RESTRICTEDWORLD TRADE
ORGANIZATIONWT/WGTCP/M/5
25 September 1998
(98-3727)
Working Group on the Interaction
between Trade and Competition Policy
REPORT ON THE MEETING OF 27-28 JULY 1998
Note by the Secretariat
1. The Working Group on the Interaction between Trade and Competition Policy held its fifth
meeting on 27-28 July under the Chairmanship of Professor Frédéric Jenny.
2. The substantive agenda for the meeting comprised the following items:  the impact of state
monopolies, exclusive rights and regulatory policies on competition and international trade (second
tiret under Item III of the Checklist of Issues Suggested for Study); the impact of trade policy on
competition (fifth tiret under item III of the Checklist); the relationship of trade and competition
policy to development and economic growth (topic under item I of the Checklist); and stocktaking andanalysis of existing instruments, standards and activities regarding trade and competition policy,
including of experience with their application (item II of the Checklist).  In addition, two requests for
observer status from intergovernmental organizations were considered.  Under the heading of other
business, the Group discussed three matters:  an update on actions taken in respect of the early
derestriction of Members' contributions to the Group;  the Group's expected report to the GeneralCouncil at the end of the year;  and the organization of work for its next meeting.
I. THE IMPACT OF STATE MONOPOLIES, EXCLUSIVE RIGHTS AND
REGULATORY POLICIES ON COMPETITION AND INTERNATIONAL TRADE
3. The representatives of the European Community and its member States; the United States
;
New Zealand; Korea ; Brazil ; Hong Kong, China ;  and Kenya  introduced written contributions on this
agenda item (documents WT/WGTCP/W/78, 83, 82, 91, 93, 94 and 95, respectively).  In addition, the
representative of Turkey introduced a non-paper, the representatives of Japan , Canada , India ,
Singapore on behalf of ASE AN WTO Members, Venezuela  and Australia  made oral statements or
posed questions on this item, and the observers from the OECD, UNCTAD  and the World Bank
provided updates on relevant activities of their organizations.
4. With regard to state monopolies and exclusive rights, the representatives of the European
Community and its member States; the United States ; New Zealand ; Korea ; Brazil ; Hong Kong,
China; Kenya ; Japan ; Canada ; Singapore on behalf of ASEAN WTO Members ; Venezuela  and
Australia, in addition to the observers from the UNCTAD , the OECD  and the World Bank , said that
these raised issues meriting consideration in the Group, in that they could harm both competition and
access to markets.  Several of these representatives said further that, in many cases, the justification
for maintaining state monopolies and exclusive rights had been eroded by technological developmentswhich had made industries previously considered to be "natural monopolies" capable of functioning
efficiently under competitive conditions, and by globalization.  In addition, the representatives of the
European Community and its member States, New Zealand
, Korea , Brazil , Kenya , Japan  and
Australia referred to examples of specific situati ons in their respective jurisdictions that illustrated
these concerns and developments.
5. The representative of the European Community and its member States outlined the
framework governing such measures under Article 90 of the Treaty of Rome.  Article 90(1) made itWT/WGTCP/M/5
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illegal for member States, in the case of public undertakings and undertakings to which member
States grant special or exclusive rights, to enact or maintain in force any measure contrary to other
rules contained in the Treaty.  In particular, this implied that, in the case of public undertakings or
undertakings to which member States granted special or exclusive rights, member States could not
resort to restrictive agreements in the sense of Article 85 or to abusive behaviour in the sense of
Article 86.  For example, Article 90(1) in combin ation with Article 86 prohibited a Member State
from putting such undertakings in a situation in which they, merely by exercising the exclusive rights
granted them, could not avoid abusing a dominant position.  Article 90(2) contained an exception to
the provisions of Article 90(1), according to which competition rules were not fully  applicable to
undertakings entrusted with the operation of services of general economic interest or having the
character of a revenue-producing monopoly.  For exampl e, Article 90(2) could be used to justify the
maintenance of certain exclusive rights when they were necessary for the operation of certain public
services.  The exception to the application of competition law was applicable only if restriction ofcompetition was necessary to guarantee the performance of the particular tasks assigned to these
undertakings (Article 90(2), 1st sentence);  and on condition that the development of trade was not
affected to such an extent as would be contrary to the interest of the Community (2nd sentence).  To
facilitate the implementation of Article 90(1), Article 90(3) of the Treaty authorized the Commission
to adopt binding decisions and directives.  Such directives specified the result to be achieved,although the choice of form and methods was left to the national authorities of the member States.
The Commission had adopted significant directives in the telecommunications sector.  These were a
key instrument underlying the policy of liberalization of the telecommunications sector in the
European Union, which also reflected the adoption of the WTO telecommunication agreement of
15 February 1997.
6. The representative of the United States, introducing document WT/WGTCP/W/83, said that
her jurisdiction had relatively little experience with state monopolies as a tool of national economic
strategy.  To the extent that they were present, agriculture would be a sector in which they would
likely be a significant factor.  Nonetheless, her delegation was aware of the problems to which such
monopolies could give rise, and wished particularly to raise the matters of single-desk buyers andsellers.  She said that single-desk buyers could restrict competition and trade in various ways,
including by creating a lack of transparency and serving as a tool for the implementation of national
import policies.  As a result, they could have the effect of limiting imports and raising the price of
imported goods above competitive levels.  Single-desk sellers could also introduce market distortions
to the extent that they created a lack of transparency, enjoyed government financial backing andserved as a tool of industrial policy.
7. The representative of Korea, introducing document WT/WGTCP/W/91, said that, in recent
times, Korea had undertaken four significant rounds of privatization.  Nevertheless, he had to
acknowledge that, to a large extent, these could be summed up as embodying "big plans and small
achievements".  There was an embedded tradition of regulation and state intervention in his country,
compounded by resistance to reform efforts from vested interests, that was hard to remove.  There had
been a degree of success in implementing demonopolization in some industries such as steel.  A keyproblem that largely remained to be addressed concerned ensuring efficient access to bottleneck
facilities, particularly in infrastructure industries such as telecommunications.  However, the overall
policy direction was clear:  the government needed  to pursue privatization and deregulation wherever
possible.  The critical problem, in his view, was that the government lacked clear-cut answers to
practical issues such as how to go about intr oducing competition, how to determine whether an
industry was still a natural monopoly and whether breaking up existing monopolies was a good idea,
given possible efficiency and other costs.  An important issue for the Group was to identify specific
trade-related effects of state monopolies (as distinct from general effects on competition).  He said
that the Korean Fair Trade Commission was increasingly active in the area of competition advocacy
work relating to demonopolization and deregulation.  The success of such work had an importantpolitical dimension.  He called for further discussion in the Group on the role of privatization and
regulatory reform in the context of economies undergoing rapid restructuring of their financial andWT/WGTCP/M/5
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corporate sectors.  The OECD's work on regulatory reform was a step forward and would be relevant
to further work in the Group.
8. The representative of Brazil, introducing document WT/WGTCP/W/93, said that privatization
of former state monopolies and other enterprises was currently under way in his country on a very
large scale.  Details were provided in an attachment to his country's written contribution.  He also
made a number of related comments on the subject of regulatory reform (see paragraph __, below).
9. The representative of Kenya, introducing document WT/WGTCP/W/95, said that developing
countries were facing more and more complex political, social and economic challenges in their work.
To take an example, while privatization was easy in principle, it posed complex practical challenges
in infrastructure sectors where questions of access to essential facilities would often need to be
addressed.  A key challenge for newly-created competition agencies was to strike the right balance
between getting themselves "up and running" and pursuing a vigorous advocacy agenda.  Other
challenges were in defining the scope of the agency's mandate vis-à-vis self-regulatory bodies (e.g.,for accountants amd lawyers) and fostering public trust in market institutions and mechanisms.
Another problem was that competition agencies in developing countries were often required to
respond to complaints regarding contractual problems or natural business failures that were not, in
fact, the responsibility of competition policy properly defined.  The area of bank mergers was another
one where agencies faced difficulties.
10. The observer from Turkey said that state monopolies were usually seen in sectors such as
network industries (e.g., telecommunications, gas, electricity, water, transportation and public
services) which typically involved a large initial investment - and other possible natural monopolies
such as airports, harbours and bridges.  While some countries applied competition rules to these
activities on the same basis as with private activities, other governments exempted them in whole orin part.  A common language was desirable with regard to the application of competition rules
vis-a-vis government activities at the international level, building on the concepts of sovereign
immunity, state acts and foreign compulsion.  With re gard to implications for the international trading
system, Article XVII of the GATT 1994 recognized that the operations of state enterprises could
create serious obstacles to trade.  Thus, in their exports or imports, they were required to actconsistently with the principle of non-discrimination, and other obligations were imposed.  In view of
the importance of smooth functioning of the international trading system, it was vital to:  (i) accelerate
liberalization and regulatory reforms in domestic markets; (ii) enhance the transparency of
government involvement in the economy; and (iii) ensure compliance with relevant provisions of the
GATT 1994.
11. The representative of Japan made an oral statement regarding his country's experience with
state monopolies and related matters.  He said that state monopolies had their major impact, in his
country, in the area of infrastructure industries.  A basic question to be answered in assessing the
implications of such monopolies was to determin e whether, in fact, they constituted natural
monopolies.  Moreover, it was vital to recognize that, in many cases, industries that had, in the past,
constituted genuine natural monopolies might now be capable of operating on a competitive basis, due
to changes in technology and the impact of globalization.  Japan's experience in the telecom andrailway sector indicated unambiguously that demonopolization could provide major gains in
economic efficiency and consumer welfare.
12. The representative of Canada discussed the treatment of state monopolies and trading
enterprises under the relevant provisions of the NAFTA Agreement. NAFTA partners recognized
problem in establishing disciplines in Chapter 15 of the Agreement dealing with the establishment and
operation of state enterprises.  Some key features of Chapter 15 were as follows:  (i) designating
monopolies was not prohibited; (ii) parties were required to notify others in order to minimize the
potential for nullification of benefits; and (iii) the parties were committed, through appropriate
regulatory controls or other policies, to ensure that private and public monopolies operated inWT/WGTCP/M/5
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accordance with commercial considerations, provided non-discriminatory treatment in purchase or
sale, did not cross-leverage their monopoly power or otherwise operate in a manner inconsistent with
NAFTA.  With regard to state enterprises, sim ilar provisions existed as for monopolies.  Such
enterprises were also required to operate in a manner consistent with the agreement's  provisions on
investment and intellectual property, and had an obligation to accord non-discriminatory treatment in
the sale of goods or services.  He emphasized that this approach was not necessarily being offered as amodel for other countries, but that it had been successful, thus far, in the NAFTA context.
13. Some representatives commented on the scope and application of existing WTO disciplines in
this area.  The representative of the European Community and its member States pointed out that such
disciplines were potentially applicable in situations where autonomous activities of certain types ofenterprises had the effect of detracting from Members' market-access commitments.  His delegation's
submission, which drew partly upon the special study on trade and competition policy by the
Secretariat, delineated the types of market access problems to which such activities could give rise.These were effects on access to: (i) the market where the exclusive rights were being exercised; (ii)
upstream markets; and (iii) downstream markets.  It was worth noting, however, that Article XVII of
the GATT, which was the basic provision applicable to state trading and exclusive privileges under
that Agreement, had had very limited impact on practices having such effects.  There was a strong
case for examining the possibility of reinforcing the disciplines available under this provision.  Inaddition, he said that the disciplines available in the services sector were considerably stronger than
those available in relation to goods.  For example, Article VIII:2 of the GATS referred specifically to
the concept of abuse of a monopoly position.  This was a clear example of a situation where
competition law concepts had already been incorporat ed into the framework of the multilateral trading
system.  It was clear, moreover, that a significant gap existed in the multilateral framework in that theability to address conduct affecting market access was limited to the types of firms covered by
Articles XVII of the GATT and Article VIII of the GATS (i.e., firms enjoying state-conferred
monopolies or similar privileges).  This was despite the fact that the conduct of private firms enjoying
no such privileges could have similar effects.  The implications of this gap merited further
consideration in the Group.  In closing, he highli ghted three overall areas where further work was
warranted in the Group:  (i) the scope for co mplementing existing WTO disciplines with a
commitment by Members to adopt and apply basic comp etition law disciplines applicable to all types
of enterprises; (ii) the need to apply competition law on the same basis to private and public
enterprises; and (iii) the feasibility and need for limiting existing broad derogations from the
application of competition law.
14. The representative of Hong Kong, China, introducing document WT/WGTCP/W/94, said that
a brief survey of the WTO disciplines showed that the GATT recognized the right of WTO Members
to establish or maintain monopolies and states enterprises.  In addition, GATT Article XVII:3
recognized that such operations might create "serious obstacles to trade".  GATS disciplines impacted
on "monopoly suppliers" and "exclusive service suppli ers" in a more limited manner.  Both the GATT
and GATS, however, shared a common objective to prevent the circumvention of WTO obligations
by monopolies, state trade operations and exclusive service suppliers.  In other words, the mainconcern was on whether the conferring of special or exclusive privileges would have adverse
implications for the conditions of competition in in ternational trade in goods and services.  Following
similar reasoning, it appeared that certain exemptions or exceptions under the competition regime of
some economies, as listed in paragraph 6 of his delegation's contribution, might also have
implications for the Working Group's consideration of this agenda item, from a competition-orientedperspective.  Such exemptions or exceptions could confer rights and privileges.  They merited the
Group's examination to see whether they could impede market access and undermine the non-
discriminatory conditions of competition.
15. The representative of India said that state monopolies and exclusive rights had played an
important role in key sectors, particularly in developing economies.  Governments had often granted
special or exclusive privileges to designated enterprises so as to ensure universal supply of a serviceWT/WGTCP/M/5
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to all citizens on specific terms and at affordable prices.  In a country like India, essential services like
the railways, the postal service, supply of electricity, national highways etc. had been for long
operated by state monopolies.  This had ensured that development in these capital-intensive areas had
been uniform throughout the national territory and that these services have been provided at a uniform
level of quality.  It was, therefore, evident that state monopolies did have an important role,
particularly in developing economies where market forces were still in their infancy.  The benefits ofstate monopolies, especially in the core and strategic sectors, would appear to outweigh some of the
disadvantages which might accompany state intervention.  However, notwithstanding the important
role that state monopolies had played in developing economies, it was a fact that there was a move
towards increasing deregulation and de-monopolisation.  In fact, even in India, in sectors such as
power generation and telecommunications, which had traditionally been reserved for the State sector,
there was an increasing move towards privatisation.  This obviously would be true for many other
developing countries also.  Moreover, with the growing complexity of industrial structures and theneed for achieving economies of scale to ensure higher productivity and perhaps a competitive
advantage in the international market, there had been a simultaneous thrust towards deregulating state
monopolistic trade practices.  In India, the trade practices of all undertakings either owned or
controlled by the Government, except certain strategic sectors related to Defence etc., were subject to
the provisions of the National MRTP Act.  Thus, in principle very few commercial sectors of theIndian Economy had been excluded from the application of anti-trust disciplines.  By regulating the
trade practices of state monopolies, there was a specific endeavour by the Government to ensure that
the right balance was struck between what were the visibly distinctive and advantageous features of
state monopolies and the perceived negative aspects of such enterprises.
16. He said further that the argument generally adduced for increasing the pace of
demonopolization was often linked to the presumed inefficiency of state monopolies on the grounds
that they did not have any incentive or market compulsion, probably because of lack of competition,
to produce at the most efficient  level.  It was stated that the goods or services supplied by state
monopolies were more expensive, which in turn adversely affected the competitiveness of the
economy as a whole.  While this simplistic view of the working of state monopolies in a marketeconomy might be correct to a certain extent, it was his delegation's view that these two facets - i.e.,
efficiency and equity were not necessary mutually exclusive social goals.  One way of looking at this
was that the efficiency facet could be related to the public interest and the equity facet to the
consumer interest. Further in this vein, it needed to be recognized that developing countries did not
usually have the same well functioning market economy dynamics as existed in developed countries.It was an incontrovertible fact that the less developed an economy was, the greater the likelihood of
market failures.  Hence, for such countries, it would not be prudent to rely only on the dynamics of
competition, particularly if the sectors involved were critical.  Hence, while the objectives of
introducing competition and deregulation of state monopolies could not per se  be objected to, it was
important to provide a certain degree of flexibility to developing economies so that they could pursue
this path at their own pace.  In fact, the UNCTAD World Investment Report of 1996, while observing
that globalisation would have pervasive consequences for the development prospects of all countries,in particular those of developing countries and economies in transition, specifically suggested that
development objectives should be safeguarded by allowing countries in need of a transition period the
time to adjust to such changes through exclusions, exemptions and other temporary measures.  In
addition, a great deal had been said about the need to ensure market access in sectors subject to
widespread government regulations and/or where enterprises have been granted special or exclusiverights.  While issues of market access were no doubt important, his delegation did not feel that these
were the only issues to be addressed in examining the trade effect of state monopolies and of those
enterprises which had been granted exclusive rights.  Apart from being major employment providers,
they also fulfilled an extremely important socio-political role.  Thus, while there was no doubt that
competitive practices would need to be introduced in all sectors and that competition would need tobe promoted through privatisation and demonopolizati on, this would necessarily have to be a gradual
process.  Apart from the fact that the State had to fulfill its social obligations by ensuring social
equity, it also needed to be recognized that deregu lation of any traditionally reserved sector was notWT/WGTCP/M/5
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without its political connotations.  Finally, he said that to a certain extent the existing WTO
provisions, particularly those relating to the activities of state trading enterprises, already provided
mechanisms for monitoring the activities of enterprises which had been granted exclusive rights by
governments.  While there would no doubt be areas where the current framework of WTO rules did
not provide adequate coverage, his delegation felt strongly that it was still too early to consider the
development of a multilateral framework of competition rules as a complement to the current WTOdisciplines.
17. With regard to the impact of regulatory policies on competition and trade, the representatives
of the European Community and its member States; the United States
; New Zealand ; Korea ; Brazil ;
Japan; Canada;  Singapore on behalf of ASEAN WTO Members ; Venezuela;  and Australia , said that
the impact of regulatory policies was already figuring importantly in diverse aspects of the work of
the WTO.  The Group could make an important contribution to enhancing understanding of the
implications of regulation for competition and efficiency, and the potential benefits of greater relianceon competition principles for market access, efficiency and welfare.
18. The representative of the United States, discussed the United States experience with
regulatory reform.  She said that the United States experience had shown unambiguously that a
commitment to competitive markets rather than regulatory approach es as the primary instrument of
economic governance yielded major benefits for competition, trade and consumer welfare.  It createdefficiencies, improved consumer welfare, and pr omoted innovation.  Moreover, the United States
experience in implementing far-reaching regulatory reforms and deregulation over the past two
decades provided a number of "laboratory experiments" that demonstrated these benefits.  The results
had been extraordinary, in that the gains from deregulation had exceeded by a considerable margin
what had been expected by the public and politicians.  For example, in first ten years of deregulationin the natural gas industry, prices fell from 27 to 57%.  In long distance telephone service, prices fell
around 50%.  Gains of a similar overall order of magnitude had also been realized in domestic air
transport, trucking and rail freight.  She emphasized that her delegation was not asserting that
regulation was always harmful.  There were, in fact, situations where it would still be needed.  For
example, regulation would still be appropriate in genuine situations of natural monopoly such as,possibly, electrical power transmission facilities.  However, the extent of such situations was
becoming smaller due to technological changes, and it was clear that the elimination of unnecessary
regulation could bring about major benefits in terms of lower prices, greater output and improved
quality of service.  One important aspect of deregulation was that it also tended to expand the scope of
application of competition law and policy.   It was also clear that a transition from regulation toreliance on competition policy (including, where required, pro-competitive regulation) had the
important beneficial side-effect of facilitating access to markets by foreign suppliers.  This was an
important example of the overall congruence of competition policy and trade liberalization
19. Other representatives of the same delegation said that the regimes prevailing in United States
industries illustrated a variety of approaches to th e technical issue of the interface between regulation
and competition (antitrust) law.  In the vast majority of industries, there was no regulation and
competition law applied without limitation.  In some industries (e.g., international ocean shipping)competition law was largely excluded, although it could still have a residual role.  In still others (e.g.,
telecommunications and electricity), there was broad applicability of both competition law and
regulation.  The U.S. experience highlighted the important role of competition advocacy activities as a
catalyst for pro-competitive reform.  Advocacy activities in both international and domestic fora were
an important part of the mission of both of the U.S. federal antitrust agencies.
20. The representative of the New Zealand, introducing document WT/WGTCP/W/82, said that
the Group had an important role to play in evaluating the impact of regulation on trade and
competition.  There was an urgent need for empirical research on the consequences for trade and
competition of unnecessary, poorly designed and discriminatory regulations.  In addition to examples
of outmoded or unnecessary regulations such as those emphasized by other representatives, he notedWT/WGTCP/M/5
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the following additional examples of regulatory situations having adverse effects on competition and
trade:  (i) a failure by countries to recognize each others' technical standards; (ii) state zoning laws or
sanitary and phyto-sanitary requirements that limited entry unnecessarily or served as disguised tools
for excluding competing suppliers; (iii) legal systems that facilitated strategic use of the courts by
firms to harass competitors; and (iv) discriminatory  R&D funding practices.  In fact, the regulations
that needed to be reviewed could be classified in four categories:  (i) regulation that openlydiscriminated in favour of domestic suppliers; (ii) regulations that were non-discriminatory on the
surface but subtly discriminatory in their substantive requirements; (iii) regulations that simply were
no longer needed (in this regard, he noted that New Zealand had recently implemented far-reaching
deregulation in the transportation, telecommunications, energy, food and other sectors); and (iv)
poorly-designed regulations, that were desirable in principle but unnecessarily intrusive.  In terms of
implications for the WTO, he again emphasized the need for empirical research on the extent of the
problem in particular jurisdictions.  Promoting understanding of the issues should be a key priority forthe Working Group.  He expressed satisfaction that the United States, the European Community and
other jurisdictions had shown understanding of the importance of such work.
21. The representative of Brazil noted that that Brazil's competition law applied, in principle,
across the economy (without exceptions).  The diffic ulty that presented itself was in knowing what
procedures and institutions should be involved in  implementing the law in state-owned or regulated
sectors.  Successful implementation of pro-competitive regulatory reforms would involve major
efforts to coordinate the activities of:  (i) competition and regulatory authorities; and (ii) federal and
state governments.  Effective advocacy work by competition agencies was critical to successful
reform efforts.  The experience of the United States competition agencies in such work was very rich,
and would be of interest to the Group.  He suggested, further, that the Group give consideration todeveloping a WTO guideline to provide for regular and systematic review of national regulatory
policies in the light of competition policy principles.  This would help to enhance the transparency
and effectiveness of reform efforts and be a useful tool in promoting freer access to markets.  Such a
guideline, administered by the WTO, would have significant advantages for developing countries:  it
would elevate the transparency and legitimacy of reform efforts, provide access to relevant pastexperiences of other countries, and help to overcome bureaucratic resistance.
22. The representative of Japan, building on his comments on the impact of state monopolies,
said that in some cases, regulations had valid justif ications and complemented the role of competition
law and policy.  Some examples of situations where this could hold true would include regulation of
essential facilities in the electricity and natural gas industries.  Deregulation was at the top of thepolicy agenda in Japan, and had been for some time.  Examples of significant reform efforts included
the deregulatory "big bang" that had occurred in the financial sector and significant changes that had
been implemented in the electricity and gas industries.  The reforms to date had produced significant
gains in efficiency and consumer welfare.  Further liberalizing reforms were to be expected.  An
important related development was the curtailment of competition law exemptions including
exemptions for depression and rationalization cartels.
23. The representative of Canada said that his country had had extensive experience over the past
20 years in deregulation and regulatory reform, including both horizontal and sector specific
regulations.  The developments underlying reform efforts had included:  (i) technological change,
which had diminished the real and perceived importance of natural monopolies; (ii) economic
research in Canada and at OECD on hidden costs of regulation to the Canadian economy, including
loss of trading opportunities;  (iii) the experience of other countries, notably the United States; and(iv) extensive advocacy activities by the national competition agency.  Specific involvements in
advocating pro-competitive regulatory reforms or deregulation had included 56 formal interventions
or appearances before responsible authorities in the transportation sector and 79 in the
telecommunications sector over the past two decades.  In terms of lessons learned, the Canadian
experience highlighted the importance of vigorous competition law to complement market liberalizingWT/WGTCP/M/5
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regulatory reforms, in order to prevent the continuation or emergence of anti-competitive practices in
a deregulated market.
24. The representative of Singapore, speaking on behalf of ASEAN WTO Members, said that
increased interest in domestic regulatory policies in  multilateral fora was a natural consequence of the
ever-deeper integration of Members' economies.  Such policies could enhance or impede trade.  He
felt that the Group should focus primarily on addressing the negative impacts of regulation on tradeand competition.  This occurred where:  (i) regulations were unnecessarily restrictive; or (ii) they had
divergent or duplicative requirements (an important example was where they imposed duplicative
performance requirements); (iii) they served as inst ruments of vested interests; and (iv) they lacked
transparency.  He suggested that the Group give further consideration to the ways in which existing
WTO disciplines attempted to address these matters.  A preliminary view was that WTO rules
preserved policy discretion of sovereign governments, but ensured non-discrimination (national
treatment) in the policies and instruments chosen.  The focus was on protecting the equality ofcompetitive opportunities.  The theory of efficient intervention would go somewhat further to require
that countries choose the least trade-restrictive in strument.  He agreed with New Zealand that more
empirical work was needed to come to grips with the impact of regulation on competition and trade.
25. The observer from the OECD provided a general update on the activities of his organization
relevant to the impact of state monopolies, exclusive privileges and regulatory policies on
competition.  In addition to other relevant work by the Trade Committee, the Committee on
Competition Law and Policy and the Joint Group on Trade and Competition Policy1, the OECD
completed, in May 1977, a series of studies on regulatory reform that examines, among other issues,
the links between regulation, market access, and co mpetition policy.  A synthesis report, the “OECD
Report on Regulatory Reform” ,2 was accepted by Ministers of OECD countries at their meeting in
May 1997, and its policy recommendations were endorsed.  The report concluded that there was
ample evidence that regulatory reform, properly carried out and with an adequate understanding of
policy linkages, could improve significantly sect oral and economy-wide economic performance, and
at the same time enhance the capacity of governments to protect important public interests such as
environmental and consumer protection.  Among ot her key recommendations, the Report urged that
competition authorities and trade officials become active in advocating for regulatory reform. It
recommended the elimination of sectoral gaps in the coverage of competition law and vigorous
competition law enforcement.  Additional recommendations urged the elimination of unnecessary
regulatory barriers to trade and investment through enhanced implementation of international
agreements and strengthening of international principles.  In 1998, the OECD began a review of
progress in regulatory reform in Member countr ies, based on the policy recommendations in the
above-noted Report.
26. The observer from UNCTAD said that calls for subjecting state owned enterprises to
appropriate competition law disciplines had featured in instruments of his organization dating back to
1980.  Heightened interest in this issue in the current economic environment was motivated by a
number of factors, including deregulation and the movement, not only in the most advanced
developing countries but also the lesser and maybe least developed countries, away from a system ofstate price regulations and toward greater reliance on market forces, as the principal engine of
economic growth.  There was more and more empirical evidence to show the benefits for all
countries, including least developed countries, of minimizing state interference and over-regulation
and towards reliance on free prices and the market mechanism.  He drew attention to a recent study
that was presented in the UNCTAD Intergovernm ental Group of Experts on Competition Law and
Policy which examined empirical evidence concerning the benefits of applying competition
                                                     
1 For details, see documents WT/WGTCP/W/21 and 21/Add. 1.
2.Regulatory Reform:  Overview and Proposed OECD Work Plan [OCDE/GD(96)115].WT/WGTCP/M/5
Page 9
legislation to development.3  This study had been revised and would be presented and discussed again
at the forthcoming meeting of the Inter-Governmental Group of Experts.  Evidence summarized in the
study indicated that the departure from administered pricing towards liberal market pricing provided
the basis for important gains in efficiency and consumer welfare.  He also drew attention to the joint
WTO-UNCTAD-World Bank Symposium on Competition Policy and the Multilateral Trading
System:  Issues for Consideration in the International Community, which had taken place just prior tothe meeting of the Working Group and to the contribution of Peru to the Symposium.  He emphasized
that in developing countries, even today, it could be very difficult for competition authorities to be
heard by other parts of the government when they were passing legislation or regulations that were
contrary to competition principles.  He considered, therefore, that the advisory function of
competition authorities was extremely important.  This would be emphasized by UNCTAD in its
technical assistance and advisory functions, for the purpose of enabling developing and least
developed countries as well as countries in transition to strengthen their advisory capacity.
27. The observer from the World Bank said that, based on the Bank's experience in working with
diverse countries, he agreed with the observations by the OECD and UNCTAD regarding the essential
role of regulatory reform in enhancing competitio n, efficiency and access to markets.  He further
agreed that competition agencies could play a crucial role in advocating necessary reforms throughout
government, including in respect of the content and administration of trade policy.  Finally, he notedthat, in his experience, regulatory reform, by improving access to business services including
distribution and other infastructure, could contribute importantly to the development of a culture of
entrepreneurship in developing and transition economies.
28. The representative of Venezuela said that he agreed with the observer from UNCTAD
regarding the relevance of developing countries' experience pertaining to this agenda item.  Currently,
his country was in the process of implementing a series of inter-connected reforms including:  (i)
reform of sectoral regulation in transportation and other industries; (ii) extensive privatization; (iii)
supporting entrepreneurship in various ways; and (iv) related activities to promote a vigorous culture
of competition and entrepreneurship, for example by supporting related work in the country's
universities.  Work on regulatory reform and state monopolies as they related to competition and tradeliberalization was a natural focus for the Group in that these were fundamentally government policy
issues, and the WTO as an institution was principally concerned with government actions and policies
that affected trade.  He considered that it was important to undertake a careful study of competition
standards at the international level in order to focus on the promotion of competition as a guiding
principle for policy reform.
29. The representative of Australia referred to the richness of national experiences that had been
shared by various delegates.  Her country had also recently implemented an extensive series of
reforms in key economic sectors, with the aim of bringing the governance of all sectors under certain
economy-wide competition principles.  The sectors affected included financial services,
telecommunications, energy, distribution services and public utilities.  She discussed in some detail
the reforms implemented in the electricity sector, which had included implementation of a new, pro-
competitive access regime for transmission networks in southern and eastern Australia.  Finally, she
suggested that, given the richness of the ideas that had been put forward in the debate, the Secretariat
could be asked to provide a compilation of the various questions that had been posed and suggestions
that had been floated regarding further work in this area (done in Job no. 5126, dated 23 September
1998).
30. The Chairman offered the following personal reflections on the debate.  Examples had been
cited of regulatory activities or behaviour by state monopolies or firms having exclusive rights which
                                                     
3 UNCTAD, Empirical Evidence of the Benefits from Applying Competition Law and Policy Principles
to Economic Development in order to Attain Greate r Efficiency in International Trade and Development
(Geneva, document TD/B/COM.2/EM/10, 1997).WT/WGTCP/M/5
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directly or indirectly affected competition and trade.  One delegate had reminded the Group that this
did not mean that regulation was necessarily bad per se  or that firms with exclusive rights were
necessarily bad per se , that they could serve a very useful purpose, and that therefore, when one
looked at those issues, one should retain a certain flexibility of mind.  At the same time, many
countries with significant experience with deregulation or which had tried to privatize some of their
public monopolies had indicated that it had provided substantial benefits to their national economiesand that indeed some regulations or some behaviours occasionally by public monopolies did restrict
both trade and competition.  Several  categorizations of such regulations had been offered.  A delegate
had distinguished between regulations that obviously discriminated against foreign firms and
regulations which discriminated in more subtle ways or were simply unnecessary.  Another category
involved regulations which were badly designed.  Another delegate offered another category, namely
regulations which fostered anti-competitive behaviour by private firms.  In terms of public
monopolies or firms having exclusive rights, a large number of delegations had made the point thatpublic monopolies could occasionally restrict competition either in the sectors in which they were or
upstream sectors, or downstream sectors. Several delegates had also noted that this discussion was
particularly topical because regulation was the product of government and WTO was mostly
interested in government behaviour.  However, ot her delegates emphasized that the extent of the
impact on trade and/or competition of regulation or the behaviour of state monopolies was not alwayswell established.  It was not so much that it did not exist but that the magnitude of the problem was
not well known and that, perhaps, further work in this area was warranted.  As to the benefits of
removing a bad or inadequate regulation or unwarranted public monopolies or reviewing the
behaviour of state monopolies, evidence had been presented by countries who had undertaken such an
exercise domestically.  A variety of approaches and experiences had been described.  Of course, theexperience of the European Community where the Commission has the power to limit the ability of
member States to adopt laws or to protect their monopolies was interesting, but at the same time it had
been recognized that this was, perhaps, a specia l case.  Another delegation had indicated that, after
having had an appetite for regulation, there was now an intense appetite for deregulation across the
board.  Several delegates from developing countries, however, signalled the difficulty of eitherprivatization or deregulation in the context of their countries.  Either because of political resistance or
sometimes for technical reasons because the economic base of the country was not so large and
because there was limited experience of what the market economy could produce.
31. As to ways of moving ahead, the Chairman noted that several possibilities had been recorded.
One of them was the possible use of the multilateral disciplines, either by using provisions that existedwithin the GATT agreement or through new approach es.  A number of delegates had also mentioned
the problem of gaps in competition policy which le ft open a wide field of regulatory intervention
which may work against the objective of competition policy.  It had also been mentioned by one of
the observers that the introduction of competition law policy could lead to the development of a
culture of entrepreneurship and that this was a crucial component of the market economy and could
set the scenes so to speak for further deregulation.  Finally, a third aspect which had been mentioned
by a number of delegates was the importance of advocacy work by competition agencies.  There hadbeen quite a lot of discussion of the fact that, if any progress was to be made in the area of state
monopolies and deregulation as they related to competition and trade, effective advocacy work would
be essential.  He had particularly noted the fact that several developing countries had pointed to the
difficulties that they had encountered in fulfilling an advocacy role.  It could be because the
competition authority was sometimes not directly part of the executive and was slightly isolated, itcould be because it faced a lot of political pressure, or for other reasons.
II. THE IMPACT OF TRADE POLICY ON COMPETITION
32. The European Community and its member States;  New Zealand;  the United States;
Hong Kong, China;  Venezuela;  Korea;  and Japan introduced written submissions relating to this
agenda item (documents WT/WGTCP/W/78, 81, 84 and 88, 85, 87, 90 and 92, respectively).Argentina;  Australia;  Brazil;  Canada;  the European Community and its member States;  India;WT/WGTCP/M/5
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Hong Kong, China;  Japan;  Korea;  Norway;  Pakistan;  Peru;  Singapore;  Switzerland;  the
United States  and the observer from the Russian Federation made oral statements regarding this item
or provided comments on the above submissions.  The observer from the OECD provided background
information on relevant activities and studies of this organization.
33. The representative of the United States, introducing document WT/WGTCP/W/84, said that
references to the impact of trade policy on competition tended to be oversimplified into a discussionof trade remedies.  The contribution by her delegati on was intended to make clear that the issues were
much broader than that.  There were a number of WTO Agreements that allowed Members to take or
maintain measures that affected competition within and outside their domestic markets.  This did not
mean that the WTO Agreements were somehow defective or misdirected, but that any serious effort to
review WTO provisions from the perspective of their impact on competition could not be limited to a
few selected provisions and agreements.  Such an effort would require an across-the-board
examination of much greater scope than that which the Group had the opportunity to develop.  Theimpact of trade policy on competition depended on the extent to which there was full and timely
implementation of WTO Agreements.  An example cited was the implications for competition of non-
compliance with the Agreement on Preshipment Inspection.  Another example was the WTO
Agreement on Subsidies which took a rather low-key approach to the disciplining of these practices,
even though they could affect significantly both trade and competition.  The so-called "green light"provisions, governing non-actionable subsidies, provided very detailed conditions and criteria for the
bestowal of non-actionable status.  However, there was no pure economic or scientific justification for
the particular conditions and criteria employed.  Rather, such provisions were largely the result of
political compromise which was deemed appropriate in return for the enhanced legal certainty that
they conveyed and the stricter disciplines secured for other kinds of subsidies predicated on suchclearly distortive terms as export performance, import substitution, debt forgiveness and coverage of
operating losses.  Considered narrowly, these provisions could be interpreted as tolerating the
existence and expansion of measures with both tr ade-distorting and competition-distorting effects.
Viewed from a broader perspective, they could be acknowledged as a necessary component in the
development of more coherent multilateral rules governing subsidies vis-à-vis what had governedthem in the past.  There was an abundance of ot her WTO provisions with effects on competition or
even competition policy;  for instance, GATT 1994 Articles II, III and XI.  The OECD paper
Competition Elements in International Trade Agreements:  A Post-Uruguay Round Overview of
WTO Agreements offered a thought-provoking glimpse at the potentially enormous impact which the
interpretation and application of WTO rules and obligations could have in either instilling or deterringcompetition.
34. With respect to the issue of the consistency of trade policy and antitrust policy, in the opinion
of her delegation both trade policy and antitrust policy were profoundly pro-competitive and pro-
consumer.  A major difference was that the former tended to deal with government actions, whereas
the latter addressed private actions, although this distinction was not always clear cut in each real-
world setting.  An obvious linkage between the two was that efforts in one area could be substantially
offset by actions in the other.  From the trade perspective, there was the classic case of the countrywith low border restrictions but whose "competition policy" - broadly defined, including the structure
and enforcement of its antitrust law - effectively incorporated industrial policy objectives such that
most of the domestic market was reserved for domestic producers.  Furthermore, the issue to be
confronted in the WTO was really much more than whether one had a competition law and vigorously
enforced it.  Rather, the issue was how to ensure effective market access by making certain thatmarkets were contestable and competitive.
35. The representative from the European Community and its member States, introducing
document WT/WGTCP/W/78, said that his delegation shared the comments made by the
representative of the United States concerning the need to look into the impact of trade policy on
competition on a global and non-selective basis, and taking into account that the world trading systemhad to been seen in its totality.  There was an important complementarity between the application ofWT/WGTCP/M/5
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competition law and trade liberalization.  Much of the discussion that had taken place in the Group
illustrated how in the absence of an effective enforcement of competition law the benefits of trade
liberalization could be cancelled.  The contribution by his delegation developed a broad framework
with respect to how the different types of trade po licy instruments interacted with competition.  In
particular, the paper outlined four basic categories of trade policy instruments:  (a) border measures,
(b) internal regulations, (c) safeguard measures and (d) measures to counter unfair trade, anddiscussed WTO rules on these instruments from a competition perspective.
36. With respect to border measures, specifically tariffs and quantitative restrictions, it was
important to recognize that, although major advances had taken place regarding the reduction of
tariffs, there were still many sectors in many countries subject to high levels of tariff protection.
There were also cases in which tariffs were not bound as well as cases where the bound tariff was
much higher than the one actually applied.  All these elements showed that there was substantial
scope for additional trade liberalization and this was an important issue for Members to consider inthe context of discussions on trade and competition.
37. Technical barriers to trade, which featured prominently among internal regulations, were a
clear area of interaction between trade disciplines and competition policy and law.  WTO disciplines
on technical barriers to trade addressed the practices of private bodies involved in the setting of
standards and conformity assessment.  Likewise, anti-competitive practices by private certificationbodies had been an area of concern for the competition authorities of the Community, and activities
by such bodies excluding foreign competitors from the market had been condemned.  Government
subsidies, another kind of internal regulation, were  subject both to WTO rules and to the competition
law of the Community.  This latter situation existed in no other jurisdiction.  Precisely because
subsidies within the Community were subject to strict competition law disciplines, countervailingduties did not apply in internal Community trade.
38. With respect to safeguards, he drew attention to the fact that the preamble of the WTO
Agreement in this field recognized the need to enhance rather than to limit competition in
international markets.  In addition, the WTO Safe guards Agreement had introduced a prohibition on
voluntary export restrictions, orderly marketing agreements and other similar arrangements on theexport and import side and, furthermore, required Members not to encourage and support equivalent
measures adopted or maintained by public and private enterprises.  However, this provision did not
cover arrangements to restrict imports or exports entered into by private or public enterprises in the
absence of government involvement.  Such arra ngements, amounting to "hard core" cartels, would
infringe competition law.  Common commitments by WTO Members on "hard core" cartels wouldaddress this potential loophole in current safeguard disciplines.
39. Finally, in the view of his delegation measures to counter unfair trade such as anti-dumping
and countervailing duties aimed at removing the trade-distorting effects of dumped or subsidized
imports and restoring effective competition.  It was important to recognize that competition law and
anti-dumping law applied in different economic, legal and institutional contexts.  Competition law
applied within the context of an integrated market.  In contrast, anti-dumping law applied in an
economic setting characterized by border measures and other regulatory obstacles and distortions ofinternational trade;  in other words, it applied to pricing practices between markets, rather than within
them.  The formation of an integrated market would imply not only the elimination of all border
measures, but also conditions to ensure full freedom of movement for services, investment and labour.
It was within this particular context that compet ition law assessed pricing practices.  Further, the
effective application of competition law required the establishment of a competition authority withcomprehensive powers of investigation and enforcem ent and a uniform interpretation of the law by a
judicial body or a common arbitr ator.  Concerns about possible incorrect application of the anti-
dumping instrument could best addressed through a strict implementation of the disciplines of the
WTO Anti-Dumping Agreement.  It could be expected, however, that in so far as further progress wasWT/WGTCP/M/5
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made in the integration of markets the need to ha ve recourse to anti-dumping action would be reduced
over time.
40. Trade policy measures, like other forms of government action, were not subject to
competition law.  However, when considering and applying such measures competition concerns
should be duly taken into consideration.  Similarly, trade policy measures were very important from a
competition policy perspective.  For instance, in a competition case, competition authorities wouldneed to consider the presence of trade policy measures in order to define the relevant market.  If such
measures were in place, it was much more likely that the market would be defined on a national level
and this would have the implication that firms would be more likely to be subject to competition law
sanctions if indeed they had undertaken an anti-competitive practice.  Finally, the competition
advocacy role of competition authorities also applied in the trade policy field.  Competition authorities
could support an overall open trade policy by highlighting the benefits of trade liberalization on
consumer welfare and the enhancement of competition in the market.
41. The representative of New Zealand, introducing document WT/WGTCP/W/81, said that in
the opinion of his delegation the relevant starting point for discussions on trade and competition was
how both policies could collectively add to global economic welfare.  Both trade policy and
competition policy should be practiced with a view to increase the size of the world economy.  Most
trade policies and competition policies liberalized trade and enhanced competition.  However, therewere a number that had the opposite effect.  His delegation believed that Working Group ought to
devote its efforts to identifying policies falling into this last category and to draw attention to the ones
that had the largest adverse impact on global efficiency.  But it was important not to limit the
discussion of the Group to anti-trust and anti-dumping.  There was a large variety of trade policy and
competition policy practices that reduced global economic welfare.  These included governmentprocurement, subsidies, regional development policies, standards and technical regulations.  It was
essential for the Working Group to be open minded to the possibility that some of these instruments
merited further attention within a global economic welfare framework.  Another important role for the
Working Group was to promote policy coherence across all the activities of the WTO, in particular by
having the Group take on the role of an advocate of competition with respect to all kinds of workundertaken by the WTO.  There was, for instance, a growing tendency towards ever increasing levels
of protection in the area of intellectual property.  He wondered whether such levels of protection were
actually consistent with the objective of promoting global economic welfare.  One provision of the
TRIPS Agreement required an extension of the term of patents to 20 years.  This seemed to be
justified on the basis of the argument that there were substantial delays between the filing for a patentand being able to commercially exploit the applica tion involved.  It appeared to him that the TRIPS
negotiations on patent terms had simply degenerated into a typical political economy negotiation.
Hence, the Working Group had a clear advocacy role to play not only in relation to anti-dumping, but
also with respect to intellectual property, government procurement and a host of other issues.  The
approach proposed by his delegation could be summarized in three points:  (i) the Group should set its
priorities by assessing which trade and competition policy restrictions had the most adverse effect on
global economic welfare, (ii) it should determine which of these issues were best dealt within theWTO, (iii) it should promote policy coherence across all areas of work of the WTO.
42. The representative of Japan, introducing document WT/WGTCP/W/92, said that his
delegation had observed in previous meetings of the Working Group that trade policy and competition
policy had both complementary and contradictory effects.  He wished to focus his presentation on the
contradictory effects as this would contribute to discussion of how to use trade rules to enhancecompetition.  Trade measures naturally had a restrictive effect on trade, and such restrictions
adversely affected competition.  Anti-dumping measures were recognized as temporary exemptions
from the principles of free trade.  However, they were often used by firms as an strategic tool to
restrain or eliminate competition in the market.  Even the threat of  imposition of anti-dumping
measures could have restrictive effects upon competition.  The contribution by his delegationcompared  domestic competition laws on predatory pricing with anti-dumping law.  This was a validWT/WGTCP/M/5
Page 14
comparison because competition law and anti-dumpi ng law were both concerned with predatory
pricing.  In particular, while competition law sought to eliminate predatory pricing in domestic trade,
anti-dumping law addressed such pricing in internatio nal trade.  In terms of the statutes applicable in
the United States, this was evidenced by the fact that both Section 2 of the Sherman Act and the 1916
Anti-Dumping Law were concerned with predatory pricing.  The Robinson-Patman Act, dealing with
price discrimination, basically made price discrimination unlawful only when this practice constitutedpredatory pricing.
43. Under competition law, low-priced domestic sales were illegal when there was a predatory
intent and a probability that, through predatory pricing, competition would be eliminated and the
predator would be able to realize subsequently monopolistic prices and profits.  Although there were
some differences among Court decisions in the United States, the criterion for predatory pricing was
marginal, or alternatively, average variable co st.  The 1916 Anti-Dumping Law required predatory
intent, but the Anti-Dumping Law of 1921 dropped this  criterion and made the application of anti-
dumping measures contingent on the existence of dumping and injury to a domestic industry.  The
anti-dumping rules of WTO basically had the same conceptual framework as the 1921 Anti-Dumping
Law.  This meant that anti-dumping measures could be imposed much more easily than competition
measures.  For instance, export prices higher than average variable cost were considered to be dumped
simply if they were lower than domestic prices.  In contrast, competition law had no problem at allwith export prices set at this level.  Anti-dumping laws were not economically desirable because they
interfered with competition and distorted an efficient allocation of resources.  They neglected to
consider that price discrimination occurred as a result of normal business behaviour.  Naturally,
competition laws did not prohibit price discrimination itself.  Arguments were made to justify anti-
dumping measures on the grounds that the exporter enjoyed a protected home market.  However, anti-dumping measures did nothing to solve this problem.  Anti-dumping laws should be reformed by
having them adopt a competition policy perspective.  More specifically, the price standard in dumping
cases should be average variable cost and the authorities should also need to prove predatory intent
and the probability of future success in predation.  The Japanese delegation suggested three specific
issues for further examination:  (i) a study of anti-dumping cases from the perspective of competitionlaw, (ii) a case-study on competition rules and anti-dumping rules in regional agreements, and (iii)
further analysis of the key vocabulary and concepts involved in discussions of trade and competition.
Finally, he said that a recent report prepared by the Congressional Budget Office of the United States
had reached similar conclusions to those in the paper by his delegation.
44. Another Japanese representative emphasized the importance of learning from the work
undertaken on trade and competition by other international organizations such as the OECD or
UNCTAD:  these international organizations had accumulated expertise on these issues for many
years, and their observations could be considered to be objective.  Specifically, he drew attention to
three documents prepared by the OECD:  (1) Competition and Trade Policy.  Their Interaction, (2)
Recommendation on Areas of Potential Conflict between Competition and Trade Policies and (3)
Trade and Competition.  Frictions After the Uruguay Round.  He referred in particular to paragraphs
7-10 of the last of these documents.
45. The representative from Korea, introducing paper WT/WGTCP/W/90, said that at the March
meeting his and other delegations had emphasized the need to focus the discussions of the Working
Group on how to remove inconsistencies between existing trade and competition rules and policies.
Specifically, concerns had been raised about the apparent inconsistency between anti-dumping and
competition rules which reflected a fundamental difference between their objectives:  while anti-dumping rules aimed at protecting "competitors" from allegedly unfair trade, competition rules sought
to protect "competition" per se.  The WTO Anti-Dumping Agreement had introduced several major
reforms in anti-dumping practices.  However, it had not addressed certain core concerns regarding the
anti-competitive effects of anti-dumping rules.  First, in the Anti-Dumping Agreement dumping was
defined mechanically and its underlying motive was not taken into account.  A firm could be seen asengaging in dumping simply by exporting at prices lower than normal value in the home market,WT/WGTCP/M/5
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regardless of whether there was a predatory intent or not.  In contrast, competition rules regulated
price discrimination only if motivated by the specific predatory intent to drive competitors out of the
market.  Second, under current anti-dumping rules, national authorities were allowed to exercise
enormous discretion.  The criteria for determining the export price and the normal value were neither
stringent nor specific.  Likewise, there were no specific criteria to determine the existence of material
injury and no generally accepted mechanism to examine the causal relationship between dumping andinjury.  Third, anti-dumping rules allowed exporters to avoid anti-dumping actions if exporters agreed
to raise their prices, thus encouraging cartelization.  Fourth, the anti-dumping petition itself could
serve as a powerful protectionist tool, inducing e xporting firms to reduce their exports unilaterally.
Fifth, anti-dumping rules were inconsistent with the WTO's most fundamental principles, i.e., national
treatment and MFN treatment, as such rules were applied selectively rather than to all foreign
exporters and domestic producers.  In the long term, it would be preferable to deal with dumping
under competition policy rather than under the current anti-dumping rules.  If abolishing the anti-dumping rules proved too difficult, the principles and procedures used in competition policy to deal
with price discrimination could be substituted for the relevant parts of anti-dumping rules.  For
example, an investigating authority would be allo wed to make a positive dumping determination only
if a predatory intent was confirmed.  In addition, th e investigating authority would be allowed to make
a positive injury determination only if the dumping was proven to have anti-competitive effects.  TheKorean delegation was of the view that discussions in the Working Group should aim at reforming the
current WTO rules in a competition-oriented manner, with a focus on the interaction between trade
and competition policy rather than on competition policy per se.  In this vein, a special emphasis
should be placed on government measures affecting competition such as anti-dumping duties.  Any
efforts to introduce a new multilateral framework of competition rules into the WTO system would beincomplete if these built-in problems in WTO disciplines were not addressed.
46. The representative of Hong Kong, China, introducing paper WT/WT/WGTCP/W/85, drew
attention to the fact that the contribution by his delegation built upon the central theme (the "WTO
Approach") of the earlier submission of March 1998 in document WT/WGTCP/W/64.  The WTO
Approach proposed that Working Group concentrat e on the interaction between trade and competition
policy and that, in accordance with GATT and WTO precedents, attention be focused mainly on
governmental measures affecting competition, th ough not to the exclusion of the anti-competitive
practices of enterprises.
47. The current paper submitted by his delegation drew attention to five main points.  First, trade
and competition policies were inter-linked and they impacted on each other.  There was a positive sideto this impact and a negative side.  On the positiv e side, mutually reinforcing trade and competition
policies led to economic efficiency and consumer welfare.  On the negative side, conflicting trade and
competition policies undermined the objectives of each and frustrated the functioning of the
multilateral trading system.  The challenge for Working Group was to increase the synergies between
trade liberalization and pro-competition policies, and to reduce the inconsistencies and welfare-
reducing effects of trade restrictions and exemptions from competition rules.  Second, the paper put
forward, for consideration by the Working Group, the concept referred to as "Free Trade andCompetition Commitments".  Its purpose was to encourage mutually-rewarding trade liberalization
and effective competition, in contrast to the anti-competitive, mutually harmful restrictions imposed
under certain existing trade rules.  His delegation was very much open to discussion of this concept
and sought Members' advice and help in order to develop it.  Third, his delegation also suggested a
"competition-oriented reform of existing WTO rules".  This reform was necessary to ensure that thebenefits of trade liberalization were not eroded by anti-competitive measures which governments
could use under existing WTO rules.  Fourth, the paper showed that international price differentiation
on its own was not disallowed under WTO rules, nor under conventional competition rules.  This
called into question the adequacy of existing WTO provisions which permitted "trade remedies" to be
applied based mainly or solely on price differentiation.  Anti-dumping was a case in point.  Fifth, itwas important for the Working Group to take into account in its discussion the theory of optimal
intervention, under which government policies must correct economic distortions at their source,WT/WGTCP/M/5
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without generating other distortions as a by-product.  For instance, trade policy safeguards and anti-
dumping measures usually did not address the source of the alleged trade and competition problems.
The root cause of such problems may be international market segmentation, comparative disadvantage
of import-competing producers, or distortions of competition in the exporting or in the importing
economy.  Economic theory suggested that an efficient government policy would aim at correcting
such problems directly at their source, for instance by liberalizing market access barriers.  Hisdelegation did not dispute the right of WTO Members to adopt measures to address distortions, but
believed that this approach was not effective.  Wh ile anti-dumping had been used to illustrate the
WTO Approach, this was far from being restricted to one or a narrow number of trade policy
measures.  Indeed, it could applied to many WTO subjects, such as services, accession talks, state-
trading, discriminatory rules of origin, and discriminatory rules of government procurement.
48. The representative from the United States, introducing paper WT/WGTCP/W/88, said that in
the view of his delegation the Working Group had not been set up to hold as a referendum on the anti-
dumping rules.  It would be misguided to repla ce the anti-dumping laws with competition laws, or
modify them in a way that would make them reflect competition policy and principles.  The anti-
dumping rules and competition laws had different objectives, were founded on different principles
and sought to remedy different problems.  The anti-dumping rules were not intended to address
predatory pricing;  in fact, most of the specialist s who had spoken at the symposium held prior to this
meeting of the Working Group supported this view.  If the anti-dumping rules were eliminated in
favor of competition laws or modified, the problems which anti-dumping rules sought to remedy
would go unaddressed.  If there was a legitimate inquiry by the Working Group, it was an inquiry into
the cause of injurious dumping, such as any number of market-distortive government industrial
policies including importantly the absence of meaningful soundly-enforced competition laws.
49. The paper submitted by his delegation discussed three basic issues.  One, the anti-dumping
rules were a remedial mechanism which WTO Members had agreed was necessary to the maintenance
of the multilateral trading system.  This was a very important point, and therefore his delegation took
very seriously any attacks on the anti-dumping mechanism.  The anti-dumping rules reflected a broad
consensus among Members, developed and refined over many years.  The overall understandingembodied in the WTO Agreements had been achieved only because Members, particularly those with
open markets, had been able to negotiate mechanisms like the Anti-Dumping Agreement.  His
delegation agreed with the view of the European Community that concerns about the possible
misapplication of the anti-dumping instrument coul d be best addressed through strict implementation
of the Uruguay Round disciplines.  The second issue covered in the paper was the underpinnings ofthe anti-dumping rules.  The anti-dumping rules were premised on the notion of "fairness", and
envisioned that producers will only use natural comparative advantages rather than artificial
advantages when engaging in international trade;  they were not intended as a remedy for private anti-
competitive practices, typically condemned by competition laws.  Injurious dumping could arise in
any number of ways but usually there was some significant role of governments in enabling it to
occur.  Competition laws addressed private anti-competitive behaviour, while dumping was a private
practice generally made possible by governmental policies and practices.  This was an importantdistinction that the Group should bear in mind.  The third issue covered in the paper was an analysis
of regional trade agreements.  This analysis showed that it was quite unusual for countries to agree to
eliminate their anti-dumping laws vis-à-vis one another.  Countries participating in this kind of
arrangement had insisted on significant pre-conditions for eliminating anti-dumping laws.  These
included strong similarities in their national economic systems, far-reaching measures such as free-movement of labour and capital, the substantial removal of government industrial policies that anti-
dumping measures indirectly sought to address, and the existence of meaningful national competition
laws.  Thus, from the analysis in the paper it was clear that the regional trading groups that had
eliminated anti-dumping rules internally required  much more than the mere existence of national
competition laws;  rather, they involved extensive steps towards near full economic integration.WT/WGTCP/M/5
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50. The representative of Venezuela, introducing paper WT/WGTCP/W/87, said that were
different ways to conceptualize trade policies and competition policies.  Trade policy did not
necessarily restrict trade and competition policy did not necessarily promote competition.  In reality,
there were trade policies directed at trade liberalization and others directed at providing protection, as
much as there as there were competition policies intended to protect competitors and others intended
to protect competition.  This was a good starting-point to discuss trade policies perceived as trade-restrictive, such as anti-dumping policies.  Both in the case of liberalizing trade policies and
competition policies intended to enhance competition, the main objective should be the avoidance of
administrative discretion.  Administrative discretion may result from the absence of specific rules, the
lack of clarity in rules, or the fact that rules as a whole were structured inadequately.  Discretion was
clearly present in the analysis of costs and prices undertaken both under anti-dumping and antitrust.
This analysis assumed that costs could be established in an objective way which presupposed in turn
that the authorities had access to full information.  This was clearly not the case:  information did notexist in fixed quantities;  it constantly changed.  To believe otherwise was to adopt a mechanical view
that may prompt governments to intervene in markets unnecessarily, in which case competition
policies would have a similar effect to anti-dumping policies.
51. The representative of Argentina said that his delegation remained unconvinced that the WTO
Agreements in the Rules area, and particularly th e Anti-Dumping Agreement, were, in their present
state, inadequate.  A simplistic approximation seeking to replace the anti-dumping rules (addressing
price discrimination across international markets) for competition policy rules (addressing predatory
pricing within individual markets) would imply adopt ing inappropriate tools designed for dealing with
problems of a different nature.  Anti-dumping and antitrust rules regulated different situations.
Furthermore, from the perspective of a developing country that had engaged in substantial tradeliberalization, unilaterally at first and then within the framework of the Uruguay Round, his
delegation did not consider it justified to proceed to the stage of reopening the WTO package deal on
Rules.   His delegation did not consider it warranted either to jump to policy instruments of far greater
complexity, given the fact that the implementation of the Uruguay Round commitments had not
turned out to be an easy task.  The Argentine delegation preferred to continue addressing the problemsarising from the administration of the WTO Anti-Dumping Agreement under the WTO Committee on
Anti-Dumping Practices and particularly its Ad-Hoc Group on Implementation.
52. The representative of Singapore, concurred with previous speakers in that a dichotomy often
arose in the objectives of trade policies.  On the one hand, trade policies could be aimed at promoting
competition with a view to maximizing welfare and achieving an efficient allocation of resources.  Onthe other hand, they could be geared towards suppressing competition with a view to maximizing
national benefits, or more often narrower sectional interests, at the expense of global welfare and
efficient resource allocation.  Thus, it was quite clear that the impact that trade policies had on
competition depended greatly on which set of objectives were in the driving seat.  This dichotomy
provided useful working parameters for the Group.  If one accepted that the WTO sought to promote
competition and global welfare, the Group should look to expand or enhance the use of trade policies
that had this as an end result.  Conversely, the Group should look to curtail or reform trade policieswith the opposite effect.  The list of trade policies with positive effects on competition extended to
traditional market access policies such as tariff reductions, roll-back of non-tariff barriers and even
trade facilitation measures.  Conversely, trade policies with an adverse effect on competition included
prominently anti-dumping measures, standards and technical regulations, and restrictions on imports
of textiles and clothing.
53. The earliest anti-dumping laws were intended to deal with international price predation.
However, this focus was now lost.  Most economists agreed that predatory dumping was a rare
phenomenon.  Empirical evidence confirmed this presumption.  A recent study of more than 1,000
anti-dumping cases filed since 1980 in certain major trading countries had found, in less than 10% of
the number of cases leading to anti-dumping measures that there had been a potential for monopolisticdumping.  Additionally, anti-dumping was sold on the grounds that it was a justifiable attempt byWT/WGTCP/M/5
Page 18
importing-country governments to offset the market-access restrictions in an exporting firm's home
country, that underlay the ability of such firm to dump.  The theory of optimal intervention shed light
on this regard.  Anti-dumping was an inferior instrument to address foreign market closure as it did
not deal directly with the source of the problem.  Besides, anti-dumping induced rent-seeking
behaviour on the part of import-competing firms, and the threat of actions led exporting firms to alter
production, allocation and production-location decisions in ways that reduced welfare.  Finally, the
current enforcement of anti-dumping was subject to imprecise rules and the possibility that dumping
practices may reflect legitimate business practices was discounted.
54. Standards-related trade issues had gained prominence in recent years.  Excessive
requirements could undermine market contestability, discourage new entrants and condone economic
inefficiencies.  They may be optimal levels of regulation at which the adverse impact of regulatory
involvement on consumer welfare, trade and overall economic performance was minimized.  The
impact of trade policy on competition was also unquestionably exemplified by the MFA tradingregime for textiles and clothing.  Without it, exporting economies would have sought profits in the
most efficient manner without the ephemeral windfall of a quota system.  On the other hand, import-
competing industries would have, much earlier on, taken harsh but correct decisions in undertaking
the needed adjustment to compete in a free and non-discriminatory environment.  The Singaporean
delegation believed that useful insights could be extracted from the realm of competition policy andlaw that could enhance the way in which trade policies were formulated and administered.
55. The representative of Norway said that discussions in the Working Group had shown that
trade and competition policies had the same basic objectives, such as achieving economic efficiency
in resource utilisation and enhancing economic welfare.  In addition, trade and competition policies
had a common foundation consisting of open and rules-based trade relying on well functioningmarkets.  In principle, therefore, it was possible to find a convergence of both sets of policies.  In the
trade policy area, distortions typically consisted of trade restraints created by governmental
interventions in the form export subsidies, import quotas and in particular trade remedies like
antidumping and countervailing duties.  The latter  remedies were exempted from the MFN-principle
and weighted national producer interests more favourably than consumer interests, which was theopposite approach to that followed by competition policies.  From the perspective of his delegation, it
was worrisome that an increasing number of WTO members had adopted trade-remedy legislation and
measures.  On the other hand, a number of regional cooperation arrangements (be they customs
unions or free trade agreements) had been established, within which there was limited scope for the
application of trade- remedy measures.  In some agreements parties had even decided not to resort tosuch measures.  This was a positive trend in trade politics, which should be further encouraged.  The
Norwegian delegation generally shared most of the critical comments that had been voiced in earlier
presentations against the use of trade remedies, particularly antidumping measures.
56. Some of the papers had focused on concrete inconsistencies between trade and competition
policies while others had concentrated on complimentarities.  The Norwegian delegation felt that the
two approaches highlighted important points.  For this reason, it was important that the records of this
meeting - and later the report from the Group - reflect in a factual and objective way both theinconsistencies and the complimentarities that unde rlay the interface between trade and competition.
This would help the Group in deciding how to proceed.  In the face of increased globalisation, there
was a case for arguing that the effects of trade measures on competition, as well as the effects
governmental and private restrictive practices on trade, should be treated within a common analytical
and policy framework.  Therefore, the Group should strive to arrive at consistency between trade andcompetition policies.  At this stage, a constructi ve contribution towards realizing this goal was to
devise in the WTO some kind of multilateral disciplines on competition, given the fact that many
Members lacked national competition laws and policies.
57. The representative from Australia said that her delegation shared the view of a number of
speakers that the Working Group was not debating a choice between competition policy and anti-WT/WGTCP/M/5
Page 19
dumping rules.  The focus for the Group was to look at the relationship between trade and competition
policies, which as many had noted, was complementar y or, at times, contradictory.  The Australian
delegation saw this relationship as generally complementary but noted that to the extent the two
policies appeared to conflict it was because, as other speakers had pointed out, trade goals and
competition goals sometimes differed.  Government s decided which policy goal overrode in which
circumstances.
58. In the case of anti-dumping rules, governments had agreed to the WTO Anti-Dumping
Agreement.  The Australian delegation did not think th ere was a need to revisit it.  At the last meeting
of the Group the Australian delegation had explained how Australia and New Zealand had found it
possible to eliminate the use of antidumping in the context of an integrated market, and because of a
number of other positive commonalties.  These conditions however were far from existing globally.
There were a number of issues in respect of anti-dumping that were very relevant to these discussions
and had been raised by the Australian delegation in previous meetings.  The Australian delegationthought that it was worth considering what gave cau se to dumping in the first place.  The Working
Group could focus on the extent to which anti-competitive practices characterized export markets,
including whether monopolies and oligopolies encouraged dumping and whether an adequately
enforced competition framework would alleviate this problem.
59. The representative from Peru said that the Peruvian authorities concurred with the premise
that in a common market anti-dumping was not needed.  In other situations, however, the Peruvian
authorities considered that anti-dumping may be a suitable tool but not as an end to itself.  This was
reflected in the fact that in Peru competition analysis was applied already to anti-dumping cases.
60. The representative of Pakistan said that a number of trade policies could have an undeniable
negative impact on the goals that an effective competition policy was meant to promote, including
specially the contestability of markets and therefore the promotion of global welfare.  His delegation
agreed with the delegation of New Zealand that one of the key tasks was to set priorities for the
Working Group by assessing which trade policy restrictions had the most averse effects on
competition and global welfare.  His delegation wished to underline three issues.  First, in the
experience of Pakistan, the operation of anti-dumping rules had had a considerable negative effect oncompetition, specially as such rules impacted negativ ely on the ability of  textile exporters to compete
effectively in large importing markets.  The effect of repeated anti-dumping actions in quick
succession on already restrained products had been specially harmful.  The very initiation of anti-
dumping proceedings against efficient exporters had resulted in trade-chilling effects and the remedies
available under the WTO against misuse of these proceedings could be protracted and onerous.  Thiswas an issue that merited continued and closer examination by the Working Group.  Second, the
Pakistani delegation concurred with the comments made by the delegation of Singapore concerning
the possible  adverse impact of standards and regulations on competition.  Third, as pointed out by the
delegation of New Zealand, there had been increasingly ambitious attempts in the context of TRIPS
and in the context of WIPO to strengthen intellectual property regulations, which could have negative
effects in the competition environment.  In many of these cases, there was an almost complete
absence of empirical studies on the economic effects of strengthened intellectual property regimes.This area also merited further analysis.
61. The representative from Canada remarked that his had been the first country to enact anti-
dumping legislation.  Therefore, it would come as no surprise that the Canadian delegation saw value
in this instrument as a legitimate tool to remedy unfair trade practices.  Nevertheless, it was the view
of the Canadian delegation that in this process there should be a balance between consumer andproducer's interests.  In light of the mandate give n by Ministers at Singapore, the Working Group was
not a negotiating forum, but a forum for exchanging  information and ideas.  In this spirit, the
Canadian delegation wished to suggest some ideas c oncerning what steps could be taken to introduce
some practical competition concepts into anti-dumping  practice.  There were two specific ideas.  First,
broader constituency should be engaged in the anti-dumping process.  This would create an importantWT/WGTCP/M/5
Page 20
role for consumers and end-users groups in determining the levels of duty.  Second, a greater role for
the competition authorities in providing advice on the competitive impact of anti-dumping actions
should be provided for.  Another Canadian delegate observed that the Canadian anti-dumping
legislation had been recently reviewed by Parliament.  The recommendations to further review and to
respond to competition policy concerns included strengthening the public interest provisions through
new regulatory guidance on factors that maybe relevant in a public interest inquiry.  The impact ofapplying the full amount of the anti-dumping duty on competition in the domestic market, and on the
competitiveness of the downstream industries, had been identified as two such factors.  Another
recommendation was the provision of explicit authority to the Canadian International Trade Tribunal
to recommend a duty lower than the full margin of  dumping but sufficient to eliminate the injury
caused to the domestic industry concerned.  A third Canadian delegate remarked, with respect to the
competition front, that the competition legislation authorized the Director of Investigation and
Research of the Competition Bureau to make representations, on his own initiative or on request byspecific government agencies, with respect to comp etition issues considered relevant in anti-dumping
cases.  The Competition Bureau had exercised this right in a few selected cases and had been able to
add value to the decision process:  it had consistently argued that anti-dumping duties should not harm
competition.  The Competition Bureau sought to play an active role in proposing reforms to the anti-
dumping law so to obtain a reasonable balance between producer and consumer interests in the designand application of Canada's anti-dumping regime.
62. The representative from Switzerland said the objective of the Working Group was to
strengthen competition policy measures with the purpose of insuring effective competition in markets
and therefore an increase in consumer welfare.  An effective competition policy should permit the
application of competition policy measures in lieu of trade remedy measures that lent themselves tocreating and reinforcing additional market distortions.  Discussions at the Working Group were not
about opening at this stage negotiations on th e Anti-Dumping Agreement, but it was convenient
nevertheless to plan for future study of anti-dumping, and specially for the examination of the causes
and effects of anti-dumping measures from the perspective of the objectives of the Group.
63. The representative of India said that any trade measure which effectively protected domestic
markets from foreign competition could contribute to a certain degree of concentration in the
domestic market and lead to possible abuses of a dominant position, to the detriment of the consumer.
His delegation agreed therefore that the impact of trade policy measures on competition needed to be
closely reviewed, specially in those areas where there was an implicit inconsistency between the
objectives of trade laws and those of competition laws.  Examples of trade policy measures withadverse effects on competition were tariff quotas, which the Group had not addressed sufficiently yet.
Anti-dumping measures could also inhibit competition and they were another important area of
concern.  The provision of export subsidies could also  be distortive of competition.  In addition, anti-
competitive effects could arise from technical and sanitary and phytosanitary measures, when these
were established at levels much higher than generally accepted levels.   Conversely, there were many
trade policy measures aimed at strengthening competition.  A number of WTO Agreements had as
their underlying objective the liberalization of trade.  However, the implementation of someprovisions left much to be desired.  In this regard, the Indian delegation wished to emphasize that
unless and until effective implementation of existing commitments was insured, it would be futile to
engage in academic discussions on how WTO provisions can be further strengthened  to support
competition.  It was the view of the Indian delegation that simply by improving the efficacy of the
implementation of the existing provisions, and perhaps by reviewing those provisions which havepredominantly been used for protecting industry, the Working Group would succeed in creating a
more competitive environment.
64. The representative from Brazil said that the interaction between trade and competition could
be approached in a different direction;  namely, that of discussing how the WTO infrastructure and
principles may be useful for competition policy.  With respect to taking advantage of the WTOinfrastructure, it would useful to arrange for co -operation specially regarding two kinds of issues.WT/WGTCP/M/5
Page 21
First, establishing "formats for co-operation", such as standard co-operation agreements, channels of
communication between agencies, a data bank of public information on international cartels, on cross-
border mergers and other issues of interest for competition policy.  In addition, the WTO could
produce a regular report on world competition policy having international co-operation as its main
focus.  Second, harmonizing merger notifications and procedures.  In this regard, the Brazilian
delegate remarked that Brazil was in the process of changing its merger notification requirements,taking as a reference the model form elaborated by the OECD.  The Brazilian delegation praised this
kind of initiative and thought that the WTO could serve as an important forum for this kind of efforts.
The Brazilian delegation also considered that WTO principles could be applied to competition policy
to serve as guidelines for the national competition legislation.  Two such principles came to mind.
First, the application of the principle of transparency taking into account the delicate balance between
desirable publicity in an administrative process and adjudication and the confidential nature of much
of the information related to anti-trust.  Second, the application of the principle of national treatmentmaking sure that no competition law discriminated against foreign firms and equal treatment was
ensured for all firms in every jurisdiction.
65. The representative from the United States said that it was worthwhile to reflect on the value
of an anti-dumping statute, targeted exclusively at  unfair trade, in maintaining a consensus in favor of
a liberal trading environment.  Anti-dumping measures normally used duties, that is price-basedmeasures, to offset dumping margins and such measures impacted only on those traders which were
found to be trading unfairly.  He wondered if the delegations which had attacked what they called the
anti-competitive effects of anti-dumping wished to see the anti-dumping statutes replaced not with
competition policy but with recourse to safeguard measures, which were addressed not only to unfair
trade but also to fairly traded imports, and which permitted use of quantitative restrictions as opposedto price-based measures, something inherently less preferable in the WTO system.
66. The representative of Hong Kong, China said the paper on the motivations for anti-dumping
action prepared by the delegation of the United States made an important contribution to the Working
Group, particularly in explaining some of the historical background and the United States' own
rationale for antidumping.  There were points in common between the United States and the HongKong, China submissions.  The United States had characterized anti-dumping as a practical response
to objectionable trade-distorting governmental industrial policies.  This thesis found some echo in the
paper submitted by his delegation.  The concept of "free trade and competition commitments"
suggested that anti-dumping could be phased out vis-à-vis WTO Members who committed themselves
to free trade and open competition.  This would provide an incentive for pro-competitive tradeliberalisation.  He wondered if in such a con cept there was something which would enable the
Working Group to start building a bridge across what sometimes seemed to be an uncrossable chasm.
67. On the negative side, in the opinion of his delegation, the problem with the United States'
characterization of the theoretical underpinnings of antidumping was that they were just that - entirely
theoretical.  There was no mention whatsoever in GATT Article VI or in the Anti-Dumping
Agreement of anti-dumping as a response to object ionable trade-distorting industrial policies on the
part of the government of the exporting companies.  Or of antidumping as a tool to level the playing
field between different economic systems.  Nor was his delegation aware of any such reference in the
domestic laws and regulations of the main users of antidumping.  In no anti-dumping investigation
there was a need to show or prove government involvement.  In fact, even very open economies like
Hong Kong were often targeted for antidumping action.  When officials of Hong Kong, China had
pointed out this openness to administrators of anti-dumping overseas, they had been told that theopenness of the Hong Kong, China, economy had no bearing on an anti-dumping investigation with
the proliferation of anti-dumping regimes, anti-dumping was being used by relatively closed against
relatively open economies.  Regarding differences between economic systems, his delegation wished
to point out that the GATT was not an instrument for harmonization, neither of policy objectives, as
was clear under Article XX for instance, nor of economic systems.   Different economic systems werenot prohibited under the GATT or the WTO, and the differences could only be acted upon if specificWT/WGTCP/M/5
Page 22
commitments were violated.  The United States paper implied a need to neutralize inequities such as
differing debt equity structures and debt burdens, but to the knowledge of his delegation, nothing in
the relevant US law required specific information on such matters.  Finally, his delegation wished to
underscore the exceptional nature of anti-dumping rules in the GATT system.  Anti-dumping was an
exception to GATT Article I, GATT Article II, and in the view of his delegation a strong case could
be made that it in effect also operated as an exception to the national treatment principle under ArticleIII.
68. The representative from the United States took exception to the suggestion by the delegation
of Hong Kong, China that GATT Article VI or the Anti-Dumping Agreement was an exception to
Articles I-III of the GATT.  Nowhere was there a reference that Article VI and measures to counter
dumping or subsidization constituting exceptions in  any way to other provisions of the GATT.  What
you could read into the language was that the non-discriminatory provisions in the WTO system were
intended to be applied only to fairly traded imports.
69. The representative of Japan also offered some comments on the United States submissions.
The paper by the United States justified anti-dumping as a means to provide a level playing field.
However, anti-dumping measures allowed domestic firms to compete favourably against foreign
companies;  in many cases such measures excluded foreign competitors from the domestic market.
The Japanese delegation also had problems with the idea that market-distortive industrial policieskeeping out foreign competitors should be addressed by anti-dumping measures.  If there were any
such policies, they should be addressed by the dispute settlement procedures of the WTO.  Besides, on
occasion market-distortive industrial policies were in fact legitimate under the WTO rules.  For
instance, in some cases developing countries were allowed to maintain temporarily such policies.  The
paper by the United States also justified anti-dumping measures on the grounds of differences innational economic systems, but it was only natural that national economic systems were not the same
in all countries.  The paper by the United States also went on to justify anti-dumping measures on the
basis of ineffective implementation of competition laws, but this raised the question of why not try to
improve such implementation instead of resorting to the use of anti-dumping?
70. The representative of Korea advocated focusing the discussions of the Working Group on
anti-dumping on the grounds that the inconsistencies between trade and competition rules should be
highlighted and this warranted some more substantive discussions on these aspects.  In addition, he
said that the two cases described in the contribution by the European Community illustrated how
competition law could play an important role in  limiting the risk that private anti-competitive
restraints were substituted for, or possibly disguised as, trade policy measures.  These cases pointed tothe reality that international competition rules co uld not be applied without looking at anti-dumping
measures which were potentially anti-competitive.  He agreed with the delegation of Hong Kong,
China in that anti-dumping measures could not be effective in combatting trade barriers:  it was best
to deal with distortions at source instead of possibly creating another distortion disguised as a trade
remedy.
71. In replying to the foregoing comments, the representative of the European Community and its
member States reiterated that the submission by his delegation argued that anti-dumping rules and
competition rules applied in different economic, legal and institutional contexts and that therefore
there could be no question of the replacement of one set of rules for the other, and no question of
simply making a mechanical transposition from competition law into anti-dumping law of concepts
which were intended to deal with a totally different kind of problem and underlay a totally different
type of instrument.  In the submission by his delegation it was observed that there was scope withinthe framework of any trade policy measure, including anti-dumping measures, to take into account
competition concerns.  Indeed, there had been a number of comments and experiences in this respect
made by several delegations, including Canada and Australia, which had contributed interesting
elements for our reflection and discussion in a positive direction.  Any attempt to focus selectively on
one instrument was really not going to help the discussions of the Group.WT/WGTCP/M/5
Page 23
72. The representative of the United States recognized that neither the GATT not the Anti-
dumping Agreement referred to the specific practices that had been described in the United States
paper as a prerequisite for imposing anti-dumping measures.  This is why anti-dumping measures had
been described as an indirect response to such practices.  The anti-dumping remedies could only
offset the injurious effects of the objectionable policies rather than the policies themselves.  It would
be preferable, of course, to address those policies directly.  To that end, the United States wasvigorously working to open foreign markets to foster a culture of competition where needed, to
discipline subsidies and generally to liberalize trad e.  In time, these efforts will help reduce the
possibilities for injurious dumping.  So perhaps on a theoretical basis the United States had something
in common with the position of Hong Kong.  He also wished to reiterate that the anti-dumping rules
were not focused on predatory pricing or any other competition policy concept.  Indeed, there was
nothing on the WTO Anti-dumping Agreement on predatory pricing.  The delegation of the
Community had explained that competition laws worked within the context of a single integratedmarket, but had no application in the domain of anti-dumping rules, which addressed situations
occurring in the presence of multiple, segmented national markets.  Many of the speakers in the
symposium held prior to this meeting of the Gr oup had acknowledged that anti-dumping rules were
distinct from competition laws and fell squarely outside the competition policy sphere.
73. The representative of Japan said that discussions by the Group had not definitively addressed
the question of what the basic framework of an ti-dumping should be and hoped that the Group would
continue to discuss this basic issue taking into account the perspective of competition policy.
74. The representative of the Russian Federation offered some remarks on the interaction of trade
and competition policies from the perspective of his country.  The State Anti-Monopoly Committee
(AMC) of the Russian Federation had been involved into the development of trade policies for anumber of years.  As it was member of the Go vernmental Commission on Safeguard Measures and
Tariff Policy, the Committee had presented its opinion to the Ministry concerned in 12 cases since the
beginning of 1997.  These opinions had been drawn from specially prepared documents assessing the
impact of the proposed protective measures in the domestic market.  Factors taken into account in
these studies had included market structure, price dynamics, and the competitiveness of domesticgoods.  In addition, the New Foreign Trade Law contained a number of competition clauses, so as to
prevent the infringement of competition resulting from the introduction of import restrictions.  Article
18.14 of the Law stipulated the situations in which the opinion of the AMC was  required with respect
to investigations concerning safeguards, anti-dumping and countervailing measures.
75. The representative from the OECD called the attention of the Group to the work of the OECD
Joint Group on Trade & Competition on the impact of trade policy on competition.  This work was
referred to in three reports to Ministers that had been previously circulated to the Working Group and
cited in document WT/WGTCP/W/2.  Another useful reference was the 1986 OECD Council
Recommendation on the Interaction between Trade and Competition.  In addition, the report on
predatory pricing by the OECD Competition Law and Policy Committee including a recommended
model analysis.  The OECD delegation would be happy to submit a short paper referring to current
work on trade policy and competition.
76. The Chairman said that the structure and the nature of the discussion recalled the discussions
among competition authorities when analyzing the goals of competition policy and law, where the
notions of efficiency and fairness often came up.  The latter explained some provisions of competition
law which did not immediately lead to enhancement in  efficiency.  He was not sure that discussions
by the Group had been entirely contradictory, even though they had led to obviously differentpositions.  Competition laws were laws, and laws resulted from the political process and there was
always a divergence between what economists and lawyers thought should be adopted and what was
in fact adopted.  Several delegations had said that they would like to reflect on the papers that had
been presented and prepare further comments.  In the next session some time would be allowed for
further questions and comments.WT/WGTCP/M/5
Page 24
III. THE RELATIONSHIP OF TRADE AND COMPETITION POLICY TO
DEVELOPMENT AND ECONOMIC GROWTH
77. The representative of the Secretariat indicated that work was underway on the synthesis paper
that been requested by Members, on the relationship of trade and competition policy to development
and economic growth  The paper would be available for the next meeting of the Working Group.
IV. STOCKTAKING AND ANALYSIS OF EXISTING INSTRUMENTS, STANDARDS
AND ACTIVITIES REGARDING TRADE AND COMPETITION POLICY,
INCLUDING OF EXPERIENCE WITH THEIR APPLICATION
(a) Existing WTO provisions
78. The representative of Switzerland, introducing document WT/WGTCP/W/89, recalled that at
the Group's meeting in March, a number of delegations had expressed interest in the application vis-à-
vis competition policy of basic WTO disciplines.  His delegation's paper constituted a preliminary
reflection on the application of two key principles, namely national treatment and transparency, in this
field.  The focus on these two principles reflected several elements.  First, these two principles seemed
to respond to the complexity of anti-competitive pr actices which affected trade.  Secondly, the recent
report of the panel on the Kodak/Fuji matter took account of both of these principles.  The first part of
the paper provided a general description of the material and procedural aspects of Articles III and XX
of GATT 1994, and then a preliminary analysis of how this principle could be applied to anti-competitive actions.  It differentiated between two types of markets, markets in which there was a
functioning competition law, which was applied, and markets in which there was no such legislation,
which was indeed still the case for many countries.  Hence, in terms of national treatment, it noted
several complexities.  First of all, there was the question of the proof of the existence a violation of
MFN, and it could be very difficult for a country to adduce this proof.  The analysis of the Kodak/Fujicase was an excellent example of this in terms of the interpretation of Article III of GATT 1994.  On
the principle of transparency, here again, proving that administrative provisions existed and were
generally applied gave rise to certain difficulties.  Particularly when a decision had been published, it
was difficult to determine whether there were substantive changes in terms of competition. In
procedural terms, the use of these principles could be particularly difficult, first and foremost becauseof a lack of information about the existence of decisions relating to trade, because it was precisely in
the situation of competition that there were many gaps.  The situation in which there was a
competition law had many advantages since in this case WTO principles could provide the basis for
further legislation.  The application of a law could have an impact on the market and also outside the
market.  This sort of principle could also ensure equal rights for foreign and national companiesduring the course of anti-trust procedures.  It appeared that this had been used on several occasions
within the OECD.  Regarding the principle of transparency, one could also conceive of this applying
in terms of the publication of decisions and rules concerning competition.  This was something that
has been raised, inter alia,  by the delegate of Brazil.  One could also ask whether this principle might
not also be applicable in situations that are a priori  trade-related but also have an impact on
competition.  In sum, the two basic principles of  national treatment and transparency seemed to be
useful particularly in situations where competition legislation already existed.  It seemed to be limited
if not non-existent in markets in where there was no such legislation. He would welcome
contributions from other Members on this point.
(b) National competition policies, laws and instruments as they relate to trade
79. The representative of India, introducing document WT/WGTCP/W/79, said that the document
built upon several interventions by his delegation in past meetings of the Group.  The issues covered
in the paper had also been touched upon  in his delegations earlier in the meeting.WT/WGTCP/M/5
Page 25
80. The representative of Venezuela, introducing document WT/WGTCP/W/86, said that it
provided a general report on competition policy in Venezuela.
81. The representative of Peru, introducing a non-paper on her country's competition law and
policy, said that it had three parts.  The first dealt with the benefits of trade liberalization, privatization
and deregulation, with reference to developments in specific economic sectors.  The second showed
how deregulation and trade liberalization alone were not enough to ensure competition in markets; forthis, competition policy was also required.  Again, this was demonstrated with reference to
developments in specific markets, in this case local transportation, flour, chickens and noodles.  The
third section of the document pointed out the characteristics of Peru's competition policy.  Three
characteristics should be noted:  first, it was part of a systematic approach under which competition
policy was dealt with under the same roof as mark et access issues, antidumping, consumer protection,
advertising and standards.  Second,  continual effo rts were made to show with statistics and other
techniques how the promotion of competition can have a direct impact on the welfare of citizens.
Third, given the extent of trade liberalization that had occurred in Peru, it was not felt necessary to
implement a system of merger control.
82. The representative of Bolivia, introducing document WT/WGTCP/W/97, said that her
country had adopted a Sectoral Regulation System known as SIRESE.  Its purpose was to regulate,
monitor and supervise the activities of State-owned enterprises including telecommunications, power,hydrocarbons, transport, water and other sectors.  It ensured that their activities were carried out
efficiently and contributed towards the development of the domestic economy.  Enterprises and other
firms engaged in activities in the aforementioned sectors were required to harmonize their activities
with principles that guaranteed free competition, eschewing or terminating activities that prevented,
restricted or distorted free competition.  In addition, these enterprises may not take any part inagreements, contracts, decisions and practices whose purpose and effect were to prevent, restrict or
distort free competition by fixing prices, setting limits, dividing up or controlling production, markets,
sources of supply or investments, as well as recourse to other similar anti-competitive practices.
Abusive practices and mergers were also prohibited if their effect was to establish, promote and
consolidate a dominant market position.  The relationship between  trade and competition policy wasgrowing as multilateral disciplines were becoming more important.
83. The representative of Australia, introducing document WT/WGTCP/W/98, said that it
provided answers to questions that had been pose d by Members in response to a previous submission
by her delegation (document WT/WGTCP/W/60).  Regarding the final question and answer,
concerning the movement of natural persons, she wished to add that that Australia was one of the fewcountries that had made commitments under the protocol to the GATS dealing with the movement of
natural persons.
84. The representative of Brazil said that it would be useful if the Secretariat could prepare a
summary document based on the numerous presentations that had been made by members on their
national competition legislation.  The document could point out the number of countries with such
legislation in addition to certain commonalities in general principles which were found in national
experiences.  The representatives of the United States and the European Community and its member
States supported the proposal, with the understanding that it should be limited to summarizing
objective information that had been provided by Members and should not go as far as attempting toextract common principles.
85. The Group decided that the Secretariat would be asked to prepare a document summarizing
objective information on national competition legislation that had been provided by Members in their
respective presentations.
86. The observer from Croatia said that her country had enacted competition legislation in mid of
1995.  Enforcement of the legislation had commenced at the begiining of 1997.  It incorporated theWT/WGTCP/M/5
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three basic pillars of competition legislation which were provisions dealing with anti-competitive
agreements, abuses of a dominant position and concentrations.  The law consisted of forty articles and
three or four pages.  This was appropriate for a country that was in the process of developing a
competition legal culture.  Recently, it had introduced some additional rules and block exemptions
relating to distribution agreements.  A definition of dominant position had been incorporated in the
legislation based, to an extent, on the German law.  She noted that time had not been available for anextended process of establishing legal interpretations and enforcement procedures and practices;  the
law had had to be effectively applied from its inception.  The first case dealt with under the law was a
classic predatory pricing investigation dealing with a small bus company near Zagreb.  Very recently,
amendments had been introduced in the legislation rela ting to fines.  In future, they would be based on
a percentage of turnover rather than an absolute amount.   The Croatian Parliament has indicated that
normal civil service restraints would not apply to the salaries of employees of the enforcement
agency, thereby facilitating employment of quality staff.  She indicated that her agency faced veryhigh expectations from Parliament, the business community and newspapers to take effective
measures to deal with anti-competitive practices and enforce the rule of law within a dynamic market
economy.
V. REQUESTS FOR OBSERVER STATUS
87. The Working Group agreed to revert to requests made by SELA and the Organization of the
Islamic Conference at its next meeting, having re gard to the ongoing consultations in the framework
of the General Council.
VI. OTHER BUSINESS
(a) Derestriction of Members' contributions to the Group
88. The Chairman recalled that, at its meeting on 11-13 March, the Working Group had agreed
that the Secretariat would be asked to contact Memb ers to inquire as to whether their contributions to
date could be derestricted, and that this would be done on the basis of instructions to be received from
individual Members (see document WT/WGTCP/M/4, paragraph 81).  In terms of follow-up to this
request, the representative of the Secretariat indicated that on 24 April 1998, the Secretariat had
circulated to Members a Note (Job No. 2252) inviting Members to notify, if they wished their
previous contributions to the Group to be immediat ely derestricted.  Since then, Hong Kong, China;
Canada; Japan; the European Community and its member States; and Norway had so notified the
Secretariat, and their documents had been derestricted.  These countries were in addition to the United
States, which had requested that its documents be derestricted in the course of the meeting in March.
For the future, in regard to papers submitted to this Group, the Secretariat was following a practice of
asking Members, when they submitted their contributions, whether they would wish the documents to
be restricted or derestricted.
89. The representative of Chile said that its recent contribution was also unrestricted.
(b) The Group's Expected Report to the General Council
90. The Chairman noted that, at its next meeting, it would be appropriate that the Group have an
initial discussion on the matter of the structure and content of its expected Report to the General
Council at the end of the year.  This requirement arose from paragraph 20 of the Singapore MinisterialDeclaration, which provided that the General Council would keep the work of the Working Group
under review and determine after tw o years how the Group's work should proceed.  This called for a
report to be prepared on the work that had been done in the Group, to allow the General Council to
make a decision.  It would seem that the Report would have to combine two basic elements:  first, a
description of the work that had been done in the Group, and second, any recommendations toGeneral Council on which the Group could agree on "areas that merit further consideration in theWT/WGTCP/M/5
Page 27
WTO framework" (Singapore Ministerial Declaration, paragraph 20).  Regarding the descriptive part,
one option would be to present a brief factual report to the General Council similar to the report that
was submitted at the end of 1997.  This type of report would only identify the main themes discussed
in the Working Group but would not attempt to summar ize the substance of the debate that has taken
place.  The other option would be to present a long er report that would reflect in a balanced and
descriptive way the substantive points made in regard  to the various items of the Checklist.  Regarding
the second part, it would be helpful if delegations coul d provide, in advance of the next meeting of the
Group, in September, preliminary written inputs on po ssible recommendations that could be put before
the General Council.  In add ition, he noted that, before the September meeting, following the usual
practice, he would be available to meet with Members individually to discuss their views and
preferences.  With this preparation, it was hoped that at the September meeting the Group would have
a discussion and reach agreement on the overall structure and content of the report, in order that the
Secretariat could commence drafting the Report.
(c) Timing and Organization of work for the next meeting
91. Following discussion, it was decided that the next meeting of the Group would be on 28-30
September.  The Chairman noted that, in addition to the planned discussion of the Group's Report, the
main substantive agenda items would be:  (i) the relationship of the trade-related aspects ofintellectual property with competition policy;  and (i i) the relationship of investment with competition
policy.  Furthermore, as agreed at previous mee tings (see, in particular, ), an opportunity would be
provided for delegations to come back to any aspects of the Group's work on which they wished to
provide further comments.  Finally, he stressed that, as with all aspects of the Group's work, the
quality of discussion at the next meeting would depend, very much, on the written contributions and
preparations of Members.  He asked that written contributions be provided no later than 10September, to provide sufficient time for processing and translation.
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