RESTRICTED
WORLD TRADE WT/WGTCP/W/7
19June1997
ORGANIZATION(97-2513)
Original: English Working Group ontheInteraction
between Trade andCompetition Policy
COMMUNICATION FROM CANADA
Thefollowing communication hasbeenreceived fromthePermanent Mission ofCanada with
therequest thatitbecirculated toMembers.
_______________
Introduction
AtSingapore, ourMinisters agreed to"establish aworking group tostudy issues raised by
WTO Members relating totheinteraction between trade andcompetition policy, including
anti-competitive practices, inorder toidentify anyareas thatmaymerit further consideration".
Inestablishing thisWorking Group, Ministers recognized thatthiscomplex relationship needs
tobebetter understood. Trade liberalization andcompetition policy share broadly similar goals. Both
seektoensurethatartificialbarrierstothecompetitiveprocessareremovedtothegreatestextentpossible
inorder toencourage efficiency intheproduction andallocation ofgoods andservices. Onespecific
goal-market access -represents animportant confluence between trade andcompetition policies.
Although traditionally directed toaddressing economic activity within national borders, competition
policyalsoplaysanincreasinglyimportantroleintheinternationaltradingsystem.Domesticcompetition
lawscomplement trade liberalization agreements byensuring thatthebenefits ofsuchagreements are
realized andnotnegated byprivate restraints totrade. Strong competition indomestic markets also
helps tosmooth thestructural adjustments thatarisefromtrade liberalization accords. Itistherefore
critical tothesuccess oftradeliberalization andeffective market access thatanti-competitive practices
bechecked through effective competition policies.
TheWTOagreementscontainsomelimitedprovisionsforconsultationandinformationexchange
intheAgreement onTrade inServices andintheTRIPS (Trade-Related Aspects ofIntellectual Property
Rights) Agreement aswellastheprovisions oninvestment performance requirements. There are,
however, noclearly identifiable specific standards ordisciplines atthemultilateral level governing
anti-competitive practices.
Whyisthetrade andcompetition relationship important?
Therenewed interest inthesubject oftrade andcompetition policy stems from atleastfour
factors:
(a) First, asformal barriers, notably border measures suchastariffs, arereduced or
eliminated, there isariskthatprivate barriers totrade could replace themandnullify
thebenefits ofprogressive trade liberalization. Certainly theincentive forcollusion
andsimilar practices increases asother types ofbarriers fall.WT/WGTCP/W/7
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(b) Second, withthedistinction between domestic andinternational markets having become
blurred through globalization, many linksexistbetween tradeandcompetition policies
applying tobusiness activity inmultiple jurisdictions. Forexample, corporate mergers
increasingly havetobeapproved bymore thanonecompetition authority. Investment
andtechnology arerecognizably themotors ofinternational tradeingoods andservices.
Asenterprises globalize theiroperations totakeadvantage ofadvances intransportation
andtelecommunications, arecurrent tradeandcompetition rulesadequate tomeetthese
challenges?
(c) Third, governments areincreasingly concerned withtheadverse impact inappropriate
orinefficient regulations haveoneconomic performance. Thisisevidenced inthe
recently completed OECD regulatory reform project. Regulatory reform, including
deregulation, andprivatization expands tradeandinvestment opportunities andfosters
amore productive economy. Italsoopens upthedomestic market tomore vigorous
international competition. Enforcement ofcompetition principles isakeyelement in
assuring thatprivate anti-competitive conduct does notreplace public conduct in
previously regulated sectors andthattradeandinvestment opportunities arenotclosed
offtoforeign competition.
(d) Fourth, specific competition policy issues areemerging inanumber ofareas subject
toWTO rules. Examples havearisen inservices liberalization, notably theGATS
agreement onbasic telecommunications, investment measures, andtrade remedies.
Theissue hasalsosurfaced inconnection withsome recent market access disputes
involving rules affecting thedistribution andmarketing ofgoods.
Building anagenda fortheWorking Group
Canada, therefore, supports thedevelopment ofasubstantive work programme thatbuilds on
themandate given theWorking Group byMinisters atSingapore.
Weofferthefollowing areas ofwork forconsideration asindicative oftopics wewould like
toseecovered:
(a) Objectives ofcompetition policy: anassessment ofcompetition policy 'scontribution
toeconomic growth anddevelopment. Inthisregard, itwould behelpful tostudy
keyelements ofcompetition lawandpolicy andtoanalyse theinterface ofcompetition
policy, market structure andderegulation asapplied byMembers. What arethe
substantive, institutional andprocedural principles thatunderpin competition/antitrust
regimes? What roledoestrade playindeveloping effective competition policy?
(b) Survey ofcurrent treatment ofcompetition issues intradeagreements: anexamination
oftheexisting coverage andtreatment ofcompetition policy matters inGATT 1994
andother WTO agreements, including theGATS, TRIPS andTRIMs andthelinkages
totheAnti-dumping Agreement. Thesurvey should alsoinclude bilateral, regional
andplurilateral arrangements/agreements andinitiatives. Analysis doneinother fora
canserve asuseful background forthework ofthisGroup. How doestheexisting
frameworkofinternationaltradeagreementsdealwithcompetitionpolicyconsiderations?
(c) Relationship withforeign direct investment: ananalysis ofthelinkages between
competitionpolicyandforeigninvestment.Theseincludeglobalizationandcross-border
restrictive business practices, andmultijurisdictional mergers. Inthisenvironment,
itwould beuseful todiscuss thebenefits ofbilateral competition policy cooperationWT/WGTCP/W/7
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inareas suchasenforcement, notification andinformation exchange. What arethe
means toproscribe anti-competitive conduct andwhat isthescope forenhanced
international cooperation within theWTO framework?
(d) Market access andmarket presence: anexamination oftheimpact ofprivate sector
anti-competitive measures, suchasinternational price discrimination, vertical and
horizontal restraints, andcartels onmarkets, producers andconsumers. Byextension,
itcould alsoassess theimpact ofgovernment measures andpractices suchassectoral
exemptions from competition rules.
Conclusion
From aCanadian perspective, effective competition policies complement trade liberalization
agreementsintheremovalofbarrierstothecompetitiveprocessandplayanimportantpartinmaximizing
thebenefits oftrade liberalization initiatives.
Webelieve there ismerit inseeking better understanding among WTO Members ofthe
relationship between competition policy andtrade, theobjectives andoperation ofdomestic competition
rules, andthemeans forensuring effective competition lawsandtheirenforcement.
Wetherefore support atargeted WTO work programme ontheinteraction between trade and
competition, withthegoalofdetermining thepotential useandeffectiveness oftheWTO framework
forcompetition policy matters.