RESTRICTED
WORLD TRADE WT/WGTCP/W/24
10July1997
ORGANIZATION(97-2894)
Original: English Working Group ontheInteraction
between Trade andCompetition Policy
COMMUNICATION FROM INDIA
Liberalization andglobalization havecharacterized international economic activities inrecent
times. Consequently, atthemicro level forfirms toremain competitive, theyarenowrequired to
adopt global strategies. Asthenumber, sizeandscope ofactivities oftransnational firms increase
more andmore ofthem forge andoperate strategic alliances, theircommercial practices arehaving
anincreasing international dimension thaneverbefore. These processes areresulting inincreased
cross border trade andattimes anti-competitive practices. Such practices undermine thebenefits of
liberalization bycountries. There maybeaneed, therefore, foraninternational framework toenhance
theeffectiveness andcoherence ofcompetition structures.
Themandate given bytheSingapore Ministerial Declaration stipulates, interalia,that: (a)it
willstudy issues raised byMembers; (b)having regard totheexisting WTO provisions inthisarea
andthebuilt-in agenda including thatunder theTRIMs Agreement; while (c)ensuring thatthe
development dimension istaken fullyintoaccount. Themandate included, butwasnotlimited to,
anexamination ofallsuchanti-competitive practices. Thispaper isaninitial contribution byIndia
tothework ofthisGroup andprovides views, inconjunction withtheviews expressed insome of
thealready circulated papers. Wehopethatthiswould helptheGroup informulating anappropriate
framework within which theanalysis could beinitiated.
Background
Trade andtradeliberalization arenotanendinthemselves. Thepreamble totheWTO clearly
stipulates that"their relations inthefieldoftrade andeconomic endeavour should beconducted with
aviewtoraising standards ofliving, ensuring fullemployment andalargeandsteadily growing volume
ofrealincome ...inamanner consistent withtheirrespective needs andconcerns atdifferent levels
ofeconomic development". There isnodoubt thattrade, isveryclosely related tocompetition policy.
Thenature ofanycompetitive policy regime affects trade, whether ininhibiting orencouraging its
growth. Tothisextent areview andsubsequent analysis oftheissue oftrade vis-à-vis competition
policy isbothimportant andcontextual. However, thisrelationship isnotonlyverycomplex, buthas
yettobestudied indepth inanymultilateral forum. OnlyUNCTAD hasdonesome work inthisarea,
areference towhich wasmade intherelated paragraph oftheSMC declaration. Thecomplexity of
theproblem isfurther compounded notonlybythedifferent interpretations ofwhatshould constitute
theoperational framework ofanystudy, butalsobythefactthatMember countries havedifferent,
andoften varying domestic legislation intheareaofcompetition policy. Thisisunderstandable since
inthewidest sense oftheterm, theterm"Competition Policy" potentially encompasses awiderange
ofgovernment policies, affecting bothcompetition andrestrictive business practices.
Anexamination bytheWTO ofthelinksbetween tradeandcompetition policy would therefore
helpensure thattrade liberalization, deregulation andglobalization, leadtoincreases incompetition.
Atthesame time, inorder tomaximize thebenefits ofglobalization toconsumers, itisessential to
establish amechanism thatensures ahealthy competition inaglobalized economy. While itistrue,
thattheclassical approach tothecompetition policy focuses largely ontheanti-trust approach todomesticWT/WGTCP/W/24
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competition, itcannot bedenied thatthereisnowabroadening ofapproaches andassumptions toinclude
awider perspective oftheissues thataddress theeffects ofglobalization andtheobjective of
development. Some oftheelements ofgovernmental competition policy would therefore include anti-
dumping policies andmeasures, safeguard actions, countervailing measures, rulesoforigin, etc.On
theotherhand, some oftherestrictive business practices bytheprivate sector would include tiedselling,
resale pricemaintenance, mergers andacquisitions, exclusive dealings, intrafirm 'international trade'
andstrategic alliances thathaveparticularly adverse effects ondeveloping countries, transfer pricing,
etc.Thelinkbetween these twoneeds tobestudied andaregulatory mechanism evolved. Hence,
itisimportant thattheWorking Group addresses allthese issues andareas which willbeofhelpto
Members tobetter understand therelationships between trade andcompetition policy asoftrade and
investment, sothattheycould thentakesuchmeasures thatwould ensure thattrade contributes more
meaningfully toeconomic growth anddevelopment.
Accordingly, wefeel,thattheGroup could consider adopting thefollowing framework for
examining thisissue.
(i) Relationship between Trade andCompetition Policy
Weagree withthesuggestion made insome oftheother country papers thatitwould beof
bothprimary andfundamental importance toinitiate theworkwithaconceptual study oftherelationship
between trade andcompetition policy, particularly, theimpact thatthelatter hasontheeconomic
development ofcountries. Itistherefore important thattheissue ofcompetition policy isdealtwith
intotality andnotmerely from thepoint ofviewofcommercial enterprises. Some oftheproposals
which havebeenmooted areperhaps notcomprehensive astheydonotdealwiththedimension of
competition policy dealing withtrade policy measures, suchasanti-dumping measures, subsidies,
safeguard measures, countervailing measures, technical standards, rules oforigin, etc.which areof
special interest todeveloping countries, particularly inthecontext ofthefactthatinrecent years trade
liberalization andtherelaxation offoreign investment regulations (such asinIndia) hasledtoan
increasing tendency ofcross-border mergers andalliances which needtobelooked atfromthenational
perspective. Hence, anyglobal policy inthissphere needs toeffectively dealwithallcategories of
potential abuse. Itistherefore important thattheWorking Group studies thecontradictions, between
tradepolicies andcompetition policies, sothatbothareharmonized. Weareaware thatcertain Members
feelthatsome ofthese issues arealready being addressed inother forums oftheWTO. While we
maynotnecessarily disagree withsuchanaverment, wefeelthatadopting aholistic approach which
takesintoaccount allramifications, would inthelongrunbemore beneficial tothemultilateral system.
(ii) TheDevelopment Dimension
Asstated earlier, thepreamble totheestablishment ofWTO states thatrelations inthefield
oftrade andeconomic endeavour should beconducted withaviewtoraising thelevelofeconomic
development. There cantherefore benodoubt, thattheultimate aimofanyanalysis ofaWorking
Group canonlybetosuggest waysandmeans ofremoving impediments todevelopment. Competition
policy isanewareafordeveloping countries. Thelinkbetween trade andcompetition policy, and
consequently ondevelopment hasyettobefullyunderstood. Itistherefore important thattheGroup
focusesontherelationshipbetweenanycompetitionframeworkanditscapacitytoinfluencetheeconomic
development, particularly ofdeveloping countries. Competition policies mustensure equal conditions
foranyonetomarket theirproduct andtohavefreedom ofactivity intheeconomic sphere sothat
bothwelfare andefficiency arepromoted. Wetherefore wish toreiterate ourspecial interest in
examining thedevelopment dimension ofissues related totrade andcompetition policy. Asalarge
anddiverse developing country wehavealways taken aninterest in,andstressed theneedforthisaspect
oftrade policy. Wefeelthatexamination ofdevelopment dimension would playasignificant rolein
theperception ofthework oftheGroup.WT/WGTCP/W/24
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There areconsiderable variations between countries intheirexisting national legislations on
anti-competitive behaviour. There arealsovariations inthedefinitions ofanti-competitive practices
depending uponthesizeoftheeconomies, degrees ofregional integration andlevels ofdevelopment.
Therefore, aconsideration needs tobegiven tothefactthatthereareconsiderable differences between
domestic lawsandpolicies ofdifferent countries andthatmany countries lackdomestic competition
lawsandenforcement principles. Inourviewtherefore, itisimportant thatthedevelopment dimension
should include ananalysis oftheexperiences andpractices ofcountries attheirvarious stages of
development, sothatdeveloping economies canensure anoptimal transition. Inthiscontext, itmay
perhaps beappropriate tokeepanopenmind towards providing developing countries, particularly the
LDCs, acertain amount offlexibility inthisregard. Under thiscategory, itwould alsobeuseful to
consider theappropriateness ofexisting competition framework inthedeveloped countries fortrade
endeavours from thedeveloping countries, soastoensure alevel-playing field. Atthesame time,
thedevelopment dimension could alsoexamine themanner inwhich thegrowth oftheTNCs andtheir
global alliances isaffecting development bothwithin andoutside thecontext ofpossible useofrestrictive
business practices.
(iii) WTO provisions having abearing upon Competition Policy
Anystudy would necessarily havetobedoneinthebackground oftherelevant provisions of
WTO/UR Agreements relating tocompetition. Itwould beimportant toexamine thefactual background
oftheprovisions, andwhere possible indicate theextent towhich theseprovisions arecompatible with
basic competition principles andwhether theyhavebeenabletodeliver therequired objective, orthey
suffer frominherent constraints. Forinstance, though theTRIMs Agreement forbids tradedistorting
performance requirements, itdoesnotrecognize thatrestrictive business practices byforeign investors
thathaveasimilar distorting effect. Infact,several oftheTrade Related Investment Measures in
countries arearesponse totheanti-competitive behaviour ofthetransnational investors andcorporations.
Similarly, theAgreement onSafeguards provides thataMember shallnotseek, takeormaintain any
voluntary export constraints, orsuchother measures which could affect trade. However, itmaybe
relevant toexamine whether certain non-governmental measures, particularly those adopted bythe
private sector areadequately covered under thesafeguard measures, inthecontext ofcompetition policy.
Inthis,theGroup draw upon thework donebyUNCTAD, which could provide aframework from
which toinitiate theanalysis.
Conclusion
Although weareaware thatinviewofthecomplexities anddiversified views regarding the
definition ofcompetition, theremaynotbeaconsensus, atleastinthebeginning, onanumber ofissues.
However, wefeelthattheproposed work programme would foster among Member countries an
understanding oftherelationship ofcompetition matters, andwould helpthem tobetter understand
thecharacteristic conditions andperspectives under which theyviewthewhole concept oftrade and
competition.