WORLD TRADE
ORGANIZATIONWT/WGTCP/W/175
26 July 2001
(01-3704)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM THE EUROPEAN COMMUNITY
AND ITS MEMBER STATES
The following communication, dated 3 July 2001, has been received from the Permanent
Delegation of the European Commission, with the request that it be circulated to Members.
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A WTO Competition Agreement and Development
Introduction
Over the last two years, the Working Group has engaged in a detailed consideration of the
possible elements of a WTO agreement on competition policy, including the question of how such an
agreement could respond to the expectations and interests of developing countries.  The EC and its
Member States have contributed to this discussion through the presentation of three written
communications which focussed on "The Developmen t Dimension of Competition Law and Policy"
(WT/WGTCP/W/140 of 8 June 2000);  "A Multilateral Framework Agreement on Competition
Policy" (WT/WGTCP/W/152 of 25 September 2000) as well as a response to some of the questions
raised in previous meetings (WT/WGTCP/W/160 of 14 March 2001).  The purpose of this submission
is to present - briefly- our views on how a WTO agreement can help to address developing country
interests and concerns as regards anti-competitive practices of an international dimension.  This
Communication, therefore, complements our previ ous submissions, which contain a more detailed
consideration of the possible elements of a WTO competition agreement and of the development
aspects of competition law and policy.
At the outset, we wish to stress that - in our view - a WTO Competition agreement would
entail benefits for all WTO Members, whether developed or developing.  In a nutshell, the main
potential benefits of a WTO Competition agreement can be summarised as follows:
• A reinforcement of the commitment by WTO Members to transparent and non-
discriminatory domestic competition policie s, including a commitment to deal with
"hard-core cartels" as a serious breach of domestic competition laws.  By supporting
effective domestic competition institutions, a WTO agreement would contribute
towards ensuring that the benefits of the process of trade and investment liberalisation
are not negated or distorted by anti-competitive business practices.
• The establishment of an effective framework for cooperation among competition
authorities to better address anti-competitive practices which impact on international
trade.  In view of the growth of domestic competition regimes and the global nature
of an increasing number of competition cases, it is essential to establish a framework
that facilitates both case-specific cooperation and a more general exchange ofWT/WGTCP/W/175
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information and experiences among the competition authorities of WTO Members.
Bilateral and regional agreements - while useful - are too limited in membership and
scope to provide a sufficient response to the internationalisation of competition
policies.
• Reducing the scope for conflicts arising from the application of domestic competition
laws to international transactions.  Agreement on core principles and theestablishment of cooperative relationships among competition authorities would go a
long way towards reinforcing mutual trust,  which - according to our experience - is
the essential requirement to ensure that divergences in substantive law (or on the
analysis of a case) can be managed in a way which avoids potential conflicts.
• Promoting a more coherent approach in WTO to competition policy issues, which
currently are only addressed in a limited manner and at the sectoral level (notably, in
the context, of GATS and TRIPS).  In addition, a horizontal agreement on
competition, within the WTO system, would contribute towards enhanced
cooperation between trade and competition authorities, which is of increasing
importance in light of the internationalisation of competition policies, the increased
WTO focus on regulatory issues and the important synergies between competitionpolicies and policies relating to foreign investment and intellectual property rights.
Such benefits can be best achieved through a WTO agreement on competition policy based on
core principles, co-operation modalities and support for the progressive reinforcement of competition
laws and institutions in developing countries.  The main objective of such an agreement would be tostrengthen the ability of WTO Members to addre ss anti-competitive practices of an international
dimension which impact on trade.  A WTO agreem ent in Competition would not imply harmonisation
of Members' laws and would accommodate and respect diversity of national regimes in terms of
policy, law and enforcement.  The agreement would instead contribute towards gradual convergence
and enhanced international cooperation.
1. Possible elements of a WTO agreement on Competition policy and development
considerations
The relationship between competition law and policy and development has been thoroughly
discussed in the Group.  The EC and its Member States presented views on this subject in their
Communication of June 2000 (WT/WGTCP/W/140).  It is also important to bear in mind that
international discussions on the relationship between anti-competitive practices and development
concerns have a long history, which predates the establishment of the WTO Working Group.  Indeed,
for a long time developing countries have argued in favour of the establishment of international
disciplines to better address restrictive business practices.  Most recently, the Plan of Action adopted
at UNCTAD X and the Declaration adopted following the fourth review of the UNCTAD set onRestrictive Business Practices reflected a clear consensus that enhanced cooperation against anti-
competitive practices should be considered as a development priority.  What has changed over the last
few years is that competition authorities from developed countries have become increasingly
supportive of a multilateral framework to reinforce international cooperation.  This is the consequence
of the growing internationalisation of competition policies, which opens the door for theestablishment of a WTO agreement based on mutual interest.
For a WTO competition agreement to fulfil its development potential, development
considerations should be integrated as a cross-cutting factor in all relevant areas.  This should be
based on a recognition that competition law and policy in developing countries are often closelyconnected with development-related objectives and that there is a need to fully take into accountWT/WGTCP/W/175
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differences in levels of economic and institutional development.  Special and Differential Treatment
should be reflected in specific provisions, including as regards progressivity, flexibility and support
for capacity building.
While recognising the importance of "special and differential treatment", discussions should
also focus on how to maximise the advantages of a WTO framework agreement for developing
countries.  It is generally recognised that developing countries are particularly vulnerably to anti-
competitive practices of an international dimension, such as international cartels, export cartels or
abuses of a dominant position including by foreign-based multinationals.  While many developing
countries have recently established (or are in the process of establishing) a domestic competition law
regime, their institutional capacity to tackle such anti-competitive practices is limited.  Therefore, it is
suggested that the potential development benefits of a WTO competition agreement would be acombination of three factors:
(a) A framework of rules which supports domestic competition institutions;
(b) Flexibility and progressivity in commitments;
(c) Providing an effective response to developing country cooperation needs, including
capacity building.
Our objective therefore is the conclusion of a flexible WTO agreement on competition which
all WTO Members are in a position to subscribe and which entails clear development benefits in
terms of enhanced international cooperation.  Individual developing countries may, however, wish to
reserve their judgement on the costs and benefits of such an agreement.  In this connection, a possibleoption to explore could  be to provide for the possibility for developing countries to decide, at the
conclusion of negotiations, whether they wish to subscribe to the competition agreement.
Negotiations should, however, be open to all countries, which could therefore contribute to shaping an
agreement that respects the interests of all WTO Members.
We expect that, in the context of possible WTO negotiation, developing countries would put
forward proposals to address their specific intere sts and concerns in relation to a competition
agreement.  The EC is ready to engage constructively in such discussion with a view to defining an
agreement which responds to mutual interest.  Indeed, discussions over the last few years in the
Working Group, have helped to identify elements that would need to be taken into account in order to
ensure that development considerations are fully integrated into a competition agreement.  What
follows is an indication of our views on how a number of developing country interests and concernscould be addressed in relation to different elements of a possible WTO competition agreement.
(a) Core principles relating to the Domestic Competition Policy Framework
In its communication of September 2000 (WT/WGTCP/W/152), the EC and its Member
States presented ideas on how certain core principles such as transparency and non-discriminationcould be applied to the domestic competition policy framework.  We also made clear - in response to
questions by some developing country Members - that the principle of non-discrimination should be
understood to mean that domestic competition laws should not discriminate on grounds of nationality
of firms.  It would have no bearing therefore on other domestic policies or on the question of how the
law is being enforced.  In particular, the principle of non-discrimination - in relation to a competitionagreement - has no bearing on the question of whether foreign firms have access to a market - which
depends on trade and investment conditions - or on how foreign firms are treated under domestic
regulations other than competition law.  Moreover, we have also specified how such principles could
be defined in a manner which reflects the need for progressivity and flexibility as regards
commitments assumed by developing countries, and in particular, the least developed among them.WT/WGTCP/W/175
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Several developing WTO Members have raised questions as regards the relationship between
the WTO agreement on competition and industrial policies, exclusions from the application of
domestic competition law and on how to address the situation of those developing countries which do
not currently have a domestic competition law regime.  In this connection, we consider that a WTO
competition agreement would be sufficiently flexible to address such concerns:
• As already noted, there is no reason why a commitment to have a domestic
competition law based on principles of transparency and non-discrimination would
conflict with industrial or other development policies.  Indeed, discussions in the
working group have shown that there is ba sic complementarity between competition,
industrial and other development policies.  Moreover, as discussed below, the flexible
framework of commitments proposed would leave ample scope for maintaining
policies that limit the application of domestic competition law regimes.
• The question of a possible interface with industrial policies has been primarily
discussed in connection with the issue of exclusions from the application of domestic
competition law.  While such exclusions are hardly an efficient industrial policy
instrument, many countries - developing and developed - maintain them for a number
of policy reasons.  The EC envisages, in this connection, that a WTO horizontalframework agreement on competition would not go beyond ensuring transparency as
regards such exclusions.  WTO Members would therefore be free to decide which
exclusions they wish to maintain, whether these relate to the protection of small and
medium enterprises, certain sectors or other policy matters.
• A significant number of developing WTO Members do not currently have a domestic
competition law, although several are considering its introduction.  It is clear,therefore, that any commitments to introdu ce such law would have to be progressive
in nature.  This is particularly the case as regards least developed countries and some
small countries which may face capacity constraints.  Any possible commitment such
countries could assume would need to be supported by country-specific capacitybuilding programmes.  More generally, there would be a need to discuss the specific
constraints of individual developing countries, taking into account that - in any event
- the commitments relating to a domestic competition policy framework would need
to be sufficiently flexible to take into account different institutional requirements.
For instance, in some cases a commitment may be assumed to introduce acompetition regime at the regional rather than the national level.  In any event - as
noted before - while our objective is an agreement which can be subscribed by all
WTO Members, an option that could be explored is the possibility that individual
developing countries may consider, at the end of negotiations, that they would rather
not assume the commitments included in a competition agreement.
(b) A commitment to treat hard-core cartels as a serious breach of domestic competition law
There is a general consensus that hard-core cartels - i.e. agreements among actual or potential
competitions, involving price-fixing, bid rigging, output restrictions or customer allocation and
market divisions - have a clear trade distortive effe ct and are considered as a serious breach of most
competition law regimes.  A common commitment on hard-core cartels would contribute towards
enhanced international cooperation, which could be particularly beneficial for developing countries.
Indeed, there is evidence that the cartels prosecuted by competition authorities in OECD
countries have had a significant negative impact on the trade and welfare of developing countries.  A
recent background paper for the World Bank 2001 World Development report contains five caseWT/WGTCP/W/175
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studies of international cartels (bromine, citric acid, graphite electrodes, steel tubes and vitamins) and
analyses their impact on developing countries.1  Participants in the cartels were almost exclusively
large firms from OECD countries.  The paper concludes that, in 1997, developing countries imported
USD 81.1 billion of goods from industries which had seen a price-fixing conspiracy during the 1990s,
and that these imports represented 6.7% of total im ports and 1.2% of GDP in developing countries.
Moreover, in many of the affected industries there were emerging exporters from developing
countries which did not participate in the cartels and whose exports may well have been affected.  It
should also be noted that, so far, there have been very few successful prosecutions by competition
authorities in developing countries against such cartels and that actions by OECD competition
authorities only address the impact of such cartels in their markets.
(c) Cooperation and capacity-building
A WTO agreement on competition should include cooperation modalities that are sufficiently
flexible to address the needs of countries at different stages in the development of a domestic
competition regime (i.e. from technical assistance relating to the introduction of a law or a
reinforcement of domestic institutions to general exchanges of experiences and case-specific
cooperations).  Indeed, the cooperation needs of individual developing countries go well beyondtechnical assistance and include the need to have access to case-specific cooperation and to
participate, on the basis of equality, in international discussions and exchanges of experiences on
global competition policies.
The importance of cooperation for competition authorities in developing countries has been
stressed on many occasions, most recently in the context of the UNCTAD Fourth Review Conference.
It is also worth noting that the cooperation needs of developing countries are all the greater at the
early stages of the introduction of a domestic competition law regime.  There is therefore, in our view,
a very strong case for the establishment of cooperation modalities at this stage, even if some WTO
Members have not yet introduced a domestic law or are at the early stages in its implementation.
In prior communications to the Working Group, we have presented our views about the type
of cooperation provisions that could be included in a WTO competition agreement, as well as on how
to enhance and improve co-ordination of technical assistance geared towards the support of
competition institutions in developing countries.  Many other countries have contributed to this
debate.  Indeed, we are ready to discuss any specific proposal put forward by developing countries in
order to meet their particular cooperation needs.  At this stage, we would wish to offer someadditional clarifications in response to questions raised by a number of developing countries:
• We envisage that the cooperation provisions of a competition agreement would apply
to all anticompetitive practices of an in ternational dimension.  Cooperation would not
therefore be limited to hard-core cartels, but would also cover other anticompetitive
practices of concern for developing countries, transboundary abuses of a dominantposition or anticompetitive practices with a market foreclosure effect.  Cooperation
provisions would therefore include responding to the longstanding developing
country concerns about the importance of assistance by "home" competition
authorities in those cases in which foreign firms may be engaged in anticompetitive
practices with an impact on developing country markets.  It is also worth noting thatfor such cooperation to develop, the essential requirement is mutual trust which
would be fostered by agreement on core principles and the establishment of a
framework for cooperation, and that no harmonisation of substantive laws is required.
                                                     
1 Margaret Levenstein and Valerie Suslow, "Pri vate International Cartels and their effect on
Developing countries", 9 January 2001.  The article can be found in
http://www.unix.oit.umass.edu/maggiel/WDR 2001.WT/WGTCP/W/175
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• Some have argued that cooperation is unlikely to be effective insofar as it remains
voluntary and does not provide for the exchange of confidential information.  Ourown experience, however, has been that such limitations have not prevented a very
close cooperative relationship among competition authorities.  As a result of the
conclusion of a WTO agreement, developing country competition authorities would,
for the first time, be able to benefit from the type of cooperation provisions whichhave become standard practice among OECD countries or in a bilateral agreements.
Benefits would not be limited to case-specific cooperation, but would also include
participation as equal partners in an institutional setting which facilities the exchange
of information and experiences, as proposed by the EC and others with the
establishment of a WTO Competition Policy Committee.
It is also important to stress that the modalities of case-specific cooperation would be
"voluntary" in the sense that countries would not be required to provide enforcement
assistance.  WTO Members would, however, have a commitment to enter into
consultations and consider sympathetically such requests.  The circumstances under
which consultations can be envisaged would be provided in the framework
agreement.  It can be expected that this would create particular incentives to developsuch cooperation, including when requests are made by developing country
competition authorities.
• The EC is already committed to a reinforcement of technical cooperation activities in
the competition field.  A WTO competition agreement would, however, play a
catalytic role in promoting an enhanced and better coordinated approach to suchassistance.  We envisage that the capacity-building needs of developing countries be
discussed at the same time that new rules are being negotiated.  In this way, country-
specific technical assistance programmes could be established as soon as possible.
Such programmes should be based on a de mand-driven approach and on coordination
among all relevant international organisations and bilateral donors.  The programmescould include steps necessary to implement WTO commitments, but also more
general capacity-building requirements.  Thus, depending on the needs of each
country, assistance could cover the development of national legislation, support for
the establishment of a domestic competition authority, training for competition
officials and exchange of experiences with other competition authorities.  Theproposed Competition Policy Committee could have a role in monitoring the
implementation of technical assistance programmes, facilitating the exchange of
information and experiences, and promoting best practices.
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The EC and its Member States are convinced that a WTO competition agreement, which
responds to developing country interests and concerns, can be established on the basis of mutual
interest.  Our own thinking on the key features of such agreement has evolved on the basis of the
intensive discussions held in this working group and in numerous regional meetings, including
contributions by many developing countries.  We remain ready to engage constructively with otherWTO Members with a view to ensuring that any competition agreement provides an effective
response to developing country cooperation needs, while maintaining the necessary degree of
flexibility and progressivity.
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