WORLD TRADE
ORGANIZATIONWT/WGTCP/W/118
26 May 1999
(99-2102)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM HONG KONG, CHINA
The following communication, dated 16 April 1999, has been received from the Permanent
Mission of Hong Kong, China with the requ est that it be circulated to Members.
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Contribution of Competition Policy to Achieving the Objectives of the WTO
I. INTRODUCTION
1. The interpretation and application of trade and competition rules are strongly influenced by
their objectives.  While the broad objectives of the WTO have been enshrined in the preamble of the
Marrakesh Agreement and it has been a practice in numerous GATT and WTO decisions to interpret
GATT/WTO rules as protecting non-discriminatory conditions of competition, the objectives, rules,procedures and institutions of competition policies differ from economy to economy depending on the
particular legal, economic and political circumstances and specific needs of each economy.  It is
important to acknowledge and explain these differences and national constraints so as to define more
precisely which objectives competition-oriented reforms of the WTO could successfully pursue.
II. DIVERGENT OBJECTIVES OF COMPETITION LAWS AND POLICIES
2. In the United States, the country with the longest tradition of antitrust laws, economic
analysis (e.g. of the relevant product market, entry barriers and efficiencies) plays a central role inmost types of antitrust investigations by the government agencies and courts involved.  In most areas
of US antitrust law, the analysis now focuses on economic efficiency and consumer welfare in terms
of non-restriction of output and prices.  Even though different schools of thought exist as to many
issues other than efficiencies, there seems to be broad agreement among US antitrust lawyers and
practitioners today that US antitrust laws should be interpreted to protect competition and consumerwelfare rather than competitors (such as competition among distributors, or a right of smaller
operators to compete).
1
3. In Europe, most countries introduced competition laws only after World War II with the view
of promoting not only economic efficiency, but also economic freedom, se paration of political and
economic power, and deregulation of their traditionally more protected economies.2  At the tim e of
the conclusion of the EEC Treaty in 1957, only a few EEC member states had effective national
competition laws.  The EEC Treaty introduced not only common international competition rules for
                                                     
1 Cf.  the communication from the US in WT/WGTCP/W/35, at 2: "US competition policy focuses on
protecting competitive markets and promoting consumer welfare.  The test for measuring whether some restraint
of commercial trade has an impact upon competition and, thereby, consumer welfare is whether that restraint'reduces the importance of consumer preference in setting price and output' ".
2 See e.g. D.Gerber, Law and Competition in Twentieth Century Europe: Protecting Prometheus, 1998;
G.Amato, Antitrust and the Bounds of Power, 1997.WT/WGTCP/W/118
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private  and governmental  restraints of competition; it prompted also all EC member countries to
progressively strengthen competition laws, independent competition agencies and judicial review at
the national level.3  Yet, even though the EC Treaty pursues the explicit objective of "a system
ensuring that competition in the common market is not distorted" (Article 3(f)), the declared goals of
EC competition policy also include non-efficiency related objectives such as "market integration"
inside the EC.  Competition policies in the EC are more determined by administrative  procedures
(e.g. discretionary powers to "exempt" restrictive agreements from the application of Article 85) than
by judicial  procedures (as in the USA).
4. Also in other developed economies (i.e. outsi de North America and Europe), competition
laws and policies seem to differ regarding their respective emphasis on allocative efficiency ,
productive efficiency , other public interests , consumer welfare  or total national welfare .  During
recent years, there seems to be a trend towards economic-based analyses focusing on economicefficiency and consumer benefits.  Yet, other economic objectives (such as protection of small and
medium-sized enterprises), social objectives (e.g. temporary limitation of the adjustment costs of
competition) and political long-term goals are also pursued in the context of competition policies or
by means of exemptions from such policies (e.g. the political long-term goals of decentralizing
concentration of power by means of markets with a large number of competitors, promoting economicfreedom as a precondition of personal and political freedom).
5. The majority of developing economies have so far not introduced national competition laws.
And in those developing economies which have introduced such laws, their competition laws and
policies do not appear to be exclusively focused on economic efficiency.  As long as the preconditions
for an efficient market economy are not fully established in developing economies and "economies intransition", it appears legitimate to perceive competition policy in a broader perspective taking into
account e.g. also governmental  market access barriers and short-term social disruptions of market
competition.  As a consequence, competition policies in developing economies often seem to focus
not only on market behaviour of individual firms, but also pursue regulatory policy objectives of
restructuring, deregulating and privatizing industries, taking into account the social adjustmentproblems of such policies.
III. ARGUMENTS FOR LINKING WTO PRINCIPLES WITH COMPETITION
PRINCIPLES SO AS TO BETTER ACHIEVE THE WTO OBJECTIVES OF NON-
DISCRIMINATORY CONDITIONS OF COMPETITION
6. Despite the on-going efforts made by Members to incorporate competition principles into the
WTO system, the application of certain WTO rules in an increasingly globalized economy is
producing anomalies.  For example, some WTO provisions (such as GATT Articles VI and XIX) areaimed at protecting import-competing producers rather than competition and consumer welfare.
There is a need to introduce competition-oriented reform in order to ensure that WTO rules remain
valid, credible and up-to-date in a globalized economy.
7. Hong Kong, China believes that a meaningful competition-oriented reform should be focused
on the link between WTO rules (particularly those on transparency and non-discrimination) and thebroad competition principles of promoting open markets, non-discriminatory conditions of
competition and consumer welfare.  In other word s, competition-oriented reform of the WTO system
should be focussed on the economic advantages of open markets, further opening of non-
discriminatory market access and reduction of competitive distortions for the benefits of consumers.
Only such a focus will facilitate the review of trade rules which stifle competition and yield marketdistortions and will help promote the welfare-increasing synergies between trade liberalization and
pro-competition policies.
                                                     
3 Cf. the EC communications in WT/WGTCP/W/1, 34 and 61.WT/WGTCP/W/118
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8. In view of the diversity among WTO Members in their policy emphasis and approaches to
promoting competition, multilateral competition principles/standards, if developed, must be flexible
enough to accommodate the differences in objectives, priorities, rules, procedures and institutions in
different economies.  These differences are not arguments against competition-oriented reform.  They,
however, argue for the adoption of a broad competition perspective to accommodate differences, andargue against the harmonization of competition policies/rules.  Attempts to harmonize the competition
policies/rules of all WTO Members would not only undermine the specific development needs of
developing economies but also the more sophisticated competition policies/rules of developed
economies.  Viewed from this perspective, a WTO framework imposing rigid requirements on
approaches, procedures and institutional set-up should not be pursued.
9. Hong Kong, China has been consistently advocating a "WTO approach" to address the
interaction issues between trade and competition polic y, i.e. to avoid one-sided discussions on private
anti-competitive practices without according equal attention to governmental restraints.  Provided that
world markets remain highly regulated and distorted by governmental market access barriers and
market distortions, competiti on policy must aim at both governmental  as well as private  market access
barriers and market distortions.  As long as trade authorities restrict and distort import and export
competition, and competition authorities exempt export cartels and "regulated industries", noeconomy can claim to have a consistent and non-discriminatory competition policy.  Claims by
competition authorities to maximize economic efficiency are not credible as long as the same
economies restrict and distort import and export competition without regard to competition principles.
10. Trade policies tend to be producer-driven rather than consumer-driven; and the consumer
interest in liberal trade and effective competition has often no political lobby.  For political and alsoeconomic reasons, the application of competition principles in the WTO context should focus on the
objectives of promoting open markets and non-discriminatory conditions of competition, thereby
benefiting producers and consumers in a balanced manner.
IV. POSSIBLE SCOPE FOR COMPETITION ORIENTED REFORM OF THE WTO
11. Trade and competition policies should be made mutually more consistent and supportive by
linking WTO rules and the broad competition principles.  The Working Group may explore the
following illustrative examples of ways of reform:
(a) whether the WTO market access commitments could be extended to private market
access barriers that restrain competition and restrict trade (cf.  GATS Article IX);
(b) whether the WTO national treatment commitments could be extended to requirements
to apply national competition policies in a non-discriminatory manner;
(c) whether the "producer bias" of the WTO rules (e.g.  antidumping and safeguard
measures) should be balanced by requirements to take into account consumer welfare
and competition principles;
(d) whether WTO disciplines for public undertakings and monopolies (e.g. in GATT
Article XVII, GATS Article VIII) could be given more precision by linking them to
competition rules;
(e) whether the provisions in the TRIPS Agreement on preventing "abuse of intellectual
property rights" (cf. Article 8) and "anti-competitive practices in contractual licences"
(cf. Article 40) could be defined more precisely by reference to competition
principles;  andWT/WGTCP/W/118
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(f) whether in the WTO context there is any room to provide incentives to economies
with open markets and mutually supportive trade and competition policies.
V. CONCLUSION
12. To ensure full realization of the benefits of trade liberalization, we see the need for a
competition-oriented reform of the WTO system.  Such a reform which focuses on the link betweentrade liberalization and competition principles would contribute to the WTO's promotion of non-
discriminatory conditions of competition.
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