and most favoured
  nation (MFN) treatment in the statement of
  competition law.
• would not apply to the application of competition
  law and therefore to specific enforcement
  decisions.
• EC argues that a non-discrimination requirement
  does not mean non-differentiation in the design
  of competition law.
• EC notes that exceptions could be negotiated.
• National champions.

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Non-discrimination

• Thais argue that a nations competition law
  should not discriminate between export and
  non-export firms, eg. Export cartel exemptions.
• Yet, Thailand argues that developing countries
  should be able to exempt national and
  international export cartels!
• India has argued that positive discrimination in
  favour of domestic firms should still be allowed
  so the impact of non-discrimination provisions
  would fall on rich nations.

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Some questions on non-discrimination

• What is the economic case for arguing that
  developing country export cartels are OK but
  industrialised country export cartels are not?
• What real goal does a country want to attain
  through discrimination and is there a more
  effective way to accomplish it than through the
  discriminatory application of competition law?
• Where is the economic evidence that
  discrimination in favour of domestic firms in the
  application of competition law has actually
  enhanced development?

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Assessment on non-discrimination

• Even though there is little economic case for
  discrimination, governments still do it.
• Non-discrimination provisions have implications
  for policies towards national cartels, national
  champions, and bilateral cooperation agreements.
• The ECs proposal has far less bite than is
  commonly thought. Exemptions for sensitive
  sectors have been envisaged.

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Voluntary cooperation

• See pages 36-37.
• Traditional tools for voluntary cooperation
• Notification
• Exchange of allowed information
• Notions of comity (traditional/negative,
  positive)
• Supporters include EC, Canada, Australia
• Canada has also called for the creation of a
  Competition Policy Committee at the WTO

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Developing country views on voluntary cooperation

• Thailand sees cooperation as a way to stop firms
  in industrialised countries from targeting
  developing countries with anticompetitive
  practices.
• Calls for mandatory cooperation (as discussed
  earlier).
• Hong Kong, China is concerned about the potential
  burdens on developing countries of cooperation
  provisions.

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Assessment on voluntary cooperation (VC)

• Enforcement officials repeatedly say that VC is
• valuable to them (see page 60)
• that it is more likely to occur when a legal
  framework is in place
• There are a small number of bilateral VC
  agreements in place (see page 21)
• Voluntary nature of cooperation ensures that
  nations decide only to incur costs if benefits
  are larger.

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Capacity building

• All agree that capacity building would be a
  central feature of a MFC
• All agree that capacity building needs to respect
  national characteristics and traditions.
• Outstanding questions
• Can commitments here be made binding?
• Which organisations will conduct the capacity
  building?

30
Special and Differential Treatment (S and D)

• Many developing countries have called for S and D
  in a future MFC.
• Yet, no developing country has put forward a
  comprehensive proposal on S and D.
• S and D could include
• Fewer commitments by developing countries
• Longer implementation periods
• Implementation of commitments only required when
  national capacities are sufficiently developed

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Summary of proposals for a MFC

• A ban on private hard core cartels that is
  enforced
• A commitment to adhere to core principles in
  statement of national competition law and
  practice
• Provisions to foster voluntary cooperation
• Progressive reinforcement of competition law and
  institutions in developing countries
• Even these proposals leave much to be negotiated.

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What is not in a MFC?

• Ban on state-run cartels, like OPEC.
• Requirement to create a new enforcement agency.
• Requirement to enact any competition law other
  than a cartel law.
• Requirement to abandon pro-development objectives
  of competition law.
• Requirement to abandon existing exemptions,
  exclusions, etc from national law.
• Prevent the creation of national champions.

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Preparing for Cancun Some questions for
policymakers

• Does your countrys competition law already
  comply with the proposals of the proponents of a
  MFC? (Question helps to identify the
  actualrather than fearedeffect of a MFC.)
• If not, what exemptions etc would you have to
  negotiate?
• If your country does not have a competition law,
  what is the minimum that would be required to
  comply with a MFC? And, how much would it cost?
  (Question helps identify what assistance is
  needed.)

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Preparing for Cancun Some questions for
policymakers

• How long would it take for your country to comply
  with the obligations for a MFC?
• Putting together a proposal for a non-reciprocal
  MFC is easy to do (and easy to ignore!) the real
  challenge is formulating a proposal for a MFC
  that involves obligations on all.
• Can Arab nations, individually or collectively,
  make such a proposal about a MFC or elements of a
  MFC?
• What about an Arab proposal on S and D?
• What are your fall back positions in Cancun if
  the leading opponents of a MFC fall silent?